On Week 48, the S&P and Dow both reached new ATHs driven by optimism surrounding former Trump’s policies and significant inflows of foreign capital. Despite this positive market sentiment, the underlying economic fundamentals continue to show signs of deterioration. For example, in the manufacturing sector, the Richmond manufacturing index remained unchanged at -14 in November, reflecting ongoing weakness.
Internationally, the Chinese offshore yuan weakened to a three-month low amidst growing concerns surrounding upcoming trade tensions. Meanwhile, gold prices remained steady as markets closed for Thanksgiving. In the EU, economic indicators continued to decline as Brussels increased the money supply to an ATH. This has been compounded by a significant depreciation of the Euro, which fell to 1.06 in November, marking its worst monthly performance in over a year. Contributing factors include tariff expectations, sluggish Eurozone growth, and political instability in Germany and France.
In the cryptocurrency market, BTC, first, slowed, staying below 95K but then recovered to 97K, and ETH corrected slightly to 3.5K to rise again to 3.7K. Overall, the crypto markets appear to be awaiting a catalyst to propel upward into a potential ‘New Year rally.’
On Monday, equities were mixed as economy continued to slow down, as reflected in the decline of manufacturing indexes. Investors welcomed Bessent’s nomination, anticipating the Treasury’s market-friendly policies. Retail stocks like Macy’s and Bath & Body Works saw significant movements. The market is expected to be less active due to the Thanksgiving holiday. The German economy is sliding down, while the Nigerian economy continues to accelerate, with the financial and banking sector expanded by 30%. BTC stumbled and eased to $95K as investors took profits and relocated some assets into secondary coins, leading to ETH’s continued rise, reaching $3.6K.
Details
- The Chicago Fed National Activity Index declined to -0.40 in October 2024, indicating a weakening economy. This was driven by declines in production, employment, and personal consumption. 1Y trend: “Side” (CFed)
- The Dallas Fed Manufacturing Index improved slightly to -2.7 in November, indicating a slightly less severe contraction in Texas manufacturing activity. While the outlook for the future improved, current conditions remain weak, with declining production, new orders, and shipments. Labor market conditions were mixed, and input and output price pressures remained elevated. 1Y trend: “Up” (DFed)
- The MOEX Russia index fell to a near-year low of 2,530, driven by geopolitical tensions, capital controls, high interest rates, and weak demand from key trading partners. Russia’s escalating conflict with Ukraine and China’s slowing economy have negatively impacted the performance of Russian stocks, particularly in the energy and banking sectors. 1Y trend: “Down”
Crypto
- Cardano (ADA) has seen a significant price surge, tripling its market capitalization to $37.4 billion in just 17 days. This is driven by several factors, including increased regulatory clarity efforts led by Hoskinson, the integration with BTC through the BitcoinOS Grail Bridge, and the relisting on Robinhood, expanding its accessibility to retail investors. Cardano’s growing DeFi ecosystem, with a record-high TVL, further contributes to its positive momentum. (source)
World Markets
- The Ifo Business Climate Index for Germany fell to 85.7 in November, indicating a decline in business sentiment. Both current conditions and business expectations worsened. The manufacturing sector experienced a decline, while the services sector showed a sharp drop in sentiment. The retail sector showed some improvement, but overall business confidence remains low. 1Y trend: “Down” (Ifo)
- Brazil’s consumer confidence index rose to a one-year high in November. Improved consumer expectations boosted the overall index. This positive sentiment could allow the central bank to maintain its current monetary policy stance. 1Y trend: “Up” (source)
- Nigeria’s economy grew by 3.46% YoY in Q3, accelerating from the previous quarter. The non-oil sector, particularly financial services (+30%), was the main driver of growth. The oil sector also saw an increase, but at a slower pace than the previous quarter. The economy expanded by 10% QoQ, marking a significant rebound. 1Y trend: “Up” (NG)
Currencies
- The dollar index fell, retreating from recent highs. The appointment of Scott Bessent as Treasury Secretary eased market concerns about potential economic instability. The dollar weakened against major currencies like the euro, pound, Australian dollar, and yen. Investors are now looking towards upcoming economic data releases and Fed meeting minutes for further guidance on interest rate policy. 1Y trend: “Side”
Commodities
- Wheat futures declined towards a 10-week low due to ample global supplies. Favorable weather conditions in the US and France have improved crop prospects. While the International Grains Council lowered its global wheat production forecast, concerns about potential disruptions to Black Sea exports from the ongoing Ukraine-Russia conflict continue to provide some support for prices. 1Y trend: “Side”
On Tuesday, the S&P and Dow reached new highs on Trump-optimism and inflow of foreign capitals, despite new home sales plummeting to a 17-year low and Fed minutes indicating growing hawkishness among FOMC members. Tech stocks outperformed, while automakers and companies with exposure to Mexican trade faced declines. EU markets fell, the yuan hit a 4-month low, and the Mexican peso dropped to a 2-year base, while the Canadian dollar reached a 4-year bottom due to Trump’s threats to impose 10% tariffs on China and 25% on neighboring countries. BTC is sharply down (91K) as it follows a classic Wyckoff pattern, where large corporate traders, who currently dominate the market, are trying to shake off smaller competitors as they accumulate assets before a decisive breakout above 100K. ETH and other altcoins followed suit, while traders, facing an absence of retail buyers, were unable to maintain momentum without corporate support.
Details
- Building permits declined 0.4% in October. Multi-family permits decreased, while single-family permits increased slightly. Regional data showed declines in the Midwest, South, and West, but a significant increase in the Northeast. 1Y trend: “Down” (Census)
- Home prices rose 4.6% YoY in September, the slowest pace in a year. While some cities like New York and Chicago saw significant growth, others like Denver and Portland experienced slower growth. MoM, prices declined slightly. 1Y trend: “Up” (SP)
- New home sales plunged 17.3% in October, reaching a 14-year low. This sharp decline was primarily due to hurricanes impacting the South and ongoing affordability challenges. While the median and average sales prices increased, the inventory of unsold homes rose to 9.5 months of supply. 1Y trend: “Side” (Census)
- The Fifth District (Richmond) manufacturing index remained unchanged at -14 in November, indicating continued weakness. While some indicators like employment and wages showed improvement, others like shipments, new orders, and capacity utilization worsened. Input and output prices remained elevated. 1Y trend: “Down The Dallas Fed general business activity index for Texas’ service sector rose to 9.2 in November, indicating improved business conditions. This was driven by increased revenue, hours worked, capital expenditures, and employment. While input costs remained high, businesses were able to moderate price increases. 1Y trend: “Up (RFed)
Crypto
- Many pro-crypto candidates have won their races, with about 270 pro-crypto candidates securing seats in Congress. Election Day polling showed that nearly half of crypto voters skewed Republican, contributing to Trump’s strong popular vote. DEM missed the chance to attract these voters, as their campaign focused more on opposing Trump than on crypto advocacy. (source)
World Markets
- Retail sales in Argentina increased 161% YoY in September, a significant slowdown from the previous month, as an inflationary prices push starts to dissipate. While sales grew across various categories, the pace of growth slowed down. When adjusted for inflation, retail sales actually contracted by 1.3%. 1Y trend: “Up (AR)
Currencies
- The Mexican peso dropped over 2% to above 20.7 per USD, marking its lowest level since March 2022, after Trump threatened a 25% tariff on imports from Mexico and Canada. In response, Sheinbaum proposed retaliatory tariffs. The peso has weakened by about 20% this year due to concerns over increased government spending and debt under Sheinbaum’s administration. 1Y trend: “Up, Weakening
- The Canadian dollar fell nearly 1% to above 1.41 per USD, its lowest since mid-2020, following Trump’s threats of increased tariffs, including a 10% hike on China and 25% on Mexico and Canada. Oil and gas remain Canada’s top exports to the US. The Bank of Canada is still expected to cut interest rates next month, but the chance of a 50bps reduction has decreased following a rise in core inflation to 2.6% in October, above expectations. 1Y trend: “Up, Weakening
- The offshore yuan weakened to a three-month low as concerns about US-China trade tensions increased. Trump’s threat of additional tariffs on Chinese goods has dampened market sentiment. The PBoC maintained its cautious monetary policy stance, keeping key interest rates unchanged. Investors are looking towards Chinese PMI data for clues on the country’s economic health. 1Y trend: “Up, Weakening
Commodities
- Gold prices held steady around $2,620 per ounce after the release of the Fed’s November meeting minutes. The Fed expressed confidence in the ongoing decline of inflation and the strength of the labor market, suggesting a gradual path for interest rate cuts. However, uncertainties surrounding inflation and potential fiscal policies have tempered expectations for aggressive rate cuts. 1Y trend: “Up
On Wednesday, equities closed lower as investors took profits after recent gains, with tech stocks leading the downturn. Investors ignored falling PCE and a slowing economy, which plays into the hands of the Fed’s doves. The economic situation in both Germany and France continued to worsen. ETH surged 10% while BTC remains in an accumulation mode.
Details
- Core PCE inflation rose by 2.1% QQ in Q3, slightly below expectations. 1Y trend: “Side(Bea)
- The economy grew at an annualized rate of 2.8% in Q3 . Personal consumption increased, driven by both goods and services. Government spending and fixed investment also contributed to growth. However, net trade had a negative impact, and inventory investment was a drag. 1Y trend: “Side (Bea)
- The Chicago PMI fell to 40.2 in November, indicating a continued contraction in economic activity. Production, employment, backlogs, and inventories declined. New orders increased slightly, and input prices moderated. 1Y trend: “Down (ISM)
- New orders for manufactured durable goods increased slightly by 0.2% in October, missing market expectations. 1Y trend: “Side (Census)
- 30-year fixed mortgage rates declined to 6.86% in the week ending November 15th. This marks the first decrease in nine weeks, following a recent increase due to Trump’s election and expectations of slower Fed rate cuts. Rates for jumbo and FHA loans also decreased. 1Y trend: “Down (MBA)
- Initial jobless claims remained unchanged at 213,000 in the week ending November 23rd, below market expectations. This suggests a strong labor market despite recent rate hikes. However, an increase in non-seasonally adjusted claims and outstanding claims indicates some potential weakness. 1Y trend: “Side (DOL)
Crypto
- Brazilian lawmaker has proposed the creation of a BTC Sovereign Strategic Reserve (RESBit), potentially allocating up to $18.6B, or 5% of Brazil’s international reserves. The initiative aims to diversify Treasury assets and protect against currency fluctuations, while supporting the central bank’s digital currency, the Drex. The bill also seeks to modernize Brazil’s financial management, drawing inspiration from other nations successfully integrating blockchain technology. Brazil’s Central Bank and Ministry of Finance would oversee the reserve, reporting on its performance biannually. (source)
World Markets
- German consumer confidence fell to a nine-month low in December. Declining income expectations, job security concerns, and a pessimistic economic outlook have dampened consumer sentiment. Purchase intentions and economic expectations have also weakened. 1Y trend: “Up” (GFK)
- Initial jobless claims in France increased to 53.6 thousand in October, a significant rise from the previous month. This indicates a worsening labor market situation in the country. 1Y trend: “Up” (FR)
- Russian industrial production grew by 4.8% YoY in October, driven by increased manufacturing output, particularly in sectors related to military production. While some sectors like electricity and raw material extraction declined, overall industrial activity showed significant growth. 1Y trend: “Side”. Russian retail sales grew by 4.8% YoY in October, a slower pace than the previous month. While food product sales increased, non-food product sales slowed down. On a monthly basis, retail sales declined slightly. 1Y trend: “Down”. Russia’s GDP grew by 3.2% YoY in October, maintaining the same pace as the previous month. 1Y trend: “Down”. The Russian ruble plummeted to a record low, exceeding 110 per dollar. New sanctions on Gazprombank and other financial institutions have further isolated Russia from the global financial system. Additionally, relaxed capital controls and reduced forex conversion requirements have weakened the ruble. 1Y trend: “Up, Depreciating” (RU)
Currencies
- The dollar index fell 1% as investors counterweight economic data and the Fed’s cautious stance on future rate cuts. 1Y trend: “Up”
On Thursday, markets are closed for Thanksgiving. EU economic indicators continue to worsen as Brussels bureaucrats pump the money supply to an all-time high, while Brazilian equities dipped due to the government’s increase in taxes. Chinese stocks fell on expectations of restrictions on chip imports. BTC lost some momentum and didn’t rise above 95K, while ETH corrected slightly to 3.5K. Overall, crypto markets are waiting for a catalyst to push further up into the ‘New Year rally.”
Crypto
- The Financial Stability Board (FSB) has identified JPMorgan Chase as the world’s sole “too big to fail” bank, placing it in “bucket 4,” which requires an additional 2.5% equity of its risk-weighted assets. Meanwhile, Bank of America has been downgraded from bucket 3 to bucket 2, lowering its capital requirement from 2.0% to 1.5%. Established to monitor global systemically important banks post-2008 financial crisis, the FSB highlights the ongoing regulatory framework initiated to stabilize large financial institutions. (source)
World Markets
- Spain’s annual inflation rate rose to 2.4% in November, 3-rd month in a row, driven by higher energy prices. Core inflation eased slightly. Monthly inflation slowed, and EU-harmonized inflation remained stable. 1Y trend: “Side” (ES)
- The Euro Area’s M3 money supply increased by 3.4% YoY in October, reaching a record high of 16.577T. This marks an acceleration from the previous month’s growth. 1Y trend: “Up”. The Euro Area Economic Sentiment Indicator increased slightly in November. While confidence in industry and retail trade improved, it declined in services and consumer sectors. Germany and Italy saw a decrease in sentiment, while other major economies experienced improvement. 1Y trend: “Side”. Consumer confidence in the Euro Area declined in November, reaching a five-month low. Consumers have a pessimistic outlook on the overall economy and their personal finances. While their past financial situation is stable, future expectations are weak. However, there’s a slight improvement in major purchase intentions. 1Y trend: “Up” (EU)
- The Ibovespa fell 2.4%, reaching a multi-month low. Investors reacted negatively to Brazil’s new fiscal package, which raised concerns about its impact on the budget deficit and economic growth. Financial stocks and other sectors were significantly impacted by the news. 1Y trend: “Side”
- Chinese stocks fell, with the Shanghai Composite and Shenzhen Component declining. Increased US-China trade tensions and potential US semiconductor export restrictions dampened investor sentiment, especially in the technology sector. 1Y trend: “Side”
On Friday, equities closed higher, with the S&P 500 and Dow reaching new ATHs. Tech stocks, particularly semiconductor companies, rallied on news of less stringent export restrictions to China. Retailers also gained due to strong Black Friday sales. In the EU, inflation continued to rise, indicating stagflation as the Euro fell to a yearly low. India’s GDP slowed further, marking a year of contraction, with the rupee at a record low. At the same time, the Brazilian economy continued to show growth, with record employment, although it experienced a real depreciation of 20% YoY, driven by increasing government spending. BTC is slowly aiming to reach $100K again, while ETH has started to consolidate under $3.7K, with $4K already on traders’ minds.
Crypto
- The Trump administration plans to expand the CFTC’s authority to oversee significant parts of the $3 trillion digital asset market, aiming for a more innovation-friendly regulatory framework. The CFTC would regulate spot markets for major cryptocurrencies like BTC and ETH while overseeing trading exchanges. Supporters believe the CFTC’s expertise in derivatives markets positions it well for this role. The initiative is part of a larger effort to shift US financial regulation and counter the SEC’s stringent policies. (source)
World Markets
- Euro Area consumers expect inflation to rise over the next 12 months, reversing a downward trend (it increased for the first time in 9 months to 2.5%). However, expectations for economic growth have worsened, while unemployment expectations have improved slightly. 1Y trend: “Down”. Eurozone inflation rose to 2.3% in November 2024, driven by a smaller decline in energy prices compared to last year. Core inflation remained steady at 2.7%. Month-over-month, prices fell slightly. 1Y trend: “Down”. (EU)
- German unemployment remained stable at 6.1% in November (11.5% in Apr 1950, 0.5% in Feb 1966, 11.7% in Dec 1997, 12.1% in Mar 2005, 5% in Jan 2019). While joblessness increased slightly, it was below expectations. However, job demand weakened, signaling a slowing labor market. 1Y trend: “Up” (source)
- India’s GDP grew at a slower pace of 5.4% in Q3 (6.5% previous), missing expectations. The slowdown was primarily due to weaker manufacturing and utility sectors. While services and agriculture sectors showed growth, the overall economic momentum softened. 1Y trend: “Down” (Mopsi)
- Turkey’s GDP growth slowed to 2.1% in Q3 2024, the weakest pace in over two years. High interest rates and declining exports contributed to the slowdown. The economy contracted QQ for the first time since 2018. 1Y trend: “Down” (TR)
Currencies
- The Euro has weakened significantly (1.06) in November, its worst monthly performance in over a year, falling about 3% against the dollar. This is due to factors such as tariffs expectations, weak Eurozone growth, political instability in Germany and France, and prognosis of ECB rate cuts. Despite recent inflation data, concerns about economic stagnation and geopolitical risks persist, leading to a bearish outlook on the Euro. 1Y trend: “Side”
- The Brazilian real strengthened after hitting a record low (6.05, 20% decline YoY), following reassuring statements from political leaders regarding fiscal policy. The country’s strong labor market, with unemployment at a record low (6.2%), also supported the currency. However, weaker global demand for Brazilian commodities from China and reduced capital inflows continue to put pressure on the real. 1Y trend: “Up, Depreciating”
- The Indian rupee hit a record low of 84.6 per dollar due to slower-than-expected GDP growth, capital outflows, and a stronger dollar. Concerns about the RBI’s monetary policy stance and global geopolitical tensions further weakened the rupee. 1Y trend: “Up, Depreciating”
On Week 49, key economic indicators will be released, including the November jobs report, Fed speeches, and various manufacturing and consumer sentiment data. Globally, GDP data from South Africa, Brazil, and Australia, along with unemployment rates from the Euro Area and Canada, will be released. Additionally, manufacturing and services PMIs from various countries, including China, South Korea, and European nations, will be closely monitored. India’s interest rate decision and inflation data from several countries will attract traders attention.
Comment: What’s Up With Tariffs and D.O.G.E?
In the 5th (Richmond) Fed District, we see a pattern similar to nearly all other districts: the manufacturing sector is declining while the services sector is rising, with employment remaining stubbornly steady.
There seems to be a plausible explanation for this employment stability: corporations are hesitant to lay off employees primarily due to political reasons. With Washington bureaucrats consolidating their power and initiating legal battles against major businesses, executives are keeping a low profile to avoid antagonizing the political elites, who seem oblivious to the principles of a free market.
As for the new Administration starting January 20, it’s hard to reconcile their claims of a dramatic shift toward “liberating” businesses and “de-bureaucratizing” Washington while simultaneously appointing multiple “czars,” which inherently centralizes bureaucratic power and meddles in areas that have remained relatively free.
Now, regarding the decline in manufacturing, remedying this with tariff policies is, from an economic perspective, utterly absurd. The primary reason manufacturing shifted overseas was to cut costs due to excessive bureaucracy and high labor expenses. Imposing tariffs will not change this; such trade wars will only lead other countries to retaliate with their own tariffs. The idea that a country can thrive while being closed off from exports and resources is sheer lunacy. Just think back to the sudden shortages of protective masks and toilet paper in 2020.
The real reasons behind the manufacturing decline stem from local and global economic downturns driven by reckless and delusional “my-turf-first” policies of Boomers generations of megalomaniacs and feudal-type bureaucrats, along with the Fed’s misguided, lawyer-driven approach to rate hikes aimed at “de-inflation.” A reminder from Japan: the Bank of Japan maintained a negative interest rate throughout and had consistently lower inflation rates than the EU and the Americas, while the Fed’s aggressive hikes have decimated manufacturing and investment worldwide.
Now, they expect us to believe they can fix all that gigantic stagflation mess in a year or two by targeting “aliens,” building towering walls, and, yes, pumping up D.O.G.E. :)
If we’re discussing the positives to balance the negatives, I can only point out that we have even more ridiculous “leaders” on the other side of the Atlantic. Their “regulate-and-then-think” approach has ensured that capital is fleeing to the “less-dirty-shirt” side of the ocean. This influx of capital will sustain the markets for a while, but what happens after that?
That’s why I advocate for the creation of a new, 100% libertarian country where people with both capital and intelligence can live freely without hereditary politicians and bureaucratic interference.
And please don’t tell me that this is impossible or idealistic, especially considering more than 120 million “displaced” people begging for someone to take them in. Not to mention, the money, practical experiences of running tremendous companies / organization, knowledge and technology we all possess today.