Thursday's Markets Update (September 28, 2023)
On Thursday, GDP and core price index increases aligned with expectations, creating a neutral backdrop on which megacap stocks such as Meta, Tesla, Alphabet, and Nvidia rallied on technicals, leading to the Nasdaq's up-tick. BTC also started to gain some positive momentum, reaching above 27K, while ETH was boosted by rumors about a potential ETH futures ETF passing SEC scrutiny.
The economy grew at an annualized rate of 2.1% in Q2 (2.2% growth in Q1), driven, mostly, by business investment (+7.4%). Consumer spending, which is the largest component of the economy, grew less than expected (0.8% vs 1.7%), but still remained positive. Government spendings increased 3.3%. The Bureau of Economic Analysis revised down economic growth (to 1.9%) for the full year 2022, due to weaker consumer spending and exports. The Fed expects the economy to grow 2.1% in 2023. At the same time, the core PCE price index rose by 3.7% in Q2 as expected, the lowest rate since Q1 2021.
The latest data on real GDP growth (GDP deflator increased 1.7% in Q2 2023) showed that businesses are confident in the future economic outlook. Companies continue to invest in new structures, equipment, and technology, which can lead to increased productivity and job creation. However, the trend in GDP growth is negative (2.2% in Q1 2023, 2.7% in Q3 2022, and 2.6% in Q4 2022), and we can expect this trend to continue in Q3 2023.
According to several news agencies Valkyrie Investments, a digital asset management firm, will start offering exposure to Ether futures through its existing Bitcoin Strategy ETF. This means that investors will be able to invest in ETH futures through a traditional investment vehicle, such as a brokerage account.
Although the approval of an Ethereum futures ETF is an important development for ETH, it has little to do with investment into ETH. Spot ETFs, which would track the price of ETH directly, have been consistently rejected by the Securities and Exchange Commission (SEC), which is governed by Gary Gensler. Gensler has been criticized for his close ties to the traditional financial industry, and most of us believe that he is biased against cryptocurrencies.
German inflation fell to 4.5% in September, the lowest level since the start of the war. This is down from 6.1% in August and 7.6% in July. This was below market expectations and was driven by a slowdown in both services and goods inflation.
The easing of inflation in Germany is a positive sign that the global economy, particularly the EU, is adapting to the recent geopolitical shocks caused, first, by the "quarantine" and, then, by the war.