“A prudent speculator never argues with the tape. Markets are never wrong, opinions are.” – Jesse Livermore

Making Sense of the Madness

Trying to decipher the driving forces behind a given market can be a tall order, let alone that of the global macro-economic landscape. If you have spent time scrolling Twitter recently, then you know there is no shortage of hot takes on what might happen next. From perma-bulls to goblin town doomers and everything in between, there is a gamut of varying opinions.

A general rule of thumb when trying to navigate a complex macroeconomic environment is to take the simplistic approach: “Don’t Fight the Fed.” In today’s environment, it seems as though any small comment from Mr. Powell can move global markets. This dynamic was once again on display last week. Given everything that has been occurring in both traditional markets and crypto markets, it can be easy to get caught up in the noise. The point here is to not neglect the bigger picture and to not only pay attention to what the Fed says but more importantly what they do and why.

Last week the Fed raised interest rates by 75 BPS and markets exploded upwards… doesn’t this seem counter-intuitive?

Indeed, this market reaction may seem counter-intuitive considering the weakening economic data being reported. The Fed has now hiked interest rates by 75 BPS in back-to-back meetings (with both matching the largest rate hikes since 1994). Despite Jerome Powell stating that another ‘unusually large’ rate hike may be necessary for September, this isn’t what traders clung to following last week’s presser.

There is one comment in particular that likely gave investors much-needed confidence: “We are now at levels broadly in line with our estimates of neutral interest rates and after front-loading our hiking cycle until now we will be much more da