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JULY 11, 2023

ALGOFI’S CLOSURE

Algofi, the largest decentralized finance (DeFi) protocol on the Algorand blockchain, has announced its closure due to various factors that made it difficult to maintain its high standards. The platform, known for lending, borrowing, and trading, will soon enter a withdrawal-only mode. Algofi’s decision comes following a decline in the value of Algorand’s token (ALGO) and increased regulatory scrutiny from the U.S. Securities and Exchange Commission (SEC), which classified Algorand as a security. This regulatory pressure has hindered the growth of DeFi projects on the Algorand blockchain. Nevertheless, despite the closure, Algofi remains the largest value contributor on the blockchain, and it expressed confidence in Algorand’s technology and consensus algorithm.

FED SIGNALS RATE HIKES

Three Federal Reserve officials have recently stated that interest rates will need to be raised further this year in order to bring inflation down to the central bank’s target. Despite making progress in monetary policy over the past year, there is still more work to be done, according to Federal Reserve Vice Chair for Supervision Michael Barr. After raising rates for ten consecutive meetings, the Fed kept interest rates steady in June, however, most policymakers anticipate increasing rates by a half percentage point by the end of the year in order to bring inflation back to a sustainable 2%. The goal is to bring inflation back to a sustainable 2% path. This sentiment was echoed by San Francisco Fed President Mary Daly and Cleveland Fed chief Loretta Mester. Daly stated that, although there are signs of of the economy slowing down, the risks of doing too little to curb inflation still outweigh the risks of doing too much.

BANK GIANTS TO SURGE

Wall Street banks are anticipated to report higher profits in the second quarter due to increased interest payments, that compensate for a decline in dealmaking. Universal banks such as JPMorgan and Wells Fargo are expected to see a significant surge in earnings per share, while Bank of America’s EPS is predicted to climb moderately. However, Citigroup is projected to experience a drop in EPS. Investment banking giants like Goldman Sachs and Morgan Stanley are likely to report weaker results due to subdued deal activity. Despite these challenges, universal lenders have been supported by resilient consumer spending and good financial health. Nevertheless, sluggish deal markets remain a concern, and loan demand is slowing. Additionally, rising default risks on personal loans, credit cards, and office loans are a cause for caution.

USED CAR PRICES FELL

According to the Manheim Used Vehicle Value Index (MUVVI), wholesale used car prices dropped by 4.2% from May to June, marking the largest monthly decrease since the start of the pandemic. This index, which measures wholesale prices of used vehicles, also saw a drop of 10.3% from a year ago. The 4.2% decline is among the largest in MUVVI history and the largest since the pandemic began in April 2020. Chris Frey, senior manager of economic and industry insights for Cox Automotive, stated that the year-over-year decline was significant, but they expect these declines to lessen as the market normalizes in the coming months. Furthermore, the report revealed specific declines in prices for pickup trucks, vans, sports cars, compact cars, and midsize cars. The findings also indicated that used vehicle retail sales in June decreased by 4% compared to May and are estimated to be down by 6% compared to June of the previous year. This data follows a period of surging used car prices, which rose by an average of 40% since the pandemic hit in 2020.

STRONG SMALL BUSINESS CONFIDENCE

U.S. small business confidence reached a seven-month high in June, signaling improved economic outlook and sales expectations. According to the National Federation of Independent Business (NFIB), the Small Business Optimism Index rose by 1.6 points, marking the greatest month-to-month improvement since August 2022. This surge was driven by reduced pessimism about the near-term economic prospects, with a favorable view of sales expectations for the next three months. Nonetheless, concerns about inflation and the difficulties in finding quality workers persist, hindering further progress.

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