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Sometimes you gotta take the small wins when you get them. And this month delivered one.

On the heels of rising yields, equites have been in an absolute bloodbath. So much so that the Dow industrials had its worst day since March and is now officially in the red on the year.

The S&P is holding up a bit better, but is still down more than 5% over the past month.

As a result, the market’s panic meter – as represented by the Fear & Greed Index – has been cranking.

Now, the Fear & Greed Index isn’t anything to write home about. But we were inclined to look it up yesterday because we’re at that point where just about everything seems negative.

Seriously, look at the mainstream financial press… Talk to your friends and family… Read the room… When was the last time overall economic sentiment was this bad?

To no surprise, the index is currently screaming “extreme fear.” Yesterday, it fell to 17, just one tick above its most recent low of 16 last October. To put this into perspective, that’s only a few notches away from where the index was at when stocks were COVID crashing in March 2020. Pretty wild.

This all goes to say that the cracks are beginning to surface as investors are coming to the realization that a higher-for-longer interest rate environment is more and more likely.

Despite what the suits in Washington want you to believe, inflation has not been tamed yet.

We're also witnessing escalating corporate and small business bankruptcies, stagnation in the housing market due to 8% mortgage rates, and a sharp increase in credit card defaults. Excess savings from the Covid era have vanished. Capitol Hill is in chaos. The Fed still continues to print money. And when you throw in an ongoing debt crisis, you can almost see the writing on the wall.

You see, for the past year or so, the Fed has been desperately trying to cool down the economy. The intent was to curb demand, stabilize the job market, and suppress consumer spending, theoretically lowering prices. However, the US economy has defied expectations by displaying resilience, hinting at potential additional rate hikes.

Now remember, all of this comes at a time when a material amount of US Treasuries are about to roll over. This means the Treasury will issue new debt at steeper rates, intensifying an already precarious situation. Further complicating matters is the imminent maturity wall confronting banks and corporations nationwide.

It’s like if we raise rates… a debt crisis doom loop scenario slowly plays out. But if we don’t raise rates… inflation spirals out of control.

So put it this way: The Fed has boxed itself in a corner and is running out of options to achieve a “soft landing.”

To get to the point, though, all of this maelstrom has led to a selloff in bonds. It’s the big elephant in the room.

It has shown us that people are getting less confident in the U.S. economy and are actively offloading U.S. debt as a result.

Zooming Out:
Remember the “small win” we mentioned?

While stocks and treasuries have been falling over the last month, bitcoin is standing strong, up 5%.

Call it what you want, but in the midst of the ongoing economic sh*tshow, bitcoin has held astonishingly steady.

And while equities and treasuries are showing signs of “extreme fear,” bitcoin has been on a neutral island…

In the past, we’ve highlighted bitcoin’s divergence from equities, only to eat crow a week later. Is this time any different?

We don’t know.

But what we do know is that it’s time to buckle up. In the event of a recession, it’s going to be wildly entertaining to see how things play out. After all, bitcoin was an invention out of our last recession. How it will perform during its first one is anyones guess.

Bitcoin is boring as ever right now. And we’re here to tell you that’s a good thing. When the world's going crazy, maybe it's the steady ones who come out ahead.

TWEET OF THE WEEK

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