Crypto Leads 72% Surge With Trump Expected to Push the Envelope Further

What stood out last week was the performance of “disruption” (using ARKK as a proxy) which was up over 7% on the week! Up 16% in a month, and 72% in three months!

The outperformance of “disruption” makes sense as crypto enjoyed another very successful week.

The "Genius Act" was signed into law. For many administrations, this would likely be the culmination of their efforts on cryptocurrency, but we expect this administration to continue to push the envelope and encourage the development of a U.S.-dominated crypto world — with USD-based stablecoins becoming a critical part of that effort.

Much of this was already priced into Bitcoin, which finished the week basically unchanged (though it is up around 10% on the month). Altcoins outperformed Bitcoin (the disruption of disruption seems fitting) but we continue to like Ethereum. It surged almost 20% on the week and will likely be an even more important part of the crypto ecosystem as the industry moves to take advantage of the new legislation. ETHA, an Ethereum ETF, has seen its shares outstanding double since late May. The ETFs focused on Ethereum seem particularly inefficient, as they do not pass through any of the income that can be made by staking Ethereum. That is less of a concern for Bitcoin ETFs and is something that should lead to more product innovation to offer investors an alternative to participate in the total return of ETH, not just the price return.

With this major push behind us, it opens the door for more discussions on the sovereign wealth fund that was prominent early on but seems to have faded in terms of headlines. That would help our "national production for national security" theory.

Tariff Revenue

While we will get some earnings and likely some “interesting” headlines via social media, I will be looking to the U.S. Treasury Deposits Customs & Certain Excise Taxes data this week. Last month, the “big day” (there is one day that apparently captures most of the month’s tariffs) was $20 billion. It will be interesting to see how high that number comes in this month. There has been so little discussion about the budget surplus in June. While there were some potential “one-time” items, like June 1 not being a business day, pushing some spending into May, the tariff revenue is real. Also, the potential cumulative effects of tariffs are more likely to affect forthcoming economic data, than the headline numbers.

Next Week Is a Big Week

It is possible we get some trade deals this week. If not, next week will be even more important with:

• Jobs data. Last month delivered a healthy surprise (though much of it was tied to seasonals on government hiring). We don’t expect that to continue, but we didn’t think last month would be as strong as it was.
• The FOMC decision is important, but it will all come down to the press conference to see how Chair Powell reacts to all the pressure being placed on him to cut rates.
• The August 1 tariff “deadline.” The “deadline” that no one seems to believe will be an actual deadline, which could be a mistake on the part of markets. If we don’t start getting deals (with tariffs meaningfully lower than the rates set out in various letters), the market could start to get more nervous, unless there are clear signs that extensions are on the way. This is the one area where the market seems to be underpricing risk. I continue to like being overweight companies and sectors that can benefit from deregulation and a further push to national production for national security.

It seems clear that the week after next has a lot more potential to be “exciting” than next week, but that could turn out to be famous last words.

I'm really curious to see if “disruption” can continue to dominate the market returns. I'm not sure why it cannot, if we get some good news on the tariff front.