The Signal: Macro Aggressions

The Market

Brief hope for a market rebound in both crypto and stocks evaporated quickly Tuesday. It did so in such a way that closely mirrors the sentiment expressed by fund manager Jeffrey Gundlach in an interview he gave following the release of inflation figures. 

“Peaked” is how he described inflation figures that came in below analyst expectations (despite being the highest in 40 years) – a positive for crypto and stock market participants worried about uncontrollable prices. Asset values immediately popped following the data. But “frustratingly elevated” is how he went on to describe how some of the elevated elements within the inflation data, like wages, will continue to last for months. Market prices subsequently fell, almost matching Gundlach’s characterization that, despite a brief, positive data point, the road ahead is long and likely paved with interest rate increases. In fact, the market is pricing in a 10% higher chance now than it was last week that the central bank will raise rates faster at its next meeting 

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Fuel on the Fire

Some of the inflation data was striking. Gasoline was one of the biggest contributors to inflation figures, notching a near 20% gain over March. On the flip side, used cars were among the biggest detractors, with prices dropping 4% (despite rising 35% y/y). 

Look no further than Carmax, a leading used car retailer, for how this trend plays out. Even though revenues in their latest quarterly financials soared 49% over last year (due to rising car prices), affordability issues were cited as the largest macro factors weighing on the company’s results Tuesday. Though shares soared 50% during the pandemic, shares are now at pre-pandemic levels following today’s price action – its worst since September. Other used car retailers – especially those that specialize in online sales, like Carvana and Vroom – are also seeing cracks in their narratives. Vroom hit an all-time low Tuesday and Carvana also dropped 5% to dip to pre-pandemic levels.

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And it wasn’t just inflation weighing – Russia President Putin’s comments about a “dead-end” in peace negotiations added fuel to the negative sentiment.

The Data

Dead or Alive

That “dead-end” comment wasn’t a death knell for all assets. Privacy coins are exhibiting remarkable resilience in the face of overall crypto volatility - coins like Monero and Zcash among them. The last time Monero saw this level of trading volume was in early March when President Biden released his executive order calling for additional scrutiny – the implication being that crypto enthusiasts were flocking to assets more resistant to such transparency. 

We’ve discussed the net positives associated with that executive order in prior editions of this newsletter. 

But the rally started before the executive order – in late February, as the war began. To start the week, Monero remains among the top performers. The others? A collection of assets recently added to trading platform Robinhood, like Solana, Polygon (MATIC)* and the meme coin Shiba Inu.

Of note: Polygon was flagged by Domain Money’s Signal** product for outsized trading activity today, while Dogecoin (a similar meme coin to Shiba Inu) notched the highest social sentiment today as measured by Signal. Solana is also enjoying recent attention after becoming the fourth blockchain to be added to the NFT platform OpenSea earlier this month. Solana was available on the Domain Money app in early March.

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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: MATIC 

** These measurements were generated by Domain Money Social Sentiment Signal on 4/12/2022 and they fluctuate continuously in response to the various contributing data points and trends. Domain Money Signals are tools that aggregate information related to market sentiment and should not be relied on for investment decisions.  More detailed information about Domain Money Signal is available at https://help.domainmoney.com/en/?q=signal