Pro Perspectives 9/7/21

September 7, 2021

We ended last week discussing a jobs report that showed weaker job growth, but hotter wage growth.

As we discussed, a return to stronger job growth will likely come this month, as incentives have shifted in favor of promoting a return to work, for the unemployed (as opposed to saying home).  And the wage growth, which has already trended hot for many months, we should expect to continue to trend "hot."

With that, we had a move in the interest rate market today, in anticipation of the Fed 'beginning the end' of QE, maybe as early as next month. 

As you can see in the chart above, we closed today testing the highs of the past month on rates.  This will be key to watch in the coming days for a potential break higher.   That would be, at least short-term, positive for the dollar, and likely negative for commodities.  We've seen this manifestation today. 

Another big mover today:  Bitcoin.

After climbing back to $50,000 over the past month, Bitcoin declined as much as 17% today. 

Was the decline influenced by rising rates?  Was it influnced by the news that a third world country (El Salvador) would be the first to adopt bitcoin as its national  currency?  Don't know. 

What is a risk to bitcoin, which is coming down the pike (soon), is the Fed's report on whether or not they see a viable path toward adopting a digital dollar (i.e. a central bank digital currency).  That report was promised by Jerome Powell, to be published and made public this month

Remember, we've talked about this over the past few months.  The Senate Banking Committee held a hearing on the prospects of a digital dollar back in June, where Elizabeth Warren described a central bank-backed digital dollar as "legitimate digital public money that could help drive out bogus digital private money (bitcoin, stablecoins, etc), while improving financial inclusion, efficiency, and the safety of our financial system." 

It's no secret that a consortium of 63 global central banks (the BIS – which includes every major central bank), has already promoted CBDCs as the "future of the monetary system." 

With that, expect some fireworks surrounding this report when it's released (again, sometime this month).  It's probably a good time to be long gold.