There are conflicting views amongst experts around where this unprecedented economic setup ends. Much of the market is sitting on its hands unsure as to what to. Ray Dalio last week reminded us that ‘cash is trash’ so where does one invest now?

It's now official. After the NASDAQ long since crossed the rubicon, the world’s biggest equities index, the US S&P500 officially turned to bear market having cross the 20% loss line on Friday night. Having reached this juncture after just 2 of the 10 rate hikes predicted and BEFORE any quantitative tightening even starts… the question on everyone’s lips is how strong will the Fed hold its ‘we will not capitulate to save the financial markets’ stance?

More red on Wall Street last night on growing concerns about the US economy and its ability to handle higher rates. Whilst ending the session lower the S&P500 again miraculously bounced off the -20% bear market line in the sand without crossing it. However the night was more notable for the surge in both gold and bitcoin against that trend, and likewise bonds bid meaning lower yields in the face of rising rates. We discuss the set up for gold in particular right now.

Sri Lanka is now running out of petrol. Prime Minister Ranil Wickremesinghe warns that the nation has no US dollar reserves and they are now planning to sell their national airline. Shortages are far from confined to Sri Lanka with Bank of England Governor, Andrew Bailey, warning MPs on Monday that the Central Bank has warned of ‘apocalyptic’ food price hikes and that the central bank was helpless in fighting food shortages driven by external shocks such as the Russian-Ukrainian conflict and supply chain issues caused by the zero covid policy in China.

The Bitcoin market experienced a week for the history books, with the $40B LUNA/UST project hyper-inflating and collapsing, 80k BTC sold by LFG, and the Tether $1 peg coming under pressure. Let’s review the last week…

Its hard to pick up a paper or read the news without headlines around plummeting auction clearance rates, stalled house sales, predictions of big house price falls, and then late last week we got the ABS stats showing new home and construction finance commitments literally halved from the ‘HomeBuilder’ stimulus February 2021 peak and likewise dwelling approvals down 36% year on year. Futures markets have rates rising over 120% on their current levels and we discuss where that sits historically and practically.

Never a dull night on global markets lately… Last night was again a sea of red. The only green was yet again the US dollar (at near 20 year highs) and big cap crypto (coming off massive falls). The S&P500 rallied a little late to avoid falling into an official bear market (20% off recent highs) by just 2bps and the NASDAQ long left the bear market station down 32% and now its biggest fall since the GFC.

Less words more charts today as we hit some very interesting junctures in precious metals markets.

Last night continued the biggest sharemarket whipsaw since peak COVD turmoil in mid 2020. After the biggest Fed day surge in 44 years on Wednesday night, last night saw the biggest drop since June 2020 with the NASDAQ down 6% at its worst and 5% at close. The S&P500 was down over 3.5% as well and to complete the reversal of ‘all things’ bonds tanked (yields shot up), the other safe haven of gold also fell back below US$1900, and the USD surged to wipe out yesterday’s gains but saw a much weaker AUD and gold hold steady in AUD terms. So what on earth is going on?

Philip Lowe, Chairman of the Reserve Bank of Australia (RBA) announced yesterday that the cash rate target is now 0.35%, with real rates still very negative. This was the first rate rise since November 2010. The time has come to start withdrawing some of the ‘extraordinary monetary support’ that has been injected into the economy since early 2020. They are now forecasting inflation to peak at 6% in 2022 after annualised inflation in the last month came to 5.1%.