CPI Comes In Right On Expectations And Crypto Comes Under Pressure

TL;DR

• New figures released this week showed inflation at its lowest level in two years, with the headline annual rate coming in at 4%
• The Fed paused their cycle of rate hikes, but suggested that more were to come, calling it a ‘skip’ rather than an outright change in trend
• The SEC has slapped lawsuits on Binance.US and Coinbase, naming 67 cryptocurrencies as unregulated securities
• In times of economic uncertainty, many investors turn to gold as a safe haven asset, and we provide a way to gain exposure, without the need to beef up your home security
• Top weekly and monthly trades

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Major events that could affect your portfolio

Given we’ve had both a CPI announcement and a Fed rate decision this week, there’s been remarkably little coverage around it. While that might seem a little surprising on the surface, the reality is that both announcements brought very little new information.

The latest inflation numbers came out just prior to the Fed announcement, with the headline and Core CPI figures coming in bang on expectations. The headline figure was up 0.1% to take the annualized figure to 4%, the lowest it’s been in two years.

Core CPI was up 0.4% for the month to hit 5.3%, down from 5.5% last month.

It made the Fed’s decision to pause a bit of a no-brainer. Chairman Jerome Powell made comments at the last FOMC meeting that they would consider a pause this month, and most analysts have been pretty convinced that they’d follow through with this suggestion.

While there had been some concerns that strong numbers in the jobs report could lead to another hike, it appears that inflation is finally getting closer to the Fed’s target range of 2-3%.

It’s the first time in 10 months that we haven’t had a rate hike. Investors shouldn’t necessarily see this as a major change from rate policy though, as the language around the announcement was that the Fed is ‘skipping’ a hike – suggesting that more are still to come.

Right now, the CME FedWatch tool puts the chance of a rate hike in July at 67%.

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After a rough 2022, crypto has had a good run so far in 2023. Bitcoin is up over 44%, Ethereum has gained 30% and many other coins and tokens have experienced big runs year to date. But after many years of avoiding the steely glare of the regulators, the hammer appears to finally be coming down.

On the biggest targets is on the largest crypto exchange in the world, Binance, and it’s US (though supposedly independent) arm, Binance.US.

Last week the SEC announced it would be suing Binance.US and its CEO Changpen Zhao (commonly known as CZ) for fraudulent activities and mistreatment of consumer funds. Part of this lawsuit would see assets held by Binance frozen by the SEC, with Binance announcing as a result that they would be halting withdrawals from the platform as early as June 13th.

But it’s not just receiving a visit from the SEC. A similar lawsuit has been brought against the second largest exchange in the world, Coinbase alleging that like Binance.US, they are operating an exchange for unregistered securities.

Cardano, Solana and Polygon have also been delisted from Robinhood and Bakkt over the past week as those projects all face investigations. The total ‘blacklist’ from the SEC is much longer than that, with Ripple, Binance Coin, Tron, Algorand and a further 63 other coins or tokens considered by the regulator to be operating as unregistered securities.

What does all this mean? In the wake of the FTX collapse, the eyes of the law are very firmly fixed on crypto.

This week’s top theme from Q.ai

Bitcoin has often been referred to by its cheerleaders as ‘digital gold.’ So far, that’s not been shown to be true, with the volatility experienced by the biggest crypto in the world remaining incredibly high through multiple market cycles.

Gold, the real stuff, has long been considered a traditional hedge against inflation and a safe haven asset. Often when we see the world enveloped in crisis, the price of gold soars as investors look to move their cash into an asset that has just about the longest track record in history.

And as an alternative asset within a portfolio, gold does make a lot of sense. But it’s not perfect. For starters, it’s difficult and expensive to store, with investors in physical gold having to fork out the cost of securing the assets at their home (which is often impossible to insure), or paying to store it at secure premises.

This also makes it hard to buy and sell, especially compared to the instant transactions we’ve all become accustomed to.

Luckily, these days there are many ways to gain exposure to the gold price without buying the golden rocks. In the Gold Rush Kit, we task our AI with gaining this exposure through investment in gold mining companies.

As the price of gold rises, the stocks of companies that dig it up invariably rise too. Every week our AI looks at which of these are likely to benefit the most from the moves in the price of gold, automatically rebalancing accordingly.

It’s a cutting edge approach to the world’s oldest investment.

Top trade ideas

Here are some of the best ideas our AI systems are recommending for the next week and month.

Designer Brands (DBI) – The fashion company is a Top Buy for next week with our AI giving them an A rating in our Technicals and Growth factors. Earnings per share is up 0.4% over the last 12 months.

Inspire Medical Systems (INSP) – The medical technology company is a Top Short for next week with our AI giving them an F rating in Quality Value and a D in Quality Value. Earnings per share was -$1.53 over the last 12 months.

BGC Partners (BGCP) – The financial services company is a Top Buy for next month with an A rating in our AI’s Quality Value and Technicals factors. Earnings per share is expected to grow 18.84% in 2023 according to Capital IQ.

Drive Shack (DSHK) – The entertainment company is a Top Short for next month with our AI giving them an F rating in Technicals and Low Momentum Volatility. Earnings per share was -$0.62 in 2022.

Our AI’s Top ETF trades for the next month are to invest in oil and gas equipment and services, US regional banks and semiconductor stocks and to short Asian-Pacific stocks (ex-Japan) and global materials stocks. Top Buys are the SPDR S&P Oil & Gas Equipment & Services ETF, the VanEck Semiconductor ETF and the SPDR S&P Regional Banking ETF and the top shorts are the iShares MSCI Pacific ex Japan ETF and the iShares Global Materials ETF.

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