Postcards: Republic-fully Speaking (The Week Ahead)

We're in our first negative Equity Strength event since November. What does the market bring to us this week? And what to make of Bitcoin's massive liquidation the same day Iran attacked Israel...

Dear Fellow Expat:

Yesterday, I discussed the negative signal we experienced on Friday.

It’s the first since November 2023, as the market pulled itself out of a liquidity-driven event fueled by 5% interest rates on the 10-year bond.

There are three major themes at play:

1. Tax Season: Money flows out of money markets and reserves to meet tax obligations. This can create short-term issues within the financial system. Looking back to April 2022, a $600 billion drain affected the markets and took us into oversold territory in June of that year. It’s no surprise to see Bitcoin dump, as there seems to be some leverage leaving the system. Near-term risk… elevated.

2. Rising interest rates: Markets are on edge due to inflation concerns, affecting investor sentiment. Not only are higher interest rates a temptation for investors to take the higher rate, but higher interest rates impact margin as collateral quality teeters. We should have gone to 6% on the Fed Funds rate last year… but we didn’t… and …