by Franklin J. Parker, CFA
The Summary
- Last week’s job and inflation data tempered investor expectation of the economy. The unemployment rate ticked up to 3.8% and there were about one million fewer job openings than last month. Personal consumption expenditures — the Fed’s preferred measure of inflation — posted lower, and about in-line with expectations. Employment is usually the last economic domino to fall, and if this one is falling a recession may not be far behind. Factory orders reported a decline this month. This week’s data includes another look at the services sector, which is expected to continue its barely-above-breakeven trend, but otherwise this is a light data week.
- Euro-area GDP posts on Thursday, which will give us another read on the health of the global economy. China has been in a slowdown and is Europe teetering on the edge of recession, but GDP is expected to post at a slight expansion (0.3%). With global economies sputtering, as I have talked about for months now, investors may do well to consider getting defensive. If nothing else, hedging might make sense. As always, your goals and time horizon will govern the risks that are appropriate to take.
The Details
Last summer, I was having lunch on the shores of Lake Maggiore in Italy with a few other investment professionals, one of whom I had known for several years. A former CIO for a family office, he had left that gig to start some cryptocurrency projects, including a fund and a venture or two in the non-fungible token (NFT) space.
“Man, I’m excited to ask you something I’ve not been able to get an answer to,” I told him. “I’ve followed bitcoin since 2011, I read Satoshi Nakamoto’s original white paper, and I really think blockchain will be an important piece of the future, but I never did invest.”
“Why not?!” he asked with a smirk. He had made quite a bit of money, and he had only been in crypto for a few years.
[Keep reading at Enterprising Investor…]
Chart of the Week
When a country borrows in a currency they do not directly control, budget deficits and total borrowing becomes a very important consideration for investors. Now that rates have risen at an historically rapid pace, governments in the euro-area are feeling the squeeze. This week’s chart shows the large increase in the numbers of “risky” sovereign borrowers in the Eurozone. As the chart shows, current figures comparable to the debt crisis from a decade ago.
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