HUIG's 3 Things this Week: Dec 2
1. Easing Interest Rate Hikes (WSJ)
Just this week, Fed Chair Jerome Powell hinted a decrease in the rate of interest rate hikes as early as December. This shook the market and resulted in greens across many indices that day. Lower rates means increased spending, but it also means a decrease in discount rates (if you can imagine what that'll do to the classical PV formula). All together, stocks rallied and non-investors can also relax a little as fears of over tightening leading to a horrific recession is reduced... At least for now.
2. Who's Looking for Work? (WSJ)
Typically, when a recession looms, employers are forced to lay off their employees in order to tighten their financials and brace for the incoming storm. However, contrary to many's expectations, that has not been the case. Instead, unemployment numbers remained at a low 3.7% with average wages in certain regions even increasing by 5.1%. This hints that not only are people getting jobs, but the need to increase wages means employers may even be struggling to hire enough people.
3. Another Block Bites the Dust (FT)
With all the ruckus surrounding FTX's fall, and how far Bitcoin has fallen from its peak, it seemed only a matter of time before another player would join. Blockfi, a crypto lender backed by one of the most famous venture capitalists: Peter Thiel, appears to be the next giant to join what seems like an avalanche in the crypto world as they filed for chapter 11 bankruptcy earlier this week. Yet, this is no surprise. Afterall, FTX was Blockfi's second largest creditor, and with the fall of not only FTX but the crypto market across the board, they had nothing left to support themselves. What is (semi) surprising however, is the effect of contagion in this scenario. Let's not forget that Bitcoin and genesis of decentralised finance was meant to curb the contagion of traditional banks and monetary systems. Yet, it would appear, they've created the very thing they swore to destroy...
Asgari, N., Ralph, O., & Oliver, J. (2022, November 28). Crypto lender blockfi files for Chapter 11 bankruptcy. Financial Times. Retrieved December 2, 2022, from https://www.ft.com/content/36a6ec4e-15f8-4b15-8bfa-076b87004264
Cambon, S. C. (2022, December 2). November employment report shows U.S. economy added 263,000 Jobs. The Wall Street Journal. Retrieved December 2, 2022, from https://www.wsj.com/articles/november-jobs-report-unemployment-rate-economy-growth-2022-11669944597
Timiraos, N. (2022, December 1). Jerome Powell signals fed prepared to slow rate-rise pace in December. The Wall Street Journal. Retrieved December 2, 2022, from https://www.wsj.com/articles/jerome-powell-signals-fed-prepared-to-slow-rate-rise-pace-in-december-11669833043?mod=Searchresults_pos3&page=1
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