‘The Stock Market Is Not The Economy’

Daily Updates:

• Equity markets across the globe have all moved up amidst a return to a more risk-on environment. The S&P 500 advanced 0.8%, bringing it just shy of its ATH in mid-February 2025. The Nasdaq-100 on the other hand, surged 0.94% in yesterday’s trading session to a new record level. 
• With those moves up, the VIX index fell to a low of 16.59 after exceeding 52 at the peak of April’s tariff drama.
• In Asia the Nikkei-225 closed 1.43% higher today while Europe’s STOXX 600 is currently up 0.81%. 

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• BTC is currently trading rangebound between $106K and $108K, as ETH also stabilises between $2400 and $2500. Implied volatility levels continue to decline for options on both assets. 7-day BTC options currently trade with an implied volatility now below 30% – that has resulted in an even steeper term structure of volatility for BTC options, as 180-day options comparatively trade with an IV exceeding 43%. 
• ETH’s volatility term structure exhibits a flatter slope relative to BTC’s, though looks poised to end the month of June, which has been characterised by a number of term structure inversions, with an upward sloping curve. 

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• Yesterday evening, US Commerce Secretary Howard Lutnick said that the US and China had finalised a trade agreement based on their discussions last month in Geneva.
• According to Lutnick, the deal with China had actually been signed two days ago and includes a plan for China to expedite its delivery of rare earth materials – “They’re going to deliver rare earths to us” and once they do that, “we’ll take down our countermeasures," Lutnick told Bloomberg News.
• He added that the White House is also imminently close to agreements with 10 other major trading partners – “We’re going to do top 10 deals, put them in the right category, and then these other countries will fit behind”. 

• A spokesperson for the Chinese Commerce Ministry confirmed Lutnick’s comments: “Recently, with approval, the two sides further confirmed the details of the framework. China will review and approve the export applications of controlled items that meet the conditions in accordance with the law. The United States will cancel a series of restrictive measures taken against China accordingly”. 

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• That’s not the only positive headline that may have bolstered US equities either. 
• The US Treasury department has called upon Congress to remove a provision in President Trump’s flagship “big, beautiful” bill that would have allowed the US government to raise taxes on companies and investors from countries that it deemed to have punitive tax policies, namely a number of OECD countries. This was a provision that had spooked much of Wall Street. 
• Treasury secretary Scott Bessent said yesterday that there was no need for the measure anymore given the US had secured an “understanding” with other members of the G7, which dominate the OECD.
• He said that, under the deal, which the G7 would seek to implement in coming weeks and months, “OECD Pillar 2 taxes will not apply to US companies”.
• Pillar 2 of the new OECD regime, which started to take effect this year, introduces a global minimum 15% corporate tax rate.

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• The probability of a July rate cut, something Chair Powell has seemingly poured some cold water on during his recent FOMC presser and testimonies to Congress is steadily increasing – now at 20% according to CME’s FedWatch tool. 
• Data yesterday showed that the US economy shrank at a 0.5% annual pace in Q1 2025, an unexpected deterioration from the earlier estimate that showed a smaller 0.2% decline.
• Growth was weighed down by a surge of imports, which expanded 37.9%, the fastest since 2020, and pushed GDP down by nearly 4.7 percentage points.
• Spending on services contributed 0.3 percentage points to GDP in the first three months of the year, the least since the second quarter of 2020 – a sharp revision from the previously reported 0.79 point boost.
• Overall, consumer spending rose at 0.5%, more than half of the previously reported 1.2%.
• Former Federal Reserve economist Claudia Sahm, known famously for her recession indicator the ‘Sahm rule’, said “the downward revision to consumer spending today is a potential red flag”. 
• The weakness in the economy doesn’t end here either – the number of recurring applications for US unemployment benefits rose to its highest since November 2021, a sign that more people are staying out of work for longer. Continuing claims, a proxy for the number of people receiving benefits, increased to 1.97M in the week ended June 14 – above all estimates according to Bloomberg economists. 
• That’s despite Chair Powell's resistance that the US economy “is still solid”.

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• Bitwise Asset Management has revised its S-1 filings with the SEC for its proposed spot Dogecoin and Aptos ETFs, adding an in-kind redemption feature which allows for direct exchange of ETF shares for the underlying cryptocurrencies. This update comes after the SEC announced a delay on the ETF’s decisions on June 12, 2025.

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• Bakkt Holdings, a digital asset platform offering solutions for crypto trading, has filed a Form S-3 with the SEC yesterday to raise up to $1B through a mix of Class A common stock, preferred stock, debt securities and warrants.
• The filing states that the company updated its investment policy earlier this June “to enable it to allocate capital into Bitcoin and other digital assets as part of broader treasury and corporate strategy.”

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• Trump backed World Liberty Financial has secured a $100 million investment from UAE-based Aqua 1 fund. The two entities have partnered to develop a tokenized real-world assets (RWAs) platform, "BlockRock".

This Week’s Calendar:

Charts of the Day:

Figure 1. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 2. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 3. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes

Figure 4. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes