💥Hoo looks troubled?💥
Owlet Inc. ($OWLT), a Thrasio Update (with UCC bombs), C1, Eiger Biopharma, Local Bounti + More
We last cast our jaundiced eye on Mr. Market the day after April Fools Day, declaring Fed Chairman POW-ell our first-quarter MVP. And why not? Incoming data supports the idea of “growth,” or at least the receding possibility of recession, even in the face of higher rates for longer. Don’t believe us? Do you believe Apollo’s Dr. Torsten Slok?
And “growth” is good!
We commend Chairman POW-ell for refusing to submit to the cheap money mob, which during the Bernanke/Yellen era expected every market hiccup to be rewarded with a new round of credit creation. Can you imagine how much higher consumer prices would be if he had? You may have heard that CPI printed hotter than expected in March. This was its third consecutive hot print, and look where lines are pointing:
The Fed doesn’t look at CPI, you sniff. Yes, we do know the Fed’s preferred inflation gauge is PCE (also not looking great):
But the hit-crazed media looks at CPI; it’s a good means of rattling the electorate. The political class looks at CPI. And market participants look at CPI, it being a critical datapoint for the Fed’s “reaction function.”
Okay then. The hot print in January was just the US Bureau of Labor Statistics’ usual “seasonal adjustments.” February? That was energy prices (said somewhat nervously). But three hot prints in a row? That’s not a “slight bump,” nor is it a “temporary pause in the trend toward lower inflation” that has been the market’s most fervent hope since early November.
So about that June rate cut?
Whoa boy. That’s quite a market shift. Higher for longer indeed. There’s many a sponsor, private credit provider, and debtor who’d hoped to ride out an interest rate option who are all questioning existence at the moment. Never time the market they say!
But let’s talk timing, actually. Like, November. The 10Y Treasury last hit 5% on Oct. 31. Then, on Nov. 1, POW-ell at his presser provided the impression the Fed was finished for the cycle. Volatility plunged. But over the last couple of weeks, it has risen back to its highest level since November:
Nothing to see here, folks.
Treasuries got a modest bid at the end of the week; the latest war talk out of the Middle East is supportive. Ultimately, though, the timing of the first rate cut is less important than the terminal rate. If we are to trust the data, the U.S. economy performs perfectly well with Fed Funds at 5%, which raises any number of interesting issues. Maybe especially for this one big borrower:
Which we are confident has no correlation to how these people are feeling:
If another rough print comes in next month we may start hearing chatter of no rate cuts until ‘25. Either way, POW-ell called it: higher for longer indeed!
⏩One to Watch: Owlet Inc ($OWLT)⏩
Incessant crying, dirty diaper changes, the occasional scare of a high fever. Ah, the beauty of parenthood.
We can sympathize with all new parents out there and we would point these overworked and baggy eyed guardians to Owlet Inc ($OWLT).
The company is a seller of what can only be described as “fancy” baby monitors.