Shrugging off bad news

Last week, risk perception priced by financial assets came down sharply. BTC erased the price drop that followed the announcement of the SEC investigations, to test the 24k level again. Credit spreads contracted further and the French stock index CAC 40 reached a new all-time high.

These price moves occurred despite the latest macro data showing sticky wage growth and inflation in the US and other countries (US CPI and PPI both above respective economists’ consensus), and despite the pricing of a third rate hike in Fed Funds rate futures to reach 5.3% in May 2023.

Why this apparent disconnect between expectations for higher rates and outperformance of crypto?

• Less sensitivity to bad news...