Hello readers,

The 2025 Jackson Hole Economic Policy Symposium will focus on “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.”

The symposium will run from Thursday, 8/21, through Saturday, 8/23, with central bankers, policymakers, economists, and academics meeting to discuss important economic issues and long-term policy challenges.

Powell is scheduled to speak at 10am on Friday.

Will he focus on a slowing labor market and challenges in the CRE market?

Or remain hawkish due to uncertainties with tariffs and inflation?

This week, we explore the state of the economy while anticipating monetary policy and its impacts on the crypto markets.

Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.

Let’s go.

Economic Data

Bank Lending

Banks continue to reduce lending standards. Remember, it’s not just the Fed that can “print money.” The banks can do it too.

Loan Growth

Commercial loans grew at 5.6% in Q2, which is still below historical norms. We can see in the chart that the last period of significant lending growth occurred in ‘23.

With loosening regulations and potential changes to the supplemental leverage ratio for Banks, we could see this number move up, in line with historical norms.

In some ways, this looks like the start of a business cycle. Not the end.

M2

The increase in lending activity is starting to impact M2 growth. More lending = more M2 = more liquidity = positive for risk assets.

Credit Spreads

Credit spreads are at historical lows right now.

It’s telling us that there is strong risk-on sentiment in the market. Investors are comfortable taking credit risk in exchange for slightly higher yields.

Companies with weak balance sheets can access capital in this environment.

It’s also a signal that financial conditions are loose, despite calls for the Fed to cut rates. 

Takeaway: tight spreads can also indicate overconfidence and tend to align with late cycle dynamics, where investors chase yield before risk reprices. 

Move Index

The Move Index tracks volatility in the bond market. This data point suggests that the market has less uncertainty regarding treasury yields — meaning fewer surprises on Fed policy, inflation, or fiscal stress.

Similar to credit spreads, this chart indicates complacency in the market as it pertains to risk.

We’re keeping an eye on the long end of the curve and how it may react to a more dovish stance from the Fed.

Let’s see if it stays subdued after Jackson Hole.

VIX

The VIX measures volatility in the stock market. The fact that it’s dropping toward cycle lows tells us that the market is pricing in very little risk near-term for equities — reflecting further “risk-on” sentiment and complacency.

Tax Receipts

Tax receipts are now moving back toward the historical trendline, after the Covid shock a few years ago.

With tariff revenues kicking in, the key question is whether this will offset tax cuts in the Big Beautiful Bill + any increases in spending.

If the bond market loses confidence in these dynamics, we think it will send the long-end of the yield curve higher, even if the Fed cuts in September (similar to last year). This could ultimately be a headwind for risk assets.

Something to keep an eye on.

Manufacturing ISM

The manufacturing ISM is still below 50 (contraction). This is sending us a different signal from the more “risk-on” sentiment we’ve seen above.

A weak ISM supports the case for Fed easing.

Furthermore, recessions tend to occur after periods where the ISM was sustainably above 50.

The last time we saw that was in early ‘21. But we didn’t get a recession during the contraction (due to fiscal spending?).

It would be very odd to have one after a period where the ISM was holding steady for a year after a large contraction.

In fact, we can’t find any evidence of it having occurred.

Shifting to white-hot activity in the crypto private markets, risks, and portfolio management…