Recession, Elections, Inflation and………What’s Next?

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Well, it’s happened. Or, is happening.

Global economies have put the Covid19 pandemic in the rear view mirror (oh, except China) with a huge sigh of relief. But as eyes come off the rear view mirror and focus on the front windshield, a whole new sense of “panic” looms. A head on collision? WTF? A health/medical scare has turned into financial uncertainty. What’s THIS about?

Ironically as the pandemic subsided and life began returning to whatever normal is anymore, the fintech, crypto and digital asset sectors flashed huge warnings. Those sectors, which were expected to flourish as Covid19 diminished began an unrelenting downturn. Investors in those sectors realized that consumers, “locked up” and armed with tons of pandemic “relief/rescue funds,” HAD to spend on something. And they did. Fintech, crypto and digital assets were the beneficiaries. But those consumers (stay at home traders?) had moved on.

So, with Covid19 in retreat, doors were again opened and those consumers were unleashed on the economy. No more buying bitcoin, fintech startups or “established” tech stocks. Nope. Cars, travel, entertainment and larger homes were the “new cryptos.” Buy, buy buy. But while those sectors were booming, the digital asset, fintech and cryptocurrency sectors were going into free fall.

Ah, but as all this pent up demand for travel, cars, entertainment, etc. sprang to life, so did the prices for those “things.” Classic. Shortages of “stuff” and lots of demand for that “stuff” results in…..ta da……INFLATION. Well, after quite some time, this inflation thing caught the eye of the ever shrewd Federal Reserve. No sneaking up on that group.

So, recognizing that this inflation “thing” wasn’t just transitory, the Fed has set out to slay the inflation dragon. Interest rates to the moon. Or Mars. But, spoiler alert, these interest rate hikes WILL cause a recession. How bad a recession? Based upon how the crypto, fintech and digital asset sector behaved, oh my.

With inflation locked in place and a recession all but insured, the “wild card” is the U.S. mid-term elections. How will they turn out? When will the results actually be known? Will there be challenges/recounts? How will financial markets react? Pretty sure nobody knows, right? Certainly more uncertainty to look forward to.

What’s next? Perhaps a great corner to look at is the fintech, digital asset, crypto and blockchain sector. Are there signs that those groups have bottomed? Maybe, maybe not.

But that sector seems to have become the financial market leadership of the future.