Bitcoin's big day, plus rate spikes, a key labor report, and the Fortune 500 by age
The Sandbox Daily (8.29.2023)
Welcome, Sandbox friends.
Today’s Daily discusses:
Bitcoin’s big day
rising rates aren’t always doom and gloom
JOLTS report shows labor demand cooling
Fortune 500, by age
Let’s dig in.
Markets in review
EQUITIES: Nasdaq 100 +2.15% | S&P 500 +1.45% | Russell 2000 +1.42% | Dow +0.85%
FIXED INCOME: Barclays Agg Bond +0.65% | High Yield +0.63% | 2yr UST 4.894% | 10yr UST 4.116%
COMMODITIES: Brent Crude +1.22% to $85.45/barrel. Gold +0.97% to $1,965.7/oz.
BITCOIN: +6.72% to $27,706
US DOLLAR INDEX: -0.60% to 103.429
CBOE EQUITY PUT/CALL RATIO: 0.77
VIX: -4.18% to 14.45
Quote of the day
“The investor experience is improved when big moves in both directions can be reduced. Volatility isn't an entry ticket to be paid, it's a tax to be avoided.”
- Willie Delwiche, Hi Mount Research in More Noise = More Risk
Crypto’s big day
Cryptocurrencies scored a major win today after a U.S. Court of Appeals decision vacated the SEC’s ruling that previously denied Grayscale’s petition to convert its bitcoin trust into an exchange-traded fund (ETF).
The Securities and Exchange Commission had previously approved ETFs that track Bitcoin futures, but not so-called spot ETFs, which directly track the price of Bitcoin. Grayscale wanted to convert its Bitcoin trust to an ETF structure, which would let investors trade shares more freely than the closed-end trust currently allows.
The federal circuit court sided with Grayscale and found the SEC’s argument unreasonable. In fact, the court’s scathing opinion included some rather stunning, choice words for the SEC:
Cryptocurrencies surged on the news, as this court battle paves the way for the 1st spot bitcoin ETF.
Bitcoin’s bounce came at a logical level of support off the anchored VWAP from the November 2022 lows:
Grayscale CEO Michael Sonnenshein responded in a prepared statement: “This is a historic milestone for American investors, the bitcoin ecosystem, and all those who have been advocating for bitcoin exposure through the added protections of the ETF wrapper.”
While the decision is a major blow to the SEC which is in the middle of a wider industry crackdown, the ruling in favor of Grayscale is a major win for the crypto ecosystem as it pushes for wider mainstream adoption to digital assets. Bankrate estimates just 21% of American adults have owned cryptocurrency, with an overwhelming percentage of ownership from Millennials and Gen Z.
Individual investors are seeking these opportunities to invest in digital assets like bitcoin because of their return potential and diversification benefits, despite both being called into question the last year.
Bitwise research shows adding just a 2.5% allocation to bitcoin in a traditional 60-40 stock-bond portfolio would have contributed positively to the portfolio’s returns in 70% of 1-year periods, 94% of 2-year periods, and 100% of 3-year periods since 2014.
Source: D.C. Court of Appeals, Grayscale, Axios, Jake Wujastyk, Bankrate, Bitwise
Rising rates aren’t always doom and gloom
Sharp moves higher in Treasury yields do not always point to messy future stock market returns.
In the chart below, Callie Cox shows the 12-month performance of the S&P 500 index following months in which the 10-year U.S. Treasury note moved 50 basis points (0.50%) or more in a month.
Source: eToro
JOLTS report shows labor demand cooling
Every month, we turn to the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) to understand the ebbs and flows of what's really happening among businesses and their workers.
The number of job openings that employers reported in July fell to a 2-plus year low, down to 8.83 million available positions and below the consensus estimate of 9.5 million. Job openings are down in 6 of the past 7 months and have declined meaningfully from their cyclical peak of 12.0 million in March 2022.
The Quits Rate dipped to 2.3%, its lowest level since January 2021 and in line with the pre-pandemic rate.
Elsewhere, the report showed that the ratio of job openings to unemployed Americans eased to 1.51 – firmly below the cycle peak of 1.99.
On balance, the market liked seeing some softness from the labor market, which remains tight by historical standards, but is showing early signs of gradual cooling as the economy slows under the weight of higher interest rates.
Source: U.S. Bureau of Labor Statistics, Ned Davis Research, Bloomberg
Fortune 500
The Economist recently profiled the Fortune 500, America’s largest companies by revenue – which accounts for roughly a fifth of employment, half of sales, and two-thirds of profits for corporate America.
The average age of the Fortune 500 is pushing 90, while just 52 of the companies formed after 1990.
The study took into account mergers and spin-offs.
Source: The Economist
That’s all for today.
Blake
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.