SVET Reports
SVET Markets Weekly Update (October 16 - 20, 2023)
On Week 42 Nasdaq breached its 13K support for the first time in six months on the Middle East conflict and Powell’s comments reiterating his “higher for longer” narrative. Meanwhile, BTC unexpectedly rallied, closing the week above 30K and reinforcing the narrative of Bitcoin being a safe haven for savvy investors worldwide in times of geopolitical turmoil.
On Monday, NY Manufacturing Index fell but Nasdaq gained on expectations of a dovish shift in Fed monetary policy linked to growing concerns about the war in the Middle East. Microsoft, Meta, Alphabet, and Tesla shares advanced. On a broader range of stocks, consumer discretionary, utilities, and energy sectors performed best. BTC and ETH rallied following tech stocks. Other news: ~$5 billion or 194,188 BTC reported in government’s holdings.
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The NY Empire State Manufacturing Index fell slightly in October 2023, but was better than expected. New orders and shipments were little changed, while unfilled orders declined and delivery times shortened. Labor market indicators pointed to a slight increase in both employment and the average workweek. The pace of input price increases was similar to last month, while selling price increases moderated. Firms remained relatively optimistic about the six-month outlook.
Crypto
The US government is one of the largest Bitcoin holders in the world, with a reported $5 billion (194,188 BTC) in holdings. However, this figure only accounts for three documented seizures, suggesting that the government’s true Bitcoin holdings could be much larger. This is significant because it shows that the US government is taking Bitcoin seriously and that its holdings could have implications for the future of Bitcoin.
Comment
In recent years, our society has witnessed a concerning trend in which our elders have chosen to prioritize their personal financial interests over fairness, decency, and humanitarian values. This decision has led to an alarming increase in societal chaos and pressure. According to a recent survey, over 80% of younger generations believe that their elders have failed to uphold basic principles of fairness and equality. This sentiment has been reflected in protests and demonstrations demanding accountability and change. However, the elders have resisted these attempts at reform, violently opposing any efforts to replace them and their outdated governance mechanisms. This resistance has perpetuated the current chaos and further alienated younger generations from the political process. It is crucial that our elders recognize the severity of the situation and take steps towards meaningful reform, or risk the long-term stability and prosperity of our society.
On Tuesday, Nasdaq ended flat, as investors adjusted to rising Treasury yields and concerns about higher interest rates. US retail sales data outperformed expectations, reinforcing the belief that the economy is strong and will continue to drive the Fed’s interest rate hikes. Nvidia fell after the Commerce Department announced plans to restrict the sale of AI chips to China. BTC and ETH remained almost unmoved after correcting following Monday’s run.
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Retail sales rose 0.7% in September, beating expectations, despite high prices and borrowing costs. Sales were strongest at miscellaneous store retailers, nonstore retailers, motor vehicles and parts dealers, and gasoline stations. Excluding autos, gas, building materials, and food services, retail sales rose a robust 0.6%.
On Wednesday, the number of building permits decreased, and the Nasdaq fell in line with the other two major stock indexes. The Middle East conflict and earnings season weighed on investor sentiment. Nvidia was among the top underperformers. BTC and ETH were lingering below 28.4K and 1.53K, respectively.
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In September, the number of building permits in the US decreased by 4.4% compared to August, reaching a seasonally adjusted annual rate of 1.473 million. The decrease was primarily due to a rise in mortgage rates, which impacted housing demand. However, the ongoing shortage of available homes in the market provided some support. The decrease was seen across various US regions, with the South, West, Midwest, and Northeast experiencing the largest decreases.
On Thursday, jobless claims decreased and Nasdaq as well as the rest of Wall Street stocks fell as investors weighed Fed Chair Powell’s comments on that the resilience of the economy suggests that neutral interest rates may have shifted higher. Netflix surged on strong subscriber growth, while Tesla and Blackstone dropped sharply on weak earnings and concerns about high rates. Meanwhile, BTC and ETH continued their sideway drift on low volumes. Other news: California’s governor has signed the Digital Financial Assets Law, which is mostly analogous to the infamous New York’s “BitLicense”.
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Jobless claims fell to their lowest level since January 2023, pointing to a strong labor market that is resilient to the Fed’s interest rate hikes. Continuing claims, which measure the number of people receiving unemployment benefits, rose slightly, suggesting unemployed individuals are taking longer to find work.
The Philadelphia Fed Manufacturing Index increased to -9 in October 2023, suggesting slow growth in the manufacturing sector. New orders, shipments, employment, prices paid, and prices received were all positive, but most future indicators declined.
Crypto
California’s governor has signed the Assembly Bill (AB) 2269 or Digital Financial Assets Law, establishing a cumbersome regulatory framework, mostly analogous to the infamous New York’s “BitLicense”, for the state’s crypto industry. The bill, which will come into effect in 2025, has drawn negative reactions from local industry players.
The following activities require a license under the California Digital Financial Assets Law:
Exchanging, transferring, or storing digital financial assets.
Holding electronic precious metals or electronic certificates representing interests in precious metals on behalf of another person, or issuing shares or electronic certificates representing interests in precious metals.
Exchanging digital representations of value used within online games for digital financial assets, legal tender, or bank or credit union credit outside the online game.
Comment
This law is stupid and detrimental to the development of the industry despite that there are some allowances. The bill exempts some types of services and targets entities, whose activities are “reasonably” valued to be in excess of $50K. This allows some minor flexibility for micro-startups and very small players.
On Friday, the budget deficit narrowed, but Nasdaq and other stocks fell again due to unrest in the Middle East, rising bond yields, mixed earnings, and concerns about higher interest rates. Meanwhile, BTC extended its sudden rally, closing over 30K for the first time in two months. On the other hand, ETH stagnated as limited investor funds continued to flow into Bitcoin. Other news: FinCEN urged financial institutions to look for “suspicious activity.”
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The US budget deficit narrowed in September (to USD 171B from 430B in Sept 2033), but it was still the largest since 2021. The deficit is expected to continue to grow in the coming years (for the 2023, the government posted a $1.695 trillion budget deficit, a 23% jump from the prior year) due to falling revenues and rising outlays (Medicare and interest costs).
Crypto
The US government’s Financial Crimes Enforcement Network (FinCEN) has warned financial institutions to be on the lookout for “suspicious activity” that could be linked to funding Hamas.
On Week 43, key economic data releases in include US Q3 GDP growth, the PCE price index, personal income and spending, durable goods orders, PMI readings, housing market data, major US company earnings reports, central bank interest rate decisions, and flash services and manufacturing PMIs in several countries. Other key data releases internationally include Australia’s inflation rate, Germany’s Ifo Business Climate, and GFK consumer confidence, as well as GDP growth rates in South Korea and Spain, and the UK’s unemployment rate.