Tech Stocks Rise While Dow and S&P Slip

Dow: -0.62% | Nasdaq: +0.87% | S&P: -0.04%

Catch Up Quick

• Despite downplaying risks of rising prices, the Federal Reserve is now projecting inflation of 3.4% in 2021 → up from 2.4%

• However, Janet Yellen (U.S. Secretary of the Treasury) does not see risks of hyperinflation (out-of-control inflation)

• The average number of streaming platforms used per U.S. customer fell for the first time ever to ~7 → who even uses that many?

• The World Bank rejected El Salvador's recent request to help the country implement bitcoin as legal tender

• A record high of 4M people (2.7% rate) quit their jobs in April

• Many business owners argue that COVID-era unemployment benefits of $300 a week are keeping would-be workers at home

• The median home price in the U.S. hit a new record high of $342K → up 20% from 2020

• Google is launching an Apple store-like retail outlet where customers can buy Pixel phones, Chromebooks, Nest devices and Fitbit wearables

• Retail sales in May fell at a greater rate than predicted

• A Deutsche Bank trader's $100M bet on a formerly distressed container shipping company could return $1B (Bloomberg)

• The World Bank estimates that global growth will hit 5.6% this year → an upgrade from its 4.1% January forecast

Thought of the Day

• Last week, we discussed the inflation concerns of many profound economists and investors

• Then, it seemed like the Federal Reserve (central banking system of the U.S.) was the only party left to shrug off rising prices, which they deemed “transitory” & temporary in nature

• Yesterday, not only did the Fed raise its 2021 inflation estimate by an entire percentage point, but it also added two interest rate hikes to it’s forecast by 2023

• As a refresher, interest rate hikes are a tool used by Fed to help contain inflation by slowing down economic activity

• Given these developments, many investors will be looking for new positions that are safe from effects of contractionary fiscal policy (fancy term for the slowing down of economic activity)

• While basic sources are outlining commodities (gold, etc), real estate, utilities, and cryptocurrency as potential candidates, we have a more interesting name in mind

• Coinbase $COIN is down over 30% from it’s first trading price this past April → a possibility we outlined at that time

• However, with these narratives at play and a lower valuation, the platform could benefit in the short-term from huge crypto trading volumes if inflation forces capital from stocks to cryptocurrencies

• The thesis may carry some risk given technology historically gets hit hard by inflation

• But with more retail traders in the markets, these historic trends become less reflected in the present → perhaps why tech stocks still rose today despite the Fed’s inflation acknowledgements

• In short, a crypto trading platform is a great position for crypto bulls to hold without the stochasticity of having to bet on individual tokens

• Perhaps there’s a reason that 74% of Wall Street research teams are bullish on Coinbase!

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