SVET Reports
SVET Markets Weekly Update (December 26–29, 2023)
On Week 52, the world’s markets corrected slightly on profit taking. However, on a yearly basis, almost all major indexes globally recorded record gains, except in China, where the Shanghai Composite and Shenzhen Component declined by 3.7% and 13.5% YoY.
The S&P 500 added 24.7%, the Dow gained 13.7%, and the Nasdaq jumped by 44.5%. In Japan, the Nikkei and Topix indexes gained 28% and 25%. In Germany, Frankfurt’s DAX 40 surged 20% yearly. The UK’s FTSE 100 had only a 3.8% yearly gain, while the French stock market was up nearly 17% since January, Italian stocks gained above 28%, and the Spanish index soared 22.8%. In other parts of the world, Indian stocks added 19% YoY, but South African gains were null, decreasing by 0.18%. Notably, Russian stocks grew by nearly 44%.
Additionally, all crypto-related stocks are in the green, with Coinbase stocks’ price skyrocketing by more than 400%. At the same time, BTC and ETH gained over 150% and nearly 100% YoY, respectively.
On Tuesday, the Nasdaq and other major stock indexes closed higher, extending an eighth straight week of gains, driven by reduced price pressures and expectations of interest rate cuts in 2024. Intel’s shares rose by 5.2%, while Apple faced a setback following a sales ban on its smartwatches. Home prices continued to rise due to tight supply and increased competition among buyers. Meanwhile, the price of BTC decreased by more than 3% due to after-Christmas profit-taking, and ETH followed with a 3% drop.
Details
Texas manufacturing sentiment improved in December, with the Federal Reserve Bank of Dallas general business activity index rising to -9.3 from -19.9. Production and new orders showed signs of recovery, while prices paid for raw materials increased, leading to higher output charges.
Home prices, as measured by the S&P CoreLogic Case-Shiller 20-city index, rose 4.9% YoY in Oct 2023, the most since Nov 2022, due to low housing supply. Eased mortgage rates and a more dovish Fed may further boost home prices, with Detroit, San Diego, and New York leading gains.
Commodities
Wheat futures are expected to close the year nearly 15% lower due to ample supplies from key producers and supply risks from the war in Ukraine. A good harvest in Russia is set to lift available wheat for export to a record high of 50 million tonnes, while robust crops in South America further contribute to global supply. However, damaged infrastructure in Ukraine limits exports from Europe’s bread basket and restricts the decline in prices.
Lithium carbonate prices hit a low of below CNY 97,500 per tonne due to oversupply and reduced demand from electric vehicle manufacturers in China. Forecasts now suggest a lithium deficit may not return until 2028, with global supply expected to increase by 40% in 2024, exacerbating the surplus.
On Wednesday, the manufacturing activity continued to decelerate, while the Nasdaq index rose, contributing to a 45% growth this year. This surge is primarily attributed to the resurgence of the seven largest technology companies and the hysteria surrounding artificial intelligence. Shares of Bit Digital, a prominent BTC miner, experienced an 18.5% increase as the company plans to double its mining fleet by 2024. In the crypto market, both BTC and ETH exhibited growth, with ETH taking the lead with an increase of more than 5%.
Details
In December, Richmond’s Manufacturing Index dropped to -11, a 10-month low. Shipments, orders, and employment declined, while backlogs reduced. Vendor lead time improved, and prices and expected price changes increased, maintaining overall pessimism in future local business conditions.
Commodities
Uranium prices nearly doubled to $91/lb in 2023 due to increasing demand and risks to supply, as 22 countries, led by China, announced plans to triple their nuclear power generation by 2050. The surge in prices was driven by volatile fossil fuel prices and decarbonization goals, but faced threats from the invasion of Ukraine, a potential US ban on Russian uranium imports, and supply disruptions in Niger and Canada.
Carbon permit prices rise to €80/tonne, rebounding from a 14-month low. Eurozone manufacturing declines, but firms show optimism for the year ahead. European natural gas market becomes more volatile due to weather, Red Sea disruptions, and ship rerouting.
Canola futures near CAD 640/lb amid low crude oil prices and increased rival oilseed availability. Weak crude oil and strong corn production in the US lowered demand for Canadian rapeseed in biofuel feedstock. Canola exports decreased 23% due to improved weather in rival seed-oil regions.
On Thursday, the Nasdaq 100, Dow Jones, and S&P 500 all gained, with the Nasdaq Composite up 44% YTD, the most since 2003, due to mega-cap tech stocks and the AI trend. Unemployment claims increased to 218K, above the predicted 210K. Meanwhile, BTC and ETH are still trading within their month-old ranges, unable to break out above 45K and 2.5K, respectively. This situation raises the question of whether there might be massive profit-taking in January as a ‘sell-the-news’ event.
Details
Unemployment claims rose unexpectedly in late December, with 218,000 people filing for benefits, higher than the predicted 210,000. Continuing claims also increased to a one-month high of 1,875,000. This may indicate a slight weakening in the labor market and could suggest that the Federal Reserve may start cutting interest rates in early 2024.
The 10-year Treasury note yield hovered near 3.8% on new economic data indicating a likely Fed’s rate cut in early 2024. Fed funds futures suggest a 90% chance of a rate cut by Q1 2024. Bond indices have rallied since Nov, best performances since 1990.
Crypto
Binance’s user base grew 30% in 2023, despite regulatory settlements and the departure of its founder. The exchange saw increased activity on its platform, including growth in its Pay and Earn products, and interest from institutional investors.
Comment: SEC is, basically, useless.
The reported 30% spike in Binance’s user base is just another slap in the face for useless bureaucrats, especially the SEC. Their attempts to “regulate” contemporary markets are nothing more than a joke. These old folks claim they’re safeguarding customers, but in reality, users are rightfully ignoring their irrelevant attempts.
The only goal of these bureaucratic agents is to gain unfair political advantages and boost their net worth. They do so at the expense of the youngest and most vulnerable private capital holders globally. Their so-called regulations only serve to cut off access to the most profitable investment opportunities.
It’s a blatant disregard for the potential and intelligence of private investors. People are smart enough to navigate the markets without being hampered by outdated regulations imposed by self-serving bureaucrats. The reported growth in Binance’s user base is a testament to users refusing to be dictated by these bureaucratic impositions.
Commodities
Aluminum futures reached an 8-month high of $2,400/tonne in Dec, ending the year up due to supply concerns and a late-year recovery. Prices fell earlier due to macroeconomic issues in major manufacturing countries. Norsk Hydro and Alcoa reported falling sales and losses, but Chinese stimulus and a Guinean explosion led to a late rally.
World’s Economy
European stocks were stable with the STOXX 50 at a 23-year high and STOXX 600 near a 23-month high, due to expected rate cuts from US and European central banks in 2024. Global shipping activity increased and UK retail footfall rose 4% post-holidays. STOXX 50 and 600 may gain nearly 19% and 13% in 2023, respectively.
FYI: The STOXX 50, also known as the EURO STOXX 50, is a stock market index that represents the performance of the 50 largest and most liquid stocks from 11 Eurozone countries.
Palestine’s Q3 2023 (prior the war) GDP grew 3% YoY, maintaining Q2’s rate. Agriculture, wholesale & retail trade, public administration, and services slowed. Mining, manufacturing, construction, and information & communication increased. Quarterly GDP rose 1%, driven by mining, manufacturing, and electricity.
On Friday, the Nasdaq and other major stock indexes ended lower at the close of the 2023 trading session, after nearing record highs earlier in the week. Investors sold off profits, and assessed the Fed’s future path. Despite this, the S&P and Dow posted their ninth straight winning weeks, and the Nasdaq surged by 44.5%, driven by an AI-backed rally in tech companies. For the year, the S&P 500 added 24.7%, the Dow gained 13.7%, and the Nasdaq jumped by 44.5%. Nvidia soared 245%, and Meta added 183%. Meanwhile, crypto-related stocks are declining as investors sell off, causing significant drops in crypto asset prices. However, on a yearly basis, all major crypto-related stocks are in the green, with Coinbase stocks’ price skyrocketing by more than 400%. At the same time, BTC and ETH gained over 150% and nearly 100% YoY, respectively.
Details
The Chicago PMI dropped to 46.9 in December, lower than expected (51), indicating a return to contraction after November’s growth, which was the first in 15 months.
World Economy
Shanghai Composite and Shenzhen Component rose on Dec 30, due to expectations of policy easing and attractive valuations in China. However, they had a decline of 3.7% and 13.5%, respectively, for the year due to the country’s fragile economic recovery and lack of policy support.
Nikkei and Topix (Japan) indexes gained 28% and 25%, respectively, in 2023 due to solid earnings, tech stock rallies, BOJ stimulus, and expectations of US Fed rate cuts, making them Asia’s top-performing markets.
Frankfurt’s DAX 40 (Germany) index closed at 16,751 points, recording a 20% yearly surge, driven by gains in tech stocks and retailers. Europe’s unexpected deceleration in Spain’s inflation rate for December suggests that the European Central Bank might also consider rate cuts in the coming year.
FTSE 100 (UK) gained 0.6% in the final week of 2023, marking fifth straight week of gains. Personal goods and energy shares rose, while real estate declined. British house prices fell, but the FTSE 100 had a 3.8% yearly gain, led by aerospace and defense, and oil and gas sectors.
The CAC 40 index (France) rose by 0.3% to 7,560, with almost all constituents in the green, amid hopes of a softer monetary policy. The French stock market gained nearly 17% since January, with Stellantis being the top boost.
The FTSE MIB (Italy) was up 0.4% towards 30,500, setting it up for yearly gains above 28%. Optimism about accommodative monetary policy drove the gains.
The BSE Sensex (India) closed at 72,240, down 0.23% due to weakness in financial and energy shares. In 2023, the Sensex gained 19%, marking the second-best year since 2017, driven by domestic macroeconomic factors, corporate profits, expected rate reductions, and foreign investments.
The IBEX 35 in Spain closed slightly higher at 10,102, supported by economic data suggesting potential rate cuts by the ECB. The Spanish index soared 22.8% in 2023, driven by a strong financial sector.
The JSE All Share Index (South Africa) started higher, up 0.34%, with expectations of rate cuts. The index is expected to gain 1.8% for the week but end the year with a slight decrease of 0.18%.
The Hang Seng closed at 17,047.39 with little change, as the Chinese central bank committed to a prudent monetary policy. Financials rose, but tech, property, and consumer sectors were subdued. The index was flat for the month and saw a 14.0% yearly decline due to economic uncertainties in China and global economic risks.
The MOEX Russia index dropped slightly to 3097 on the last trading day of 2023, with little movement over the week. The December S&P Global Russia Manufacturing PMI increased to 54.6, the highest in seven years. Transport, electric utilities, and metals & mining recorded losses, while IT and consumer goods advanced. The index grew by nearly 44% over the year, helped by renewed dividends payments, disclosure of companies’ financial results, and bypassing of Western sanctions.
The first week of 2024 will feature important data releases including labor market reports, FOMC minutes, and key indicators such as ISM Manufacturing and Services PMI. Global attention will also be on inflation rates, manufacturing PMI figures, and unemployment rates in various countries.
Comment: The New Year Prognosis. What could possibly go wrong?
I’ll make it short and simple.
In case you ever wonder what’s wrong with the world in one picture, have a second look at a global map of the distribution of World’s USD 100 Trillion GDP. This map, under the contemporary centralized elders-clans-based governance model, basically represents the distribution of decision-making power.
According to that map, there are only seven countries whose opinions matter: the US (GDP = USD 23 Trillion), Japan (5T), Germany (4T), the UK (3T), France (3T), Italy (2T) on one side, and China (17T) on the other. These countries, with a combined GDP reaching 60% of the global economy, have the capability to finance, deploy, and maintain large military forces in the long term. Consequently, they are able to enforce compliance from other countries, for lack of a better word. More often than not, they exercise this power.
Sure, there are smaller GDP countries like Russia, Saudi Arabia, or Israel that punch above their weight, but it would be difficult for them to withstand the economic pressure of a prolonged war without some form of alliance.
At the same time, the great majority of the world’s population has almost zero influence on what’s going on in politics, economy, and military globally, and very often locally. Naturally, people worldwide are extremely upset with this nonsensical redistribution of wealth and power. What could possibly go wrong?
Of course, we have all become more “civilized” (or rather, lazy and relaxed) over the past hundred years or so. This means we are less inclined towards direct kinetic confrontations to resolve our differences, unlike our predecessors. Additionally, the existence of thermonuclear weapons gives us pause. However, the world is still ruled by brutal force, just as it was ten thousand years ago, and it will continue to do so until we fundamentally change our global governance model. We need to shift from a “muscles-based” approach to a “brains-based” approach. This implies that we must decentralize or face extinction.
“Why is decentralization the best solution?” you ask. It’s because we have already tried everything else. Decentralization will, at the very least, give a portion of our global humanity a chance to embark on some unconventional social experiments. For instance, we could explore giving decisive political power to algorithms and crowds, connected through intelligent networks. Perhaps this approach will make a difference. If not, then we must prepare ourselves to become just another species out-competed and wiped out from the face of the Earth.
Happy New Year!
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