SVET Reports
SVET Markets Weekly Update (November 20–24, 2023)
On Week 47, stock markets remained relatively unchanged amidst mixed economic signals. Durable goods orders pointed to an economic slowdown, but the number of unemployment claims dropped sharply, suggesting that the feared labor market slowdown has not yet fully materialized. Meanwhile, BTC and ETH experienced marginal gains following Javier Milei’s victory in the Argentinian elections.
On Monday, the major stock indexes gained, with the Nasdaq leading the way, as Microsoft reached an all-time high following news that the company has hired two former OpenAI executives to head a new advanced AI research team. Still, most traders awaited the FOMC’s minutes on Tuesday, which could provide clues about the Fed’s monetary policy outlook. Meanwhile, BTC and ETH retreated back to their Friday’s close after a sudden Sunday’s surge on the victory of Javier Milei in Argentina’s general election.
Crypto
The pro-bitcoin candidate won Argentina’s election. Javier Milei beat his opponent by over 2.7M votes. Though Milei hasn’t proposed making bitcoin legal tender, he wants to replace the hyperinflating peso with the USD. The new president takes office Dec. 10.
Comment
Milei’s political platform is not expected to incorporate Bitcoin, at least initially, and possibly not at all. Although Milei seldom discusses Bitcoin publicly, he doesn’t come across as a fervent supporter; rather, he seems to align with an anti-establishment ethos to resonate with his base. Bitcoin, for him, appears more of a distraction than a practical tool. Furthermore, Milei is cautious not to antagonize the International Monetary Fund (IMF), as the IMF disapproves of Bitcoin, and Argentina, having accepted a $45 billion IMF loan, is obligated to discourage cryptocurrency use.
While Milei may be radical enough to defy the IMF, severing ties with China, another major international lender, would be economically perilous. Despite this, there is optimism that Milei won’t impede the growing interest in Bitcoin within Argentina, and restrictions on banks providing crypto services might be eased. Although Bitcoin has thrived amid Argentina’s economic challenges, it is unlikely to become the country’s standard currency. Milei’s stance on Bitcoin differs from that of El Salvador’s president, who views Bitcoin as a tool for freedom and is less bound to the IMF.
Despite uncertainties, Bitcoin stands to benefit from Argentina’s evolving economic landscape, fostering local interest and potentially contributing to the country’s resurgence by providing a model for nations seeking to overcome the pitfalls of socialism.
On Tuesday, sales of existing homes as well as the Chicago National Activity Index decreased, the Nasdaq dropped, and there was a subdued trading day in Wall Street as investors processed unfavorable earnings reports from major retailers Lowe’s, Kohl’s, and Best Buy. Traders was also looking for insights into the future of monetary policy from the FOMC minutes. Meanwhile, Bitcoin and Ethereum fluctuate close to their year’s top.
Details
In October, the Chicago Fed National Activity Index dropped to -0.49, the lowest in seven months, indicating a decline in economic growth. All four categories contributed to this decline, with production-related indicators falling to -0.33 and employment-related indicators dropping to -0.10. Additionally, the personal consumption and housing category decreased to -0.02, while the sales, orders, and inventories category fell to -0.04.
Sales of existing homes fell 4.1% in October to their lowest level since 2010, below forecasts. Tight inventory and high mortgage rates continue to weigh on the market, though starter and mid-priced homes still see multiple offers. Inventory rose slightly from September but remains down from a year ago. The median home price rose 3.4% from a year earlier to $391,800. Sales declined in the Northeast, South, and West but were flat in the Midwest.
Argument
In the journey of human progress and economic growth, the interaction among entrepreneurship, innovation, and regulations has been a continuous focus. Human talent for entrepreneurship flourishes in open spaces. Historical examples like the development of North and South America and Australia show how such spaces fostered innovative economies over 400 years. Yet, in today’s world, such spaces are rare, hindering organic entrepreneurship.
Fostering entrepreneurship in modern, orderly countries faces challenges. Strict law and order perspectives, often from traditional views, lead to numerous regulations. These regulations, meant for societal order, unintentionally stifle entrepreneurship by removing necessary elements of anarchy and risk in the innovative process. Governments historically tighten regulations as innovative endeavors grow, hindering progress with excessive bureaucratic control.
In the recent cryptocurrency industry incident, regulators disproportionately affected a sector of 100 million people. This reflects a broader pattern of governments reacting to innovations challenging established norms. The decentralized nature of the crypto industry clashed with traditional regulations, raising questions about the balance between regulation and entrepreneurial growth.
To address challenges in conventional settings, we propose a solution: “Entrepreneurial Cities” with minimized regulations, allowing maximum freedom for capital and innovation. Similar to societies accepting activities like gambling in designated places, establishing cities exclusively for entrepreneurs is a constructive step, better than extreme measures like “private armies” or nuclear weapons.
On Wednesday, Durable goods orders signaled an economic slowdown by declining more than expected, yet jobless claims were lower than forecast. Nasdaq and other major stock indexes closed higher as traders digested this mixed economic data. This increase was driven by gains in tech, communication, and consumer stocks. Microsoft hit a record high, again, while Nvidia fell on poor results. BTC and ETH were, also, on the rise, with Ether leading the charge.
Details
New orders for manufactured durable goods fell sharply by 5.4% in October 2023 compared to the previous month, reversing a 4.0% increase in September and falling well short of market expectations. This was the second-largest monthly drop in durable goods orders since April 2020, driven primarily by significantly reduced demand for transportation equipment, especially civilian aircraft and vehicles. There were also declines in orders for primary metals, electrical equipment, and other capital goods, signaling decreasing business investment.
The number of unemployment claims dropped sharply last week to 209K after hitting a three-month high the previous week, falling well below market forecasts. Meanwhile, ongoing claims also declined from a two-year peak. This suggests the feared labor market slowdown has not fully happened yet, giving the Federal Reserve leeway to sustain high interest rates. When smoothing out weekly volatility, claims are also down over the last month. However, on a non-seasonally adjusted basis, unemployment filings actually rose last week, with significant increases in California, Oregon and Kentucky.
On Friday, the private sector experienced continued marginal growth, and stock markets closed mixed following a shortened Thanksgiving week. The Nasdaq remained relatively flat. Mega-cap tech stocks like Apple, Meta, and Microsoft declined. Nvidia also slipped after reportedly delaying the launch of a new AI chip in China to comply with US export regulations. Meanwhile, BTC and ETH received another bullish impulse on the hourly timeframe, temporarily surpassing 38K and 2.1K, respectively.
Details
The private sector saw continued marginal growth in November according to the preliminary S&P Global Composite PMI. While manufacturing expansion slowed, service sector output grew slightly faster, marking the fastest pace since July. New orders also increased slightly, thanks to service sector new business growth for the first time in four months. However, employment declined for the first time in over three years. Input cost increases were the smallest since October 2020, though selling price hikes accelerated. Business confidence also softened somewhat.
On Week 48 attention will turn to consumer confidence, GDP, home sales, and profits. Globally, policy updates are expected in South Korea and New Zealand. ECB and BoJ officials will speak. October inflation rates are due for Eurozone countries, Poland, and Australia.
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