Unexpected World Cup and overreactive markets

The World Cup, which keeps most of the non-US population on tenterhooks, has proven to be the World Cup with the most unpredictable results. The current market is acting similarly:

The Fed finally raised interest rates this week by a half percentage point. It was expected, and people in the investment world had been waiting for this news for a week. And even when they saw this hike coming...??

The markets reacted badly. Powell's aggressive tone scared the markets: the Fed could raise rates more aggressively in the future, or at least do not expect the Fed to lower interest rates.? In addition, retail sales have fallen more than usual for this time of year. Fears of a stronger-than-expected recession are everywhere. DJIA, S&P, and NASDAQ are down at the time of writing and have been since yesterday.

And it was expected that if rates rose, bond prices would fall. Treasury yields deteriorate, which would drive up the price of gold as traders would go to a "haven" asset. That is the theory, but if we look at the metal prices, we will see that although it has a higher value at this date than a month ago, it has been falling during the week.

Bitcoin would be expected to go higher. If money is not going to gold, it must be going to crypto, says the theory, and we are encouraged by the Crypto-Bros. A look at the BTC price shows that while it rallied in the last week (to USD 18,244 per BTC), it has done nothing but fall in the last 24 hours. Confidence is a bird that is easily spooked and slow to return. FTX left the bitcoin market very messed up. Our bet? BTC to USD will be more and more correlated to US equities.?

FTX left the crypto market very messed up. Because of the collapse of the exchange, the (very) shady way it was run, and the fact that its founder went to jail, crypto startups have gotten the least amount of investment since 2020.

But Bankman is not the only CEO losing billions. Musk is no longer the wealthiest man in the world. According to Forbes, after Tesla's price drop, LVMH CEO Bernard Arnault now holds that position. Arnault put together the world's largest luxury brand conglomerate with brands like Louis Vuitton, Tifanny, Tag Heuer, and Celine.

Speaking of expensive luxuries, the birdie has been very expensive for Musk. Tesla's falling share prices are directly related to its $44 billion acquisition of Twitter. The electric vehicle brand's stock valuation is the lowest since 2018.? Musk speeds up this trend by selling another 22 million TESLA shares and making a whopping USD 2.6 billion.?

And who is winning the world of company size by market capitalization? Apple is bigger than Google, Amazon, Tesla, and Walmart combined.

Other big tech companies are shrinking in size as well as market value. Big tech companies in the United States and worldwide are laying off many employees. That's 60,000 employees laid off in November of this year alone.

And how is the real estate game? There are no significant surprises here;

• Applications for new mortgages in the U.S. grew 4% this week compared to last, given a slight reduction in mortgage rates recorded weeks ago.?
• The significant constraint on sales growth in the single-family housing market is the affordability of the average home. We are talking about high mortgages, prices, and relatively low inventories. The single-family housing team is not going forward or backward.
• Will this cause a significant housing crisis in the single-family housing market? No, there are no systemic conditions like in 2008. A global recession will reduce the appetite for housing, and housing prices will have to give way at some point. We do not foresee a sharp drop but rather a "plateau."
• And the goals that single-family housing does not make, multifamily housing does. High prices, low inventory, and high mortgages; will remain high in 2023. This translates into higher demand for rental housing (somewhere you have to live)—good news for those investing in and developing multifamily housing solutions.

Our take: Nothing is set in stone anymore. Nothing. We can only be sure of a few things that won't change much in 2023. For example, multifamily real estate will always be safer and more predictable than single-family homes, offices, gold, shares of companies run by impulsive geniuses, or crypto applications that move on the edge of what's legal and morally correct.