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Feeling Good
Aurelie Barthere
Key Takeaways
6 min read
  • Crypto prices, ex-NFTs, are reacting asymmetrically, as “good news” generate more upside than “bad news” generate downside.
  • Other risk asset investors are increasingly bullish, with equity risk premia compressing further down and the scenario of US recession being pushed back.
  • Paradoxically, global rates are moving higher but are not impacting risk assets, yet. Our intuition is that, if central banks are truly concerned about inflation and appropriately increase policy rates for longer, the effect should be reflected on risk assets at some point.
  • In the meantime, crypto and risk assets are surfing the “feel good” momentum.

Financial markets are feeling good

Risk assets, from crypto to equities, via their strong performance, appear to reflect more investor bullishness and a lower risk premium.

In the US, “cyclical” stocks such as Caterpillar and Chevron have taken over the US equity performance leadership from big-tech stocks in the past week. This would tend to suggest less pessimism from investors on global growth prospects.

We also note that spreads on US high-yield credit have been tightening recently (see chart below).

We will comment on crypto prices in the last section of this newsletter, but, excluding the price action of NFTs, prices have recovered from the SEC-induced sell-off a few weeks ago. This...