Global stocks and crypto sag as investors brace for a blockbuster FOMC meeting

Good morning.

U.S. futures are trading lower ahead of the big two-day FOMC meeting that gets underway today. Wall Street believes we’ll see a more hawkish Fed emerge from these meetings, putting investors on edge.

Crypto, meanwhile, has proven to be an unreliable safe haven as we ponder a world of tapering and tightening. Bitcoin is flat today, but it’s been trading below its 200-day moving average over the past week.

In today’s essay, I try to handicap what to expect from the FOMC meeting and what it means for stocks. In that essay, I share Goldman Sachs’ “Top 10” picks for the year-ahead.

Before we get into that, let’s see what else is moving markets.

Markets update


  • Asian markets tumbled on Tuesday with the Hang Seng down 1.3%.
  • Omicron has landed in mainland China, authorities confirm. Patient zero is a traveler who is now in isolation at a hospital in Tianjin, outside of Beijing.
  • Shares in Weibo fell nearly 9% at one point on Tuesday after Chinese regulators slapped a 3 million yuan ($470,000) fine on the social media giant.


  • The European bourses rose out of the gates, and then began to sell off. The benchmark Stoxx Europe 600 was up 0.1% two hours into the trading day. The big leaders at the open were the banks, insurance and construction.
  • Shares in Ocado Group opened 4.2% higher even as the e-commerce grocery giant delivered a top-line miss, hurt by labor shortages.


  • U.S. futures are again a blur of red. That’s after the Nasdaq shed 217 points yesterday, to close 1.4% lower.
  • Shares in Amazon fell 1.5% yesterday—it’s essentially flat over the past six months—after workplace-safety investigators at OSHA opened a probe into this weekend’s fatal warehouse collapse in Illinois.
  • Tesla closed below 1,000-bucks-a-share yesterday, hitting an eight-week low. And, it trades lower in pre-market after news broke yesterday that Elon Musk had offloaded another 934,000 shares. The bad news for Tesla bulls: he’s still not done selling.


  • Gold is flat. It trades around $1,785/ounce.
  • The dollar continues to outshine its rivals.
  • Crude is flat. Brent trades above $74/barrel this morning—largely unchanged over the past week.
  • Where are the crypto dip-buyers? Bitcoin trades around $47,000, flat over the past 24 hours. Ether is doing about the same, treading water below $3,800.


Fed up, Fed down

FOMC Day (the first of two) is here, and investors are a bit on edge.

A reminder: Federal Reserve chair Jerome Powell will make a series of statements tomorrow at his news conference that fall under the benignly named “Summary of Economic Projections,” or SEPs.

The SEPs are a big deal. In them, you get the central bank’s thinking on inflation, the labor market, the plan to wind down asset-purchases and, gulp, when the markets can begin to expect a change in the federal funds rate.

As Berenberg Capital Markets chief economist Mickey Levy reminds us in yesterday’s investor note, “in its September SEPs, the FOMC members were evenly split between the appropriateness of waiting until 2023 before raising rates and raising them by year-end 2022.”

That’s about to change—in a big way.

Wall Street is now banking on the Fed wrapping up its asset-purchases program by March, and, a few months later, introducing a series of interest rate hikes. Goldman Sachs, for example, is sticking with a baseline forecast that calls for three hikes in 2022, the first in June.

The markets have already been pricing in this new chapter in Fed policy, with investors flocking to a smaller and smaller number of winning stocks. You can see this play out on the Nasdaq, and the S&P 500. A small basket of high-quality tech stocks—there are just five in all—are driving the bulk of equity returns right now. Those five are—repeat after me, everyone—Apple, Microsoft, Nvidia, Google’s Alphabet and Tesla.

By Goldman’s calculation, this Fab Five accounts for more than one-third of stock-market returns this year.

That looks like an unhealthy picture. But there are plenty of reasons to remain bullish about the year-ahead.

“While difficult to predict,” the Goldman equities team writes, “the risk of a recession appears low. Earnings and margins continue to surpass expectations. Meanwhile, nominal and real rates are expected to rise but remain low over the coming months, supporting the backdrop for both valuation and equity demand.”

That said, a hawkish Fed could fundamentally alter what we’ve come to understand of “equity demand.”

Goldman, for one, thinks we’ll see a flight to quality. Translation: high growth, high margin companies are in. Which ones are those? The firms that are growing their business and have healthy cash flow. Out will be…loss-making momentum stocks.

Sticking with the former category: Some names in Goldman’s “Top 10” include: Mastercard, United Therapeutics, Nvidia, Aspen Technologies, Marvell Technology and Autodesk. Incidentally, Nvidia is the only one of the current Fab Five (above) to crack the top 10.

In general, rate hikes pose a headwind for stocks. But not all stocks.


I hear you. You’re pretty incredulous that Bull Sheet is winding down at the end of the week.

Yesterday, I responded to several dozen reader emails, and, in the process, I got the chance to chat with many of you for the first time. I even got introduced to some of your dogs. Thanks for sharing those photos! That really made my day.

I promise to you I will respond to all of your notes. It may take me a few days to work through the queue.

Un abbraccione, da Roma.


Bernhard Warner

As always, you can write to or reply to this email with suggestions and feedback.

Today's reads

Here’s what 8 financial planners say you should do with your money during inflationFortune

Companies are opening digital headquarters in the metaverse where employees can ‘return’ to workFortune

How much 2022 home prices are forecast to shift in each of America’s 100 largest marketsFortune

Shareholders Press Facebook for Governance ChangesWall Street Journal

Market candy

Quiz time

Sentimental me... At what level was the Nasdaq trading, pre-market, on the morning of January 21, 2020? Why Jan. 21? Because on that day, Bull Sheet historians remind me, this here newsletter launched... Anyhow, back to the quiz. The Nasdaq that traded at which of these levels:

  • A. 9,389
  • B. 12,034
  • C. 10,989
  • D. 17,034

The answer is A. The tech-heavy index is up an impressive 64% since the inaugural Bull Sheet newsletter, which means that had you invested a grand in a Nasdaq-linked ETF, you'd be sitting on $1,640 right now.

This is the web version of Bull Sheet, a no-nonsense daily newsletter on what’s happening in the markets. Sign up to get it delivered free to your inbox.

Read More

CEO DailyCFO DailyBroadsheetData SheetTerm Sheet