As it usually is the case at a time of a momentous monetary policy shift, speculation has run wild in the past six weeks on how fast would the Federal Reserve hike rates. Sparking the flame, not unusually, was St Louis Fed President James Bullard – a well-prepared maverick with a penchant to take the lead on thorny issues – who suggested a 75 basis-point hike would be more appropriate given the high level of inflation.. While the centrists in the Committee are unlikely to follow the advice, and a 50 basis-point hike is what markets have been pricing in, the debate in and of itself has shifted expectations. Investors now expect a string of 50 basis-point hikes – at least three – with 75 as an improbable, but not anymore unthinkable, upper bound.
While the Fed meeting is the highlight of the week, there will be several other releases focused on manufacturing and services data, and employment – namely manufacturing PMI (Monday, May 2nd), factory and capital goods orders (Tuesday, May 3rd), services PMI (Wednesday, May 4th), and, finally, April’s employment number on Friday, May 6th.
PMIs and employment numbers are intuitively important to get the pulse on the US economy. Capital goods and factory orders will likely get plenty of attention as they are a signal of business confidence in future growth, as companies are unlikely to increase capex if they anticipate a recession.
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Investors are also increasingly focused on China’s strict COVID response, as it has so far caused bottlenecks in global trade, pushing up inflation despite renminbi depreciation – which is usually disinflationary. For nearly a month, Shanghai – population 25 million – has been effectively closed, with cargo ships backed up at sea, and warehouses filled to capacity.
The International Monetary Fund has lowered its GDP growth estimate for China to 4.8% for 2022, versus the 5.5% target announced by the Chinese government, and these numbers may get worse. On the equity market front, the Shanghai Composite Index is down nearly 8% since the People’s Bank of China announced lower bank reserve requirements to support the economy in mid-April. An announced public infrastructure construction spree will face a lack of available workers, due to the rolling lockdowns.
A China slowdown may cause jitters in the global economy. But what is more frightening in the medium term is the potential domestic instability caused by the mismanagement of the COVID crisis.
Yieldstreet focused on launching a new digital asset fund this week in partnership with Osprey Funds, a well-known manager in the space. The Enhanced Crypto Fund offers cost-effective access to index-like exposure to a basket of crypto assets, with an above-market allocation to growth coins. In addition, Yieldstreet offered the opportunity to invest in an intellectual property fund managed by Fortress Investments, a $53.5 billion asset manager.
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