Mar. 22 Markets Report: Are We On the Brink of World War 3?

One month in, and the Russian invasion of Ukraine is mostly stalled. Peace talks are ongoing, but Russian forces continue attacking civilian infrastructure in the meantime — like bombing an art school in the city of Mariupol. And if you thought the stakes weren’t already high, Ukrainian President Volodymyr Zelenskyy warned that a third world war could break out if negotiations failed.

Across the pond, the Federal Reserve hiked interest rates by 0.25%-0.5% in an effort to slow down rampant inflation. The Fed also indicated that they will continue to raise rates for the remainder of 2022, and begin to reduce their $9 trillion balance sheet. All this means is that the cost of borrowing money is going to continue increasing. 

In positive news, weekly jobless claims came in at 214,000 — 15,000 less than last week. But the decreasing unemployment rate is still at risk. A highly contagious omicron variant called BA.2 is making the rounds in Europe and China. China has already reported its first few deaths from the latest wave, but fingers crossed that this variant is no more dangerous than its predecessors. 

What say you, traditional and alternative markets? Check out the details and get updates on more of your favorite asset classes below.

Curious how art has been performing since 2021? Well, Artprice just released their 2021 Global Art Market Report so let’s dive in.

According to Artprice, $17 billion worth of art was sold last in 2021 — up 60% from the previous year. The Western market was responsible for $10.9 billion of this total, with $5.7 billion in sales coming from the US. China, on the other hand, edged past the US with $5.9 billion in sales. 

Only 0.2% of artworks were sold for over a million dollars, but that small percentage accounted for more than $8 billion. 167 works fetched over $10 million, which represents a doubling since 2018. 

The two most expensive artworks sold last year are: Picasso’s Femme assise près d’une fenêtre (Marie-Thérèse) ($103.4 million) and Jean-Michel Basquiat’s In This Case ($93.1 million). Even Beeple’s Everydays NFT ($69.3 million) made an appearance on the list. The best-selling artists of 2021 include Picasso, KAWS, Warhol, Banksy and Murakami — with Bansky pieces fetching even higher prices than legends like Salvador Dali. 

Also worth mentioning, the rate of unsold pieces stood at 31% — its lowest in years. It makes sense that demand would outstrip supply in these macro conditions, with the wealthy often using art to hedge against inflation (ehm.. and avoid taxes). 

These days, you don’t have to be an oligarch to invest in art. With Masterworks, you can buy fractional shares in Blue chip art, from Andy Warhol, Banksy and George Condo to Kaws and Basquiat. Speaking of the Neo-expressionist master, the Basquiat that sold for $93.1 million last year was initially purchased for only $1 million — a 9,210% ROI.

Crypto prices bounced back this past week — regardless of interest rate hikes, rising Covid cases, ongoing war and supply shocks. BTC and ETH peaked at around $42K and $2.9K respectively, before they ran out of steam. As of writing this, they’re still up for the week. But it’s not clear whether crypto has the momentum to keep climbing. 

Speaking of ETH, Ethereum co-founder Vitalik Buterin was recently featured on the cover of TIME Magazine. But rather than focusing on the interview, Twitter was more interested in his cover photo. Namely, the fact that Vitalik looks like a scrawny version of Tom Brady.  Apparently, “The Prince of Crypto” wasn’t even familiar with the legendary football player (he thought people were referring to Tom Cruise). Tom Brady, on the other hand, was humble enough to reply that he is a big fan of Vitalik’s.

Yuga Labs, the company behind Bored Ape Yacht Club (BAYC), has been on a roll this past week. Fresh off the heels of acquiring CryptoPunks, they announced the release of ApeCoin (APE) – with 62% of the APE supply being airdropped to BAYC owners. As expected, the crypto community went absolutely batshit as APE pumped and dumped several times over the course of 4 days. All in all, APE’s market cap is sitting at an impressive $2.7 billion right now.

Another week, another crypto bill. This time, Ukrainian president Volodymyr Zelenskyy signed a bill called “On Virtual Assets” that legalizes and establishes a regulatory framework for cryptocurrencies. 

Regulation doesn’t sound all bad with the amount of DeFi exploits we’ve had this past week:

• Agave and Hundred Finance DeFi protocols exploited for $11 million.
• Deus Finance hacked for over $3 million.
• Li Finance drained for $600,000.

Of all the ways you could lose your hard-earned money in crypto, butter fingers has got to be the worst. Last week, a user accidentally sold a valuable rock NFT for 444 WEI (less than 1 cent) instead of 444 ETH ($1.2 million).

In other news, NFT institutional adoption is on the up and up. HSBC is the latest banking giant to enter the metaverse, buying a plot of land in The Sandbox that they intend to dedicate to sports, esports and gaming. 

GameStop is also jumping into Web3 with plans to launch a NFT marketplace by the end of July. Will the GameStop Apes pump the stonk leading up to the launch? Will GameStop release an NFT collection to rival Bored Ape Yacht Club (BYAC)? 

With all the hype around ApeCoin, it comes as no surprise that BYAC also dominated the NFT charts this week. Multiple Bored Ape NFTs have sold for hundreds of thousands of dollars in the last few days, with BYAC #32 fetching for 250 ETH ($720.43k).

Not content with dominating the NFT world, Yuga Labs recently released a trailer for their Bored Ape Yacht Club (BAYC) metaverse. If they actually pull this off come April, just imagine what that will do for BAYC and APE.

This past week, as investors gained more clarity on the Russia-Ukraine situation and the Federal Reserve’s next moves, the stock market took a dramatic turn for the better. Mind you, stocks are still seesawing between red and green from one day to the next. But the overall market posted its best weekly return this year. 

The Dow Jones popped +4%. The S&P traded over +6% higher and the Nasdaq Composite jumped +9%. Consumer Staples and Technology were leading the market with +7% gains this week, followed by the Retail and Energy sectors at +6%. 

Individual tech stocks had the strongest recoveries though, with favorites like Shopify and Block climbing 50%. Boeing, on the other hand, started tanking after news broke that a China Eastern Airlines Boeing 737 passenger plane crashed with 132 people on board.

The U.S. 10 Year Treasury Note was trading sideways at the tailend of the week as stocks rallied, but USD10Y has since spiked to a 2-year high of 2.3%.

Gold tends to sell-off when the Federal Reserve hikes interest rates or begins to tighten their balance sheet. But despite Fed hawkishness, the yellow metal isn’t doing as badly as expected. Sure, it dropped all the way down to $1,898 following the FOMC meeting, but gold has been quick to rebound and is heading back to $2,000.

Oil came off its highs for a minute there, with crude oil futures bottoming at $94 last week before resuming its bull run. With national average gas prices sitting at $4.25, some Americans are even turning to crime to relieve pain at the pump. 

News outlets have reported cases of gasoline theft across states like North Carolina, Texas, Pennsylvania, and Atlanta. This unfortunate state of affairs only makes the case for transitioning to renewable energy sources that much stronger. Easier said than done, though. 

According to the National Association of Realtors, sales of previously owned homes plunged 7.2% in February. The median price for these existing homes? $357,300 — a 15% increase from just a year ago. You’re probably already familiar with the usual suspects behind housing affordability: rising mortgage rates and low supply. 

There were only 870,000 homes left for sale at the end of February, a 15.5% drop year over year. And the majority of homes listed do not belong to the lower end of the market ($100,000- $250,000). So first-time buyers are being priced out. 

Not to mention, the average 30-year fixed mortgage is currently sitting at 4.5%, up a whopping 1.25% in just three months. And we haven’t seen the worst of it yet.

As mentioned above, the Fed gearing up to reduce its balance sheet, which mostly consists of Treasuries and mortgage-backed bonds. This so-called quantitative easing (QE) means that mortgage rates could rise higher still.