On Week 10, BTC reached 70K and ETH reached 4K. The Dow, S&P, and Nasdaq all hit new ATHs. Faced with unexpectedly high unemployment and easing inflation, gold rose to a record high of 2.2K, while the dollar fell by 1.4%.
On Monday, stocks indices closed lower as investors awaited economic data releases and Powell’s congressional testimony for insights. Meanwhile, on world markets, gold hit a record high, while Japanese manufacturing continued to expand and Chinese production slowed down slightly. Bitcoin almost reached an ATH but retreated due to spontaneous profit-taking. The rest of the crypto market also performed well, with some major coins such as Dogecoin (+12%) seeing double-digit percentage increases.
Crypto
- The second milestone for the Ethereum ETF application passed the Sunday. Analyst predicts 70% chance of approval by May. BlackRock filed for an Ethereum ETF. Futures-based products exist but lack attention. (source)
World Markets
- South Korea’s GDP grew 2.2% in Q4 2023, up from 1.4% in Q3, with an average annual growth of 6.95% from 1961–2023, peaking at 20.8% in 1969 and hitting a low of -7.3% in 1998.(BOK)
- The au Jibun Bank Japan Services PMI rose to 52.9 in February 2024, marking 18 months of sector growth, driven by a significant increase in new business from tourism and product launches. Employment surged, but growth was mainly domestic as foreign demand stagnated. Input cost inflation eased, while output cost inflation grew. Business sentiment dipped but stayed optimistic about future investment and expansion.(SP)
- The Caixin China General Service PMI fell to 52.5 in February 2024, marking the slowest expansion since November. Despite increased export orders, overall new work and employment dropped. Higher input prices led to increasing output prices, and business sentiment hit a four-month low. (SP)
- Turkey’s 10-year bond yield reached 26% amid rising inflation and upcoming elections. Annual inflation hit 67% in February, with expectations of it surpassing 70% in May. Concerns persist about potential lira depreciation and looser fiscal policies post-elections.
Currencies
- Euro surges to 1.085, highest since February, as investors anticipate ECB meeting for clues on future interest rates. Inflation eases but core rate remains high, suggesting cautious approach from ECB.
Commodities
- Gold hit a record $2,115 per ounce as investors predicted FED interest rate cuts. This follows data showing a 16-month contraction in US manufacturing and weak consumer morale.
On Tuesday, Dow, S&P, and Nasdaq dropped more than 1%. Tesla, Microsoft, and Meta led the decline due to concerns over China and the tech sector’s health. Gold reached a new all-time high on weak PMI and expectations of rate cuts. BTC crashed spectacularly to $59K after touching an ATH at $69K as a result of a massive Wall Street bear attack, taking down the rest of the crypto market with it. Some major coins, such as Bitcoin Cash (-14%), Cardano (-11%), Polygon (-11%), and Algorand (-10%), depreciated by ten percent or more within a few hours.
Details
- Services sector growth slowed in February (to 52.6 from 53.4), despite rising business activity and new orders. Employment and supplier deliveries contracted, while inflation pressures eased. Concerns remain regarding inflation, employment, and geopolitical conflicts. (ISM)
Crypto
- Solana DEXs smash weekly trading volume record, exceeding $11 billion (154% increase) and surpassing previous high of $9.88 billion. Orca and Raydium (DEXs) on the Solana network saw $4.5B and $3.52B in trade. (source)
World Markets
- The Eurozone Composite PMI rose to 49.2 in February, indicating near-stabilization of the economy. Growth in service sector activity and contractions in manufacturing output continued. France and Germany experienced modest growth, while Ireland and Spain observed solid expansions. (SP)
- Industrial producer prices in the Eurozone decreased in January, marking a moderation from the previous month. (EUS)
Commodities
- Gold hits a new record high ($2,130) on weak PMI and factory orders, fueling expectations of rate cuts (55% chance priced in for June). Geopolitical tensions and recession fears add support. Investors eyeing jobs report and Powell’s speech for further clues.
On Wednesday, stocks rebound after Powell’s comments and data. Fed not rushing to cut rates, labor market strong, Nvidia, Meta, Broadcom up and Apple falls for 6th day. On world’s markets, gold surged to the new ATH on Powell’s comments and weak job reports, while wheat dropped on oversupply and oil continue to rise. Crypto market was in deep green as all major coins recovered from Monday’s crash to their 2 years height. BTC kept above 65K.
Details
- Private businesses added 140K jobs in February, below expectations of 150K. Most new jobs were in service sectors, especially leisure and hospitality. Most jobs shed were in mining (-4K) and information (-2K). (ADP)
- Job openings fell to 8.86 million in January, the lowest in 3 months and below expectations. The decline was broad-based across most sectors except nondurable goods manufacturing. Job openings also decreased in most regions except the Northeast. (BLS)
Crypto
- El Salvador’s BTC holdings surpass $150 million, reflecting a $50M profit since adopting it as legal tender in 2022. President Bukele’s daily 1 BTC buying strategy has grown their stash to 2,380 BTC, currently valued at $164.7 million. (source)
World Markets
- In February 2024, the HCOB Eurozone Construction PM increased slightly to 42.9, indicating a continued but softer decline in activity, with housing remaining weak. New orders fell sharply, affecting purchasing, while employment declines slowed, and future outlook slightly improved. Input costs rose at a slower rate. (SP)
- Euro area retail sales fall further in Jan 2024, down 1.0% YoY (1.3% expected) after -0.5% decline in Dec. This marks the 16th consecutive month of contraction. (ES)
- Brazil’s industrial output surges 3.6% YoY in Jan 2024, exceeding expectations (2.8%) and marking the 6th straight month of growth. (IBGE)
- Egyptian stocks surge to record high (32150) on surprise central bank move: 600bps rate hike, currency floatation. Loan rates hit record highs (28.25%), pound weakens towards 50/$1.
- Hong Kong’s Hang Seng rebounds 1.7% to 16,438 after a drop, driven by hopes of China’s stimulus measures (5% GDP target, support by during the annual National People’s Congress) and rising US futures. Tencent, JD.com, and other tech giants lead gains.
Commodities
- Wheat prices plummet 5% to 3.5-year low on falling global prices, abundant supply from major exporters like Russia and Ukraine, and slightly increased global wheat production.
- US oil prices jump over 2.5% to near 4-month high as lower-than-expected inventory rise, Fed’s wait-and-see stance, and OPEC+ cuts support demand. Geopolitical tensions add further pressure.
On Thursday, major indices climbed, with the S&P 500 and Nasdaq hitting new highs. Powell hinted at the Fed cutting rates this year, while jobless claims edged up slightly, and labor costs were revised lower. In the world markets, the ECB held the rate at the record high of 4.5%. BTC hovered under 68K, while the rest of the crypto market continued to outperform, with Solana (+14%), Binance (+10%), and Algorand (+8%) leading the surge.
Details
- Employers announced most Feb job cuts (84,638) in 11 months, led by tech (12,412) and transportation (13,573). YTD cuts down 7.6% YoY, with tech leading industry cuts (28,218). (CHAL)
Crypto
- Tether partners with Uzbekistan to make it a blockchain hub. This aims to boost the country’s economy and innovation through crypto and stablecoins. (source)
World Markets
- ECB holds interest rates at record highs (4.5%) to fight inflation (projected at 2.3% in 2024), despite revising down growth forecast to 0.6% for 2024. They anticipate a rebound in growth (1.5% in 2025, 1.6% in 2026). (ECB)
Currencies
- Dollar falls to 1-month low on rate cut bets. Fed sees inflation nearing 2% target, jobless claims rise, layoffs highest since 2009. Euro surges despite lower ECB forecasts.
Commodities
- Sugar futures near 2.5-month low (21 cents/lb) on weak demand, Thailand output optimism. Potential cane planting decline in India and lower production expected in Brazil’s center-south (40.8 million tons).
On Friday, Nasdaq, S&P and Dow hit new ATH but then stocks retreat after chip sellof. The unemployment went up unexpectedly. Fed rate cut bets in June stay. On world’s markets, Euro zone GDP flat. BTC reached 70K and then retreated to 66K in a second wave of profiteering. ETH reached over 4K. The rest of the crypto market wend down after BTC with most coins correcting 1–3%.
Details
- Feb unemployment at 3.9%, highest since Jan 2022 (up from 3.7% expected). Unemployed rose by 334k to 6.5 million. (BLS)
Crypto
- Retail crypto interest is rising (website traffic, Google searches) but not at peak levels (compared to 2022). Bitcoin searches up, “how to buy” less so. Ethereum searches stronger. Crypto app usage climbs (Coinbase) but isn’t near peak. Retail seems hesitant for full commitment. (source)
World Markets
- Eurozone GDP flat (0.1% yoy) in Q4 2023, matching Q3. France, Italy, Spain grew, Germany shrank. (ES)
Currencies
- Dollar tumbles to mid-January low (102.5) on cooling US jobs data. Strong Feb payroll hides revisions down, unemployment up, wage growth slows. 57% chance of Fed rate cut in June. Greenback falls most vs. yen, pound, and Aussie dollar. Weekly: -1.4%.
Commodities
- Gold hits record high at $2,200 on rate cut bets. Feb jobs strong, revisions lower, unemployment up. Wage growth slows. 60% chance of Fed rate cut in June expected.
On Week 11: markets analysts will focus on: inflation, retail sales, and consumer sentiment. UK watches jobs, GDP, and trade. China’s loans, car sales, and housing market in focus. Brazil, India, and Russia’s inflation rates key. Eurozone and India’s production along with Australia’s business confidence round out the global economic data picture.
Comment: Where are we going?
So, the story of this week (and of many previous one) is a paradoxical one. While assets like BTC, domestic and international stocks, and gold are all rallying, the underlying state of the world seems to be deteriorating rapidly. Economies are struggling, with unemployment rising and GDP slowing or stalling . Many ridicule Powell and his political friends for celebrating a non-existent victory over inflation. Despite Powell’s attempt to appear confident during his Congressional testimony, it contrasted sharply with polls showing growing consumer unease.
The question remains: where are we headed? Everyone seems to be expecting rate cuts in June, hence the current stock and BTC rally. But what if the Fed doesn’t cut rates, or if FOMC members make more hawkish comments, leading to a sudden shift in investor sentiment and renewed focus on the troubled economy?
Trading Scenarios
Based on this Comment, here are three possible trading scenarios for the next 6 months across different asset classes:
Scenario 1: Disillusionment Rally Fades (Equities & Crypto)
- Logic: The current rally in stocks and cryptocurrencies seems disconnected from the weakening economic fundamentals. As economic data worsens and consumer unease intensifies, the Federal Reserve may be forced to abandon its dovish pivot (easing monetary policy) or even tighten policy sooner than anticipated. This could lead to a reversal of the current rally.
- Trading Strategy:
- Equities: Consider shorting major indices (e.g., S&P 500) or taking a defensive posture with utilities or consumer staples sectors.
- Cryptocurrency: Be cautious on Bitcoin (BTC) and other major cryptocurrencies. Watch for signs of a reversal in momentum and consider taking profits or shorting if the economic data worsens and the Fed adopts a more hawkish stance.
Scenario 2: Stagflation Sets In (Commodities & Equities)
- Logic: The combination of slowing economic growth and persistent inflation (stagflation) could play out. Central banks may be limited in their ability to raise interest rates due to the fragile economy. This environment could benefit commodities like gold and oil, which are often seen as hedges against inflation.
- Trading Strategy:
- Commodities: Consider long positions in gold and potentially oil, anticipating their potential to rise in value as inflation persists.
- Equities: This scenario is challenging for equities. Look for companies with strong pricing power and those that benefit from higher commodity prices (e.g., some energy companies).
Scenario 3: Surprise Policy Pivot & Reflation Trade (Equities & Currencies)
- Logic: If economic data shows unexpected resilience and inflation starts to cool, the Federal Reserve might be able to pivot back to a dovish stance (easing policy). This could reignite the rally in risk assets like equities and weaken the US dollar.
- Trading Strategy:
- Equities: Be ready to take long positions in equities, especially beaten-down growth stocks, if economic data improves and the Fed signals a dovish pivot.
- Currencies: Consider shorting the US dollar (USD) against other major currencies like the Euro or Yen if the Fed eases monetary policy.
Disclaimer: These are just hypothetical scenarios, and the actual market movements can be unpredictable. It’s crucial to conduct your own research and consider your risk tolerance before making any investment decisions.
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