I’m standing alone, you’re weighing the gold, I’m watching you sinking Fool’s gold Stone Roses

Before we head into the broader economic picture, a quick word on the cryptocurrencies that finally appear to be proving to be what many suspected, a fool’s gold. The falls that have taken place in the past few weeks underline how much this asset is not a safe haven or a store of value as the real yellow metal is considered to be. Bitcoin is, I believe an indicator of risk appetite, when speculators feel optimistic they buy in times of stress and sell. It is not a store of value but a geared play on risk appetite and those who own it for any other reason are misguided. The current sharp falls could be a sign of capitulation in risk appetite.

US stocks entered a bear market this week, defined by a 20% correction as investors continue to fear that the Fed will be unable to tighten monetary policy to a degree that slows demand enough to bring down inflation rates engineering an economic slowdown. However, at the same time managing to avoid an economic recession.

The Bank of England are facing the same difficult task and to discuss this I was asked to appear with @Liam Halligan on GB News to discuss the latest GDP data. The quarterly GDP report released on Thursday confirmed a decline in growth driven by discretionary consumers tightening the belt as the well-documented cost of living has bitten into spending.

Another of Mr Halligan’s guests, Fraser Brown Managing Director MotorVise, gave a fantastic insight into the consumer picture and how demand can change. Mr Brown reported that the decline in demand for cars in April was dramatic. Supply remains an issue for parts. Central Banks cannot impact supply but they can slow demand, as we said earlier it is how much they engineer a slow down in demand. A few weeks ago getting a car deal was non-existent in the coming months that chance may increase.

Equity sentiment is becoming extremely bearish. The AAII retail investor survey enforces the view retail investors are very nervous. Wednesday’s inflation report did indicate inflation rates may have peaked but remain elevated. The drawdown in technology shares is reaching similar levels to that seen during the height of the pandemic fears. Various technical indicators, from macro houses for example BCA Research, suggest that the market is in oversold territory. The S&P 500 has fallen around 5% in the past few days, and during the same time the Vix index has fallen. This would suggest we due to a technical bounce in stocks. US ten year yields are now back below 2.9%, time for a growth rally.