Return Of The Bull Market? | On The Margin Round Up

Episode Summary

Executive Summary: The episode centers on crypto’s sharp rally, sparked by BlackRock and other spot Bitcoin ETF filings, and broader market strength driven by liquidity, falling inflation, and fiscal/monetary dynamics. Jack and Mike also debate whether a recession has merely been delayed, discuss stress in banks, private markets, and UK inflation, and conclude that while risk assets may keep benefiting, the macro backdrop remains fragile and uneven.

Main Topics: Spot Bitcoin ETF wave and crypto market response (Priority: 5/5): The hosts discuss BlackRock’s surprise spot Bitcoin ETF filing and follow-on filings from Invesco, WisdomTree, and Bitwise, arguing that institutional validation helped drive Bitcoin higher and improve crypto sentiment. Bitcoin dominance as a cycle indicator (Priority: 4/5): They explain Bitcoin dominance as both a secular and cyclical metric, with Bitcoin typically leading at the start of a recovery and outperforming more speculative assets when markets are healthier. Why markets have rallied: liquidity and inflation (Priority: 5/5): A long discussion on why stocks and crypto have risen, with emphasis on Treasury issuance, Fed QT mechanics, reverse repo outflows, lower volatility, and especially falling inflation and energy prices. Recession debate and the lagged effect of Fed tightening (Priority: 5/5): They revisit whether the expected recession has simply been delayed, noting long and variable lags from monetary tightening, but also arguing that last year’s drawdown may have been the recession-like phase and that the economy has stayed more resilient than expected. Banking stress and credit conditions (Priority: 4/5): The hosts discuss pressure on regional banks from higher deposit costs and compressed net interest margins, contrasting this with stronger large banks and noting tightening lending conditions in commercial real estate and loans more broadly. Private market stress at Tiger Global and Sequoia (Priority: 3/5): They interpret signs of stress in late-stage private markets, including Tiger Global opening its portfolio to individual bids and Sequoia splitting funds, as evidence that frothy venture and growth investing has reversed. UK inflation and guilt-market turmoil (Priority: 4/5): They contrast UK inflation with the U.S., noting severe inflation and rising gilt yields, and explain that mortgage structures in the UK transmit rate hikes more forcefully than U.S. fixed-rate mortgages.

Key Arguments: BlackRock’s spot Bitcoin ETF filing matters not just because of size, but because BlackRock rarely ‘shoots blanks,’ signaling serious institutional intent. Bitcoin tends to lead healthy crypto rallies, while more speculative tokens often outperform only at the frothy end of bull markets. The market rally is partly explained by mechanical liquidity factors: reduced Treasury bill issuance from the debt ceiling, slower QT, reverse repo drawdowns, and lower volatility. Falling inflation—especially energy disinflation—is one of the strongest supports for risk assets and higher equity multiples. The recession call has not yet played out; the most plausible explanations are either delay due to policy lags or that the recession-like move occurred in 2022. Regional banks are under pressure because deposit costs rose rapidly while loan yields lagged, compressing margins and encouraging lending pullback. Private-market players that pushed into unfamiliar, frothy territory may be now facing liquidity stress and possible forced selling. The UK faces more acute inflation and interest-rate transmission than the U.S. because many mortgages reset after a short fixed period. AI may still be in an early-to-middle adoption phase, but the narrative has gotten ahead of actual investing behavior. Technology and finance layoffs have created a white-collar recession, even while broader labor-market data remain resilient.

Data Points: BlackRock AUM: $9 trillion - Mike cites BlackRock’s scale when discussing the spot Bitcoin ETF filing. BlackRock ETF approval record: 575 to 1 - Used to emphasize BlackRock’s strong historical approval odds with the SEC. Invesco AUM: $1.4 trillion - Referenced as another major issuer entering the spot Bitcoin ETF race. WisdomTree AUM: $90.7 billion - Cited as part of the follow-on ETF filing wave. Bitcoin dominance: ~51% - Described as the share of total crypto market cap held by Bitcoin at the time of discussion. Bitcoin dominance in 2016-2017: 90%–95% - Used to illustrate the secular decline in Bitcoin’s share as crypto expanded. Bitcoin weekly price move: about 20% - The hosts discuss Bitcoin’s strong one-week rally following ETF news. NASDAQ YTD performance: over 30% - Mentioned as part of the broader market rally beyond crypto. S&P 500 YTD performance: well over 10% - Used to show that equity strength is broad-based. Treasury upper range / Fed funds: 5.5% - Referenced as the expected upper bound after another Fed hike. Fed hike probability for July meeting: close to 80% - Market pricing discussed in the context of Powell’s hawkish guidance. Bank of England hike: 50 basis points - The BoE’s rate increase used as evidence of higher-for-longer global policy. Sterling overnight rates expectation: above 6% by year-end - Market pricing in the UK rate outlook. UK CPI inflation: around 8% - Used to highlight the severity of UK inflation relative to the U.S. and Euro area. Fed rate hike start: March 2022 - Referenced when discussing the long and variable lags of monetary policy. Monetary policy lag: about 18 months - Traditional timeframe cited for Fed tightening to affect the economy. Government deficit: $2 trillion a year - Used to argue fiscal policy is still highly expansionary. Technology jobs share: 4% of American jobs - Used to argue that tech layoffs, while visible, do not represent the entire labor market.

Pivotal Quotes: "BlackRock, they tend to not shoot blanks." — Mike Ippolito: Commenting on why the spot Bitcoin ETF filing is being taken seriously by the market. "You kind of want to own Bitcoin at the beginnings and the ends of bull markets." — Mike Ippolito: Explaining Bitcoin’s role as the early and late leader in crypto cycles. "Being early is the same thing as being wrong." — Jack Farley: Used in the discussion about recession forecasts and slow-moving macro stress.

Implications: Risk assets may still benefit from liquidity and disinflation, but the macro setup is uneven: recession risk, bank pressure, and private-market stress remain unresolved. Bitcoin’s institutionalization could strengthen its role as the crypto benchmark.