Memes Fades, Ethereum Rocks, USD Stays Firm
As we highlighted early on, the meme stock madness led to some equity market liquidation on fear of hedge funds blowing up, or having to sell winners to raise cash. There has been a clear inverse correlation between broader equities and meme stocks in the past week and with the craze crashing down, the market has quickly bounced back. As we wrote earlier in the week, this was just a thing that happened, not a sign of an imminent change in the market or the economy.What's more of a puzzle is the US dollar, which was strong again on Tuesday even as risk appetite picked up. It's still early and it could be flows but we're seeing stronger signs of the death of the old 'risk trade'. There is increasing evidence that US growth is going to outperform in 2021 and 2022; closing the covid output gap well ahead of others. With the US continuing to pile on fiscal stimulus, there's a very good chance the Fed is the first to hike.
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