Welcome to TBL Weekly #19—here are your highlights!

Markets Analysis

Our monitor for the week ending Saturday, November 5th, 2022:

Neither stocks nor bitcoin are spooked post-FOMC after Powell's hawkish finger-wagging. In fact, bitcoin has appreciated more, relative to stocks. This of course is not Powell’s intent. In fact, he’d prefer these assets move in the opposite direction. When asset prices appreciate, people are driven to spend, in theory, which is counteractive to the Fed’s goal of “fighting” inflation. Bitcoin outperforming stocks since Wednesday:

The 2022 pattern of -
a) hawkish FOMC statement, followed by
b) stern Powell to rein in any market rallies
- has happened once again. Except that this time, the language in the statement hinted towards a slowdown and pause. This was interpreted as dovish by risk markets, so who cares what Powell said afterward? That's what markets are asking with their behavior following the still-hawkish presser.

Pictured: Jerome Powell performing his best hawk impression

In 2018, Fed hiking expectations increased monthly, with SEEMINGLY no end in sight. And then, the floor fell out. Sound familiar? The Fed remains decidedly hawkish until internal dissent grows, and something forces its hand in the opposite direction. Today’s circumstances are different than in 2018, but history rhymes.

We’re starting to see the seeds of dissent among Fed members, as Powell retains his decidedly hawkish tone, while Daly, Collins, and Brainard have drifted more dovish. They’ve been recently outspoken that the Fed should take a more calculated approach and slow the pace of its rate increases by paying mind to the “cumulative effects” of tightening and the “lagging impact” of monetary policy, both phrases which appeared in the statement.

With a still-strong labor market pushing continued hawkishness, coupled with funding stress in Europe warranting more restraint with the aggressiveness of hiking, we’re going to see Powell try to squeeze every last drop out of this tightening cycle that he can. This means that when something forces the Fed’s hand, it will be hard and fast, and you will see an abrupt downshift in policy rate expectations as shown above in 2018.

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Now, here are your quick links to all of the TBL content for the week:

Tuesday

Nik previews our November Monthly Report, discussing cross-asset correlations, the behavior of rates and money markets, and so much more.

This is the highest level of detail we go into across our research outlets; orient yourself with markets moving into the final two months of the year:

November Monthly Report Preview: Rates, Risk, & Correlation

Wednesday

Nik & Joe broke down the market’s reaction to the FOMC decision to hike another 75 basis points. What did the Fed say differently, what does the path for monetary policy look like going into Q4, and when will we see the real regime change for markets? Take a listen here:

Thursday

The unelected elders have emerged from their two-day summit and announced changes to the price of money, again. This is how we find ourselves covering markets these days; in an increasingly tense global financial landscape, we look to the Fed and the subsequent reaction in the rates market. The FOMC contained shifts in language that set up the light at the end of the tightening tunnel, followed by still-hawkish Jerome Powell to rein in that marginally-dovish tone.

Let’s gather around the television set, analyze the Fed’s stated path for monetary policy, and discuss the implications for assets moving into 2023.

It’s “higher for longer” again in America: FOMC Recap

Friday

Nik interviewed TXMC, a data-visualization expert, markets researcher, and host of Alpha Beta Soup, on Twitter @TXMCtrades. In this episode, he discusses pivotal books used in developing his macro framework, the long-term debt cycle, bitcoin, and the current macro and geopolitical landscape:

A quick note: our podcast is down across platforms as we undergo some maintenance. Thank you for your patience!

And lastly, greetings from Dubai!

Gaurav Malhotra @Gauravarch

Just met @timevalueofbtc he was gracious enough to sign this mug. Funny I got this mug as a gift from my team as a farewell gift only today.

Wherever you’re reading and watching The Bitcoin Layer from, we’re grateful for your continued patronage - have a great weekend everybody!

The Bitcoin Layer does not provide investment advice.

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