GM. This is Milk Road, the newsletter that is here to worry about macro so you donโt have to, although in this case, you still have to a little bit (sorry).
Hereโs what weโve got for you today:
- โ๏ธ The fear deepens.
- ๐ช A bull market won't save bad tokenomics.
Todayโs edition is brought to you by The Flyover, because keeping up with the world shouldnโt take you all morning. Get the biggest stories delivered free every morning.
Prices as of 2:00 p.m. ET. Powered by CoinGecko.
THE FEAR DEEPENS
The headline allocation posture of the Milk Road Macro Index fell to -0.87 this week.
This puts the index deeper into CASH and now 0.37 points below the CAUTION threshold, fully reversing the prior brief's recovery in five trading sessions.
Breadth did improve (+0.58 over seven days to -0.99) as the prior brief expected, but the bond market ran the other direction.
Idk about you, but I hate when it does that.
The 10-year Treasury yield climbed to 5.18%, a near two-decade high, sending rate volatility to its biggest weekly surge in over a year and pulling financial conditions from +0.37 to -0.28.
That single swing more than canceled the breadth progress and drove market momentum to -0.62.
So thatโs the market update side. Now letโs check on the economic side.
The economy pillar answered the prior brief's hard-data question decisively: the Atlanta Fed's Q3 nowcast holds at 5.0%, jobless claims fell again to 197,000, and the macro buffer is at full strength (+0.50) with stress at +0.00.
Pretty much as good as it gets, but the same strong growth that is keeping stress low is feeding the higher-for-longer rate narrative that is crushing financial conditions.
So, both pillars now trace back to the same root cause pulling in opposite directions.
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THE FEAR DEEPENS (P2)
The sharpest near-term tension is equity volatility staying calm while bond volatility has already surged. If equity markets reprice to match what bond traders are already pricing, financial conditions fall further, and market momentum has room to worsen from here.
Two prints will resolve or extend the setup:
- August PCE on September 30th tests whether the strong growth is flowing into actual spending, and
- October 14 CPI determines whether a fourth consecutive 0.3% monthly print starts bending the six-month inflation window in a way that eventually puts the macro buffer, the last pillar holding, under real pressure.
If inflation starts to blow out, we might be cooked, chat, ngl.
The path back toward CAUTION requires bond yields to retreat enough to let financial conditions stabilize while breadth keeps widening. Right now neither condition is in place.
There is another option though.
If the equities market sells off, it might cool things down a bit, and might give the Fed cover to keep conditions loose even if inflation heats up.
Overall, there are some serious macro concerns in the market right now, and that is weighing on asset prices outside of crypto.
Inside crypto, however, Bitcoin has confirmed a second weekly close above the May high of $83K, and it seems more likely now that Bitcoinโs price will ultimately continue higher in Q4.
This will not be a straight line, but it is the most likely path for the moment.
Altcoins are popping off all over the place.
If you want to see what I and the other Milk Road PRO analysts are doing in our portfolios through this period, join Milk Road PRO today for just a buck!
Hang on tight. Things are going to stay volatile and probably get even more wild.
Stay safe, stay educated, and stay bullish.
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Bank run risk: Apollo's Torsten Slok says AI agents could drain bank deposits by sweeping savings into higher-yield accounts.
NEAR's comeback? NEAR is still down 75% from its 2022 peak, but Near Intents fees hit ~$2.05M last week (up 88% in a month).
Hot take: A bull market won't save bad tokenomics. If insiders hold the supply and there's no real buyer, the token can still go to zero.
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