The Signal: Inflation Regulation

The Market

Not even Elon Musk could save this market, like he did with Twitter earlier this week. The same combination of forces we’ve discussed – inflation,  higher interest rates and China shutdowns – are back on the front burner of market participant concerns. 

We know this for a host of reasons. Whereas in past weeks, the market was laser-focused on whether oil prices would continue to soar (and assets sold off when prices hit the stratosphere), oil fell Wednesday, in part due to confirmation that the U.S. administration would be releasing more supply into the market. Stocks instead fell, clearly a reaction to other forces than oil. 

One of China’s larger cities is now in lockdown, which hurts casinos and other “reopening” stocks like Wynn Resorts. In addition, a member of the Federal Reserve, Lael Brainard, Tuesday teased to that market that the central bank feels like it may need to become more aggressive in how it handles interest rates (read: higher interest rates). Almost immediately, yields started to spike, hurting the types of assets we’ve discussed in this column before – high growth stocks and cryptocurrencies.

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Inflation Speed

That trend continued Wednesday, and was confirmed when the Federal Reserve released its commentary around its hike last month – cementing the idea that rates will be moving higher and with greater speed. Higher interest rates aren’t inherently bad – in many cases it’s a sign that the economy is on solid footing – but in this case it’s the speed and the concern around inflation that is of a worry.  Read about Market Basics

Special Programming

Listen to our founder, Adam Dell, speak on the PitchIt podcast about why the market needs actively managed portfolios, and how Domain Money is focused on opportunities within crypto around real market value and utilization. He also discusses the inevitability of regulation in the sector. 

The Data

Regulation GG

Domain Money’s head of investment management, Andrew Pesco has long maintained that regulation, like that Adam Dell spoke about within the podcast link above, is much needed in the sector. We discussed last week how DeFi (decentralized finance) outperformed other crypto since Biden’s executive order in early March, and now the SEC Chairman, Gary Gensler, has weighed in further. 

In a discussion earlier this week, he advocated for greater collaboration between his agency – which covers stocks and other securities – with the regulatory body charged with oversight of commodities, the CFTC. Given many crypto-trading platforms offer services that straddle both commodities and securities, oversight is unclear. Any clarity on this topic is welcomed, and we feel is another step toward smoothing the path of crypto as an asset class. 

What was likely not as welcomed in his speech were the choice words he used to describe recent Super Bowl commercials, which he implied were tantamount to excessive hype. Time will obviously tell. We’ll have to reconcile that view with Citigroup’s latest estimate that the Metaverse could be a $10 trillion opportunity – joining Goldman and others with multi-trillion dollar forecasts about the future of portions of the crypto industry.

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* Domain Money Advisors, LLC, an investment advisor registered with the U.S. Securities and Exchange Commission and an affiliate of Domain Money, is currently recommending the following assets contained in this edition of Domain Money’s The Signal as part of Managed Strategies: TWTR