SVET Markets Weekly Update (October 28 — November 1, 2024)

On Week 44, stocks closed lower as traders were cautious ahead of the elections and the Fed decision. Job openings fell to a 28-month low, and manufacturing indicators showed a sharp contraction in business activity. The dollar index surged, hovering near a three-month high. Gold prices rose, fueled by expectations of a potential Fed rate cut and economic uncertainty. Europe’s unemployment rate is at a historical low, with production continuing to slide and inflation picking up. BTC corrected sharply to just below $70K as some traders locked in profits ahead of the elections. ETH remained largely unchanged above $2.5K amid a lack of investor interest.

On Monday, stocks closed higher while investors await job openings and labor turnover data. Apple, Amazon, Meta, Microsoft, and Alphabet are set to report earnings. Gold is up due to geopolitical factors. Japan’s unemployment rate dropped to a two-year low. BTC surged above $70K, driven by strong inflows into BTC ETFs and expectations of a Trump victory. ETH, still at $2.6K, is drastically underperforming.

Details

• Texas manufacturing improved in October, with production, capacity utilization, and shipments rising. However, new orders weakened, and labor market conditions softened. Price and wage pressures persisted. 1Y trend: “Up” (DFed)

Crypto

• Microsoft shareholders will vote on December 10th to consider adding BTC to their investments. Despite the proposal, Microsoft’s board recommends voting against it. This comes as major shareholders like Blackrock embrace crypto, while Vanguard remains cautious. (source)

World Markets

• Japan’s unemployment rate dropped to a 20-month low of 2.4% in September. Joblessness decreased, while the labor force participation rate increased. However, the number of employed individuals also declined. The jobs-to-applications ratio slightly improved to 1.24. 1Y trend: “Down” (JP)
• Spain’s retail sales surged 4.1% YoY in September, driven by strong growth in non-food products. This marks the highest increase since March 2023. Monthly sales also rose 1%, the biggest gain in nearly a year. However, e-commerce sales declined 8.2%. 1Y trend: “Side” (ES)

Currencies

• The dollar index surged, hovering near a three-month high. Investors are awaiting key economic data releases this week, including GDP, PCE inflation, and payrolls. Market expectations for a 25bps Fed rate cut is above 90%. 1Y trend: “Side”

Commodities

• Gold prices surged above $2,750, fueled by expectations of a potential Fed rate cut and economic uncertainty. Lower interest rates typically boost gold’s appeal as a non-interest-bearing asset. Meanwhile, China’s gold demand has weakened this year. 1Y trend: “Up”

On Tuesday, stocks closed mixed as job openings fell and home prices increase slowed, with technology leading gains ahead of earnings and more economic data. The Nasdaq approached an ATH, while the Dow fell. Alphabet rose ahead of its earnings report, while McDonald’s and Ford declined due to weaker results. Investors are watching for clues about the Fed’s rate decision from upcoming economic data and tech earnings. German consumer confidence improved, and Brazil’s digital asset imports surged by 40%. BTC and ETH are on the rise, with BTC leading the charge with a 4% gain, almost reaching its ATH. ETH is slowly following with an increase to $2.7K.

Details

• Job openings fell to a 28-month low of 7.443M in September. The decline was widespread across sectors and regions. While hires and separations remained stable, the cooling job market suggests a potential slowdown in economic activity. 1Y trend: “Down” (BLS)
• Texas’ service sector improved in October, with a positive reading in the Dallas Fed’s general business activity index. Revenues and hours worked increased, signaling a rebound in demand. However, input costs, including wages and benefits, continued to rise. Firms expect future growth but also increased uncertainty. 1Y trend: “Up” (Fdal)
• Retail inventories grew modestly in September, while wholesale inventories declined. Retail inventories excluding autos increased 0.1% MoM and 0.6% YoY. Wholesale inventories fell 0.1% MoM, with durable goods declining and non-durable goods increasing. 1Y trend: “Up” (both retail and wholesale) (Census)
• Home prices increased 5.2% YoY in August, the slowest pace in 10 months. While some cities like New York and Las Vegas saw strong growth, others like Denver and Portland experienced slower growth. Rising mortgage rates and seasonal factors contributed to the slowdown. 1Y trend: “Up” (source)
• The trade deficit widened significantly in September to $108.2B, the highest level since March 2022. This was due to a surge in imports, particularly consumer, capital, and industrial goods, while exports declined. 1Y trend: “Down, Deficit Increasing” Census

Crypto

• Brazil’s digital asset imports surged 40% in September 2024, reaching $1.4B. Exports remained stable at $44 million. This resulted in a net inflow of $1.385B. Cryptocurrencies and stablecoins accounted for 70% of all trades. Year-to-date, Brazil’s crypto imports totaled $13.7 billion, a 60% increase compared to the same period in 2023. (source)

World Markets

• German consumer confidence improved for the second consecutive month in November, reaching its highest level since April 2022. Income expectations and the propensity to buy increased, while economic outlook remained pessimistic. However, uncertainties related to crises, wars, and high prices continue to dampen consumer sentiment. 1Y trend: “Up” (GFK)

On Wednesday, stocks closed lower as investors digested mixed corporate earnings and economic data. Tech stocks were uncertain, with Nvidia and AMD declining, while Alphabet rose. Slower GDP growth and a strong labor market tempered hopes for Fed rate cuts. Investors are awaiting earnings from Meta, Microsoft, Apple, and Amazon. In the EU, inflation is accelerating as economic growth continues to slow down, exacerbating stagflationary expectations. BTC has corrected slightly but is still holding above $72K, while ETH sits at $2.6K.

Details

• Personal consumption expenditure increased 1.5% in Q3 2024, the slowest pace since Q2 2020. This was lower than expected, indicating a slowdown in consumer spending. 1Y trend: “Down” (BEA)
• GDP grew 2.8% in Q3 2024, slower than Q2. Consumer spending increased, driven by goods and services. Government spending and net trade also contributed positively. However, inventory investment and fixed investment slowed. 1Y trend: “Side” (BEA)
• Private sector added 233K jobs in October, far exceeding expectations. Service sector led job growth, while manufacturing shed jobs. Annual wage growth for job-stayers and job-changers continued to slow. 1Y trend: “Side” ADP
• 30-year fixed mortgage rates rose to 6.73% in the week ending October 25, the highest level in three months. This increase reflects investor expectations of a slower pace of Fed rate cuts. Jumbo mortgage rates also rose, while FHA mortgage rates declined slightly. 1Y trend: “Side” (MBA)

Crypto

• A recent poll by Paradigm suggests that 5% of voters are single-issue crypto voters, potentially influencing close elections. This group includes a significant portion of young, male, African American, and Hispanic voters. (source)

World Markets

• The Eurozone economy grew 0.9% YoY in Q3 2024, exceeding expectations and marking the strongest growth in three quarters. 1Y trend: “Down” (ES)
• Eurozone economic sentiment weakened in October 2024, as industrial confidence declined due to falling production and order books. Consumer inflation expectations rose, potentially hindering the ECB’s efforts to curb inflation. However, the services sector showed strength. 1Y trend: “Side” (EU)

On Thursday, stocks closed sharply lower, led by tech stocks. Disappointing earnings from Microsoft and Meta, coupled with concerns about AI costs, pressured the market. A strong labor market and rising inflation also dampened hopes for Fed rate cuts. Europe’s unemployment rate is at a historical low, with production still sliding down and inflation picking up. BTC tumbled below $70K on profit-taking before the elections, while ETH is frozen within its $2.4K-$2.6K range due to a lack of trader attention. Other crypto news: ‘Crypto’s not going anywhere,’ says Florida CFO.

Details

• In September core PCE inflation rose 0.3% MoM, the highest in five months, and decreased 2.1% YoY, the lowest level since 2021. This decline reflects moderating price pressures in the US economy. YoY core PCE inflation remained at 2.7%. 1Y trend: “Down” (BEA)
• Job cuts in October totaled 55,597, up from the previous month but lower than the same period last year. Aerospace and defense led the cuts, followed by retail and consumer products. Year-to-date job cuts reached 664,839, the highest since 2020. Companies are adopting a cautious approach due to economic uncertainty and potential regulatory changes. 1Y trend: “Up” (CH)
• The Chicago PMI fell to 41.6 in October 2024, indicating a sharp contraction in business activity. Production, new orders, and employment all declined. Price pressures eased slightly. 1Y trend: “Side” (ISM)

Crypto

• Florida has invested nearly $800M in cryptocurrencies, according to its CFO Jimmy Patronis. He believes crypto is here to stay and Florida aims to capitalize on this opportunity. (source)

World Markets

• Eurozone annual inflation accelerated to 2% in October, reaching the ECB’s target. This was mainly due to base effects and higher food and energy prices. Core inflation remained steady at 2.7%. Monthly inflation rose 0.3% in October. 1Y trend: “Down” (ES)
• Eurozone unemployment rate remained steady at 6.3% in September, the lowest level on record. 1Y trend: “Down” (ES)
• German retail sales surged 3.8% YoY in September, exceeding expectations. This is the strongest growth in recent years, driven by increased consumer spending. 1Y trend: “Up” (DE)
• French annual inflation rose to 1.2% in October, driven by higher food and energy prices. Monthly inflation rebounded 0.2% due to increases in fuel, clothing, and food prices. EU-harmonized inflation also increased to 1.5%. 1Y trend: “Up INSEE
• The National Bank of Ukraine held its key interest rate at 13% in October 2024. Inflation remains elevated (8.6%), driven by food prices and currency depreciation. The NBU expects inflation to peak in late 2024 and decline in 2025. GDP growth is forecast to be 4% in 2024, supported by international financing. 1Y trend: “Down” (UA)

Currencies

• The dollar fell slightly but is set to close October with a strongest monthly rise in over two years. Recent data, including GDP growth, PCE inflation, and strong labor market figures, has tempered expectations for aggressive Fed rate cuts. The market is now pricing in a 25 bps cut next week, with a higher probability of another cut in December. A potential Donald Trump win in the upcoming election could also weigh on the dollar. 1Y trend: “Side
• The British pound fell to a three-month low of $1.285 after the Labour government’s budget announcement. The budget includes increased borrowing, higher taxes, and a revised economic outlook. While the Bank of England is still expected to cut rates next week, market expectations for further cuts have been reduced. 1Y trend: “Up, Appreciating

On Friday, stocks closed higher, with Amazon and Intel leading the gains after strong earnings. A weak jobs report, the upcoming Fed meeting, and the election added uncertainty. Oil prices increased again due to tensions in the Middle East, while China’s manufacturing prospects improved on stimulus measures. BTC and ETH remained unchanged, sitting just below $70K and above $2.6K, respectively, after a sharp correction over the previous two days as some traders locked in profits ahead of the elections.

Details

• Unemployment rate remained steady at 4.1%. While the labor force participation rate declined slightly, the number of unemployed persons and job losers remained relatively unchanged. 1Y trend: “Down” (BLS)
• Job growth slowed significantly in October, adding only 12K jobs. The decline was primarily due to a Boeing strike and hurricane disruptions. Employment in healthcare and government increased, while manufacturing and temporary help services declined. 1Y trend: “Up”” (BLS)
• The ISM Manufacturing PMI fell to 46.5 in October, indicating a continued contraction in the sector. Production, new orders, and inventories declined. Price pressures increased, while employment and supplier deliveries showed slight improvement. 1Y trend: “Side”” (ISM)

Crypto

• Crypto industry layoffs continue. Consensys (20%), Kraken (15%), dYdX (35%), and Nova Labs (36%) have recently reduced their workforces due to market conditions and strategic shifts. (source)
• Following a CNN/SRSS poll on Oct. 31, Harris saw her odds improve in two battleground states, with a 5% increase in Wisconsin and 6% in Michigan. Her overall chances of winning the election rose from 2.3% to 39.6%, while Trump holds a 60.3% lead overall. Trump leads Harris by 22.2% across six key states, including a 14% advantage in Pennsylvania. A Galaxy Research report shows Trump ahead in 18 venues, though he has lost his lead in 13 of them. (sourrce)

World Markets

• Brazil’s manufacturing PMI eased to 52.9 in October, but still indicated solid growth. Output and new orders increased, driven by international demand. Job creation remained strong, and price pressures eased. Businesses expressed increased optimism about future prospects. 1Y trend: “Up” (SP)
• Argentina’s central bank slashed its interest rate by 500 basis points to 35%, reflecting progress in curbing inflation. President Milei’s fiscal policies have helped reduce inflation from over 25% monthly to around 3.5% in recent months. However, these policies have also led to economic slowdown and increased poverty (above 50%). 1Y trend: “Up” (AR)
• China’s Caixin Manufacturing PMI rose to 50.3 in October, as a result of a series of stimulus measures from Beijing in late September, indicating expansion in factory activity. Output and new orders increased, while export orders declined at a slower pace. Employment fell, and input costs rose, leading to higher selling prices. Overall sentiment improved, but challenges remain. 1Y trend: “Down” (SP)
• Russia’s manufacturing PMI rose to 50.6 in October, signaling expansion. Output and new orders improved, with export orders rising significantly. However, employment remained weak, and input and output costs increased. Businesses expressed optimism about future investment. 1Y trend: “Down” (SP)

Commodities

• Oil prices rose, driven by tensions between Iran and Israel. Market participants are concerned about potential escalation and its impact on oil supplies. OPEC+ may delay production cuts due to weak demand and rising supply. However, overall sentiment remains cautious due to geopolitical risks and economic uncertainties. 1Y trend: “Side”

On Week 45, the upcoming presidential elections on Tuesday will be closely monitored by global investors, alongside the Fed’s interest rate decision and various economic indicators like the ISM Services PMI and consumer sentiment. Earnings reports from large and mid-cap companies will also be significant. Additionally, interest rate decisions from several countries, along with Germany’s industrial data and European PMIs, will offer insights into the European economy. In China, key events include the National People’s Congress and important trade and inflation metrics.

Comment: What’s Up With Future?

As the current global economic and political landscape evolves, the contours of the future world order are becoming increasingly apparent.

In the next two to three decades, after an initial period of economic and political readjustment marked by instability and conflict, the world will likely bifurcate based on inherent limitations and historical trajectories. One part will maintain its technological and social advantage, fueled by open, highly competitive markets built on cutting-edge advancements. However, this region will face growing social pressures due to aging populations, decreased immigration, and increased government intervention, leading to tighter regulations and higher taxes. The rise of inequality, exacerbated by a rise of AI, market restrictions and reduced entrepreneurial opportunities, will further complicate the situation.

The other part of the world will stabilize within a more patriarchal, heavily regulated framework, reliant on government initiatives and investments. While unlikely to match the first world in high-tech innovation, this region may experience rapid economic growth due to its lower starting point and untapped potential for regional cooperation, bolstered by significant government support. However, it will remain dependent on the first world for high-tech goods and services. This region will also exhibit significant social disparity, with more pronounced extremes. Despite these challenges, it may offer better profitability and growth opportunities for businesses, albeit constrained by bureaucratic hurdles and high transaction costs.

A third category of countries will emerge, aiming to position themselves as intermediaries between the first and second worlds. These countries will export food, natural resources to one side, and high-tech goods to the other one, serving as conduits between the two.

Finally, a fourth category of micro-economies will strive for complete independence. By leveraging geographical or technological advantages, these economies will cater to wealthy individuals, offering unique, exclusive products and services that are inaccessible in the larger world. Freedom, both political and economic, may become a rare commodity in this scenario, as it is increasingly curtailed by governments in all three major economic models.

In this context, decentralization and cryptocurrencies will play a crucial role, attracting talent and facilitating borderless trade, offering a potential escape from the constraints imposed by traditional economic systems of the 1st, 2nd and 3rd Worlds.

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