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TL;DR
- Crypto exchange FTX looks set to collapse after rival and early investor Binance pulls out of a last minute rescue acquisition
- Inflation has hit its lowest level since January this year, with the latest annual figure down to 7.7%
- The stock market responded emphatically with its biggest gains since 2020
- Top weekly and monthly trades
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Major events that could affect your portfolio
Back in 2008, the collapse of Lehman Brothers was a major turning point for the financial crisis. It shocked the financial system, caused a domino effect across the world and led to wide ranging changes to the way the industry is regulated.
Right now, it appears that FTX is doing the same thing for crypto in what’s been a crazy week for the sector. In the space of a few days, FTX has gone from a valuation of $32 billion in January this year, to venture capital fund Sequoia Capital writing down their $214 million investment in the company to $0.
The full details of the story are complicated, and we’ve covered the story so far here. The short version is that early investor turned competitor Binance announced they were going to dump their entire $529 million worth of FTX’s own token – FTT.
This caused a run on the platform as customers feared a liquidity crisis, which turned out to be well founded.
Binance then offered to save the day with an emergency acquisition (for a rumored $1), before pulling out of the deal the next day, citing concerns over their business practices and an investigation by the U.S. regulators.
Unsurprisingly, all this drama has caused crypto to tank. Over the past five days, Bitcoin is down almost 20% from its already low levels, Ethereum is down over 20% and other coins such as Chainlink and Ripple are down similar amounts.
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For the first time in a long time we’ve seen a meaningful reduction in the rate of inflation. That’s right, for once we’re not going to be talking about record highs in the rate of rising prices, with the headline annual rate of 7.7% now the lowest it’s been since January this year.
The figures for October have come in at 0.4%, a sizable difference to the 0.6% that analysts were projecting. Core inflation, which removes the often volatile food and energy sectors, slowed dramatically from the previous month, up 0.3% compared to 0.6% in September.
It’s good news all round really. It shows that the Fed’s series of record high rate hikes are finally doing their job and it’s also likely being aided by a global supply chain that is slowly going back to normal.
It also increases the likelihood that the Fed will be able to slow the pace at which they’ve been raising rates, as Jerome Powell suggested they would be aiming to do after the last FOMC meeting.
The market responded to the news in blistering fashion. The S&P 500 had its best day since 2020, opening up over 3% and climbing to finish the day up a massive 5.5%. The NASDAQ 100 was even better, finishing the session up 7.4%.
This week’s top theme from Q.ai
One person who’s likely to be particularly happy about the focus on the crypto markets and inflation figures this week is Mark Zuckerberg. His announcement of thousands of layoffs affecting around 13% of the Meta workforce have been pushed aside, but it doesn’t make it any less of a big deal.
It’s been a major theme in tech this year, with many companies reducing their headcount after growing too fast during the pandemic bull run. The list of companies who’ve reduced their numbers this year include, Stripe, Spotify, Coinbase, Lyft, Snap, Twitter, Peloton, Shopify, Netflix, Robinhood, Tesla and Microsoft.
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Yeah, quite a few.
You might think that’s bad news for their stock prices, but you might be surprised. Meta, for example, has seen their stock rocket up almost 25% this week. Depending on the reason behind a series of layoffs, it can actually be a bullish sign.
Sure, in the case of a company like Peloton there are real concerns over the future of the business. For ones like Meta though, layoffs tend to mean a leaner machine and greater focus on profitability, for a company that’s not in danger of disappearing overnight.
So after a year to forget for tech stocks, things could be starting to look a bit brighter. One of the ways we help investors is by utilizing AI to predict and rebalance exposure to different verticals in the sector each week, with the aim to generate the best risk-adjusted returns.
The AI-powered Emerging Tech Kit aims to predict the weekly performance and volatility of a universe of tech ETFs, large tech companies, growth tech companies and cryptocurrencies via public trusts. It then automatically rebalances investors funds, to provide the best mix.
Top trade ideas
Here are some of the best ideas our AI systems are recommending for the next week and month.
Hudson Technologies (HDSN) – The green tech company is one of our Top Buys for next week with an A rating in our Quality Value and Growth factors.Revenue has grown 78.2% over the past 12 months.
Heartbeam (BEAT) – The digital healthcare company remains our Top Short for next week with our AI rating them an F in Quality Value and Low Momentum Volatility. Net income was -$8.94 million in the 12 months to the end of June.
Intrepid Potash (IPI) – The fertilizer manufacturer is one of our Top Buys for next month with an A rating in our Growth and Technicals factors. Revenue has increased 50% over the last 12 months.
Shiftpixy (PIXY) – The gig work company is one of our Top Shorts for next month with our AI rating them an F in Low Momentum Volatility and Quality Value. The company lost over $40 million in the year to May 31st.
Our AI’s Top ETF trade for the next month is to invest in Spanish and German equities and U.S. small-caps and to short consumer staples. Top Buys are the iShares MSCI Span ETF, the Schwab US Small-Cap ETF and the iShares MSCI Germany ETF. Top Shorts are the iShares U.S. Consumer Staples ETF and the Vanguard Consumer Staples ETF.
Recently published Qbits
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