Strong manufacturing data indicates the economy is entering a sustained growth cycle, creating an attractive environment for broad risk assets heading into September.

Investors should use recent market pullbacks as an opportunity to accumulate Bitcoin (BTC), which is currently in an accumulation phase and historically surges during the later stages of macroeconomic expansions.

Monitor upcoming ISM Manufacturing readings to ensure metrics remain above 55, which will confirm continued economic momentum.

Finally, track Crude Oil (OIL) prices closely, as energy-driven supply shocks remain the primary inflation risk that could prompt central banks to raise interest rates.

Cryptocurrencies & Digital Assets (BTC)

• Macroeconomic expansion is cited as the primary driver for cryptocurrency market rallies, rather than traditional narrative catalysts like four-year halving cycles
  • Cryptocurrencies historically behave as the last asset class to take off once broader economic expansion takes hold
  • Current economic growth indicators point to the market being in a prime accumulation phase before the largest phase of the cycle begins
• Bitcoin (BTC) experienced a recent sell-off driven by market expectations of potential interest rate hikes following the Jackson Hole symposium
  • This reaction may be overstated, as monetary authorities have not explicitly committed to aggressive rate hikes that would disrupt economic growth

Takeaways

• Consider accumulating crypto assets like BTC during periods of confirmed economic expansion, as they typically see significant momentum late in the cycle
• Monitor September economic indicators to confirm if broader macroeconomic growth continues to support risk assets

Broad Risk Assets & Macroeconomic Cycle (MACRO)

• Key manufacturing and business cycle metrics show the economy is shifting deeper into an expansion phase (readings above 50 indicate growth)
  • The proprietary CCV Business Cycle Index printed at 55.2 in August, up from 53.7 in July and 47.6 from the previous year
  • A formal confirmation requires three consecutive monthly prints above 51, making September the critical deciding month
  • National ISM Manufacturing PMI printed at 55.6, with New Orders at 56.7, Production at 58.5, and manufacturing employment expanding for the first time in 36 months
• Discrepancies exist, such as the Chicago PMI falling sharply to 47.1, but regional Federal Reserve data across five districts (Philadelphia, New York, Dallas, Kansas City, Richmond) all reflect positive expansion
• The primary downside risk is supply-side inflation forcing the Federal Reserve to aggressively hike interest rates, which could prematurely restrict economic growth

Takeaways

• Watch upcoming ISM Manufacturing and regional economic prints; a print sustained above 55 reinforces a favorable environment for risk assets
• Prepare for potential market volatility if economic numbers unexpectedly drop below 55 or if the Fed adopts more restrictive policies

Crude Oil (OIL)

• Current inflation pressure is largely being driven by supply shocks in the energy sector related to geopolitical tensions involving Iran
• Raising interest rates does not resolve supply-side oil shocks, meaning monetary policy may not need to aggressively overreact unless high energy prices spread broadly into consumer inflation
• The base-case expectation presented is that elevated oil prices are temporary and will eventually decline, removing the primary inflation risk hanging over the economic expansion

Takeaways

• Track oil price trends as the primary catalyst for inflation risk, which dictates whether central banks might raise interest rates and pressure risk-on markets