SVET Markets Weekly Update (March 11–15, 2024)

15 Mar 2024 by rate3

On Week 11 BTC turned red for the first time in two weeks, while main stock indices, except the Nasdaq, managed to close in green. This comes despite inflation rising unexpectedly to 3.2% and traders being jittery about the outcome of the FOMC’s meeting next week. On the world’s markets, oil, gold, and silver prices rose despite the dollar index edging above 103.

Overall, traders behaved more rationally this week compared to the previous two weeks, when major stocks and crypto markets continually reached new all-time highs (ATHs). Investors factored in the slow but sure deterioration of economies worldwide as energy and food prices began to appreciate again. Additionally, despite the ongoing rally in “big name” tech stocks, smaller and mid-sized stocks underperformed, leading many analysts to question the validity of the recent bull market.

A similar trend is occurring in the crypto markets, where major coins outperform and reach ATHs, while the vast majority of coins and tokens remain in bear market territory. This situation characterizes the 2024 market as a “golden bull run” driven by hyper-rich institutional and private investors aiming to make the most profitable assets across all markets out of reach for the average capital holder.

On Monday, stock market sees mixed performance. The Dow ticks up slightly, while the S&P 500 and Nasdaq dip. Tech sell-off hits Nvidia, AMD, and other tech stocks. However, materials, energy, and consumer stocks rose. Investors anticipate key inflation data before the Fed meeting on March 20. Internationally, Japan managed to avoid entering a recession, and steel prices reached a 9-month low. BTC reached a new ATH at $72.4K, leading the rest of the market, with ETH closing above $4K again. Many altcoins, including XRP (+20%), Litecoin (+17%), Avalanche (+15%), and Algorand (+14%), significantly outperformed two leading coins.

Details

Consumers inflation expectations stay put at 3% for next year, matching a 3-year low. Gas prices expected to rise slightly, while some sectors like medical care, education, and rent see inflation dip. Long-term inflation outlooks inch up slightly. (BoNY)
Crypto

Bitcoin price skyrockets to a new high above $72K, jumping over 70% this year with its total market cap above $.14 trillion. This surge pushed BCT total value above silver’s $1.382 trillion for the first time. (source)
World Markets

Japan barely avoided a recession. GDP grew slightly (0.1%) in Q4, revising previous estimates. Capital spending surged, exports rose, and net trade helped offset weak consumer spending and government cutbacks.
Japanese big manufacturers turn gloomy. Business sentiment tumbles (survey index -6.7%) despite economic growth. Concerns over global issues and potential rate hikes weigh on sentiment. (Esri)
Germany’s inflation dips to 2.5% (lowest in 2 years), beating expectations. Food and energy slow down, core inflation steady. Monthly price increase falls short of forecast. (Des)
Currencies

China’s currency strengthens (past 7.2 yuan/dollar) on inflation data. Consumer prices unexpectedly rose in February, sparking mixed signals for future stimulus. Producer prices remain low, suggesting economic recovery may be fragile.
Commodities

Steel prices in China drop to a 9-month low (CNY 3.5K/tonne) on worries about weak demand. Imports fall 8.1% year-on-year, while steelmakers ramp up iron ore purchases. Investors wait for China’s loan data to gauge future demand.
On Tuesday, major stock indices rose despite an unexpected inflation increase and a decline in business activity. Internationally, manufacturing output decreased in Brazil and India, while Mexico registered an increase. BTC, ETH, and most of the crypto market corrected, while XRP surged by 20%. MicroStrategy bought 12th BTC.

Details

The inflation rose unexpectedly to 3.2% YoY in February (above predictions). Energy slowdown weaker than expected. Food, used cars, and apparel price increases eased compared to January. Transportation costs continued to surge. Monthly inflation ticked up slightly (0.4%). (BLS)
Core inflation dipped slightly to 3.8% YoY in February (near 3-year low), but remained above expectations. Shelter costs, a major contributor, slowed down. Prices for recreation and personal care eased, while medical care and auto insurance kept rising. Monthly core inflation stayed flat at 0.4%. (BLS)
Small business confidence dips to a 9-month low (89.4) in February. Inflation replaces labor quality (down to lowest since early 2020) as the top concern for owners. (NFIB)
Crypto

MicroStrategy buys more Bitcoin (12th) as its price hits a new high. Their total holdings now stand at 205th BTC, worth over $14.8 billion. BlackRock’s new Bitcoin ETF (iShares Bitcoin Trust) also holds a significant amount (197,943.2 BTC) (source)
World Markets

Brazil’s inflation slows down for the 5th month straight, reaching 4.5% in February (lowest in 7 months). Food and transportation costs rose, but housing, clothing, and healthcare saw some relief. Monthly prices ticked up (0.83%, highest in a year) due to school year expenses and fuel tax increase. (IBGE)
India’s industrial output grew 3.8% year-on-year in January 2024, lower than expected (4.1%). Manufacturing, making up most (78%) of production, slowed to 3.2% growth compared to December’s 4.5%. However, mining and electricity sectors saw faster expansion (5.9% and 5.6%, respectively). This follows an upward revision for December’s growth (4.2%). (MOSPI)
Mexico’s industrial output jumped 2.9% in Jan (exceeding expectations). Construction boomed (17.9%), while manufacturing recovered (0.1%). Mining dipped further, and utilities grew slower. Monthly production also rose slightly (0.4%). (INEGI)
Currencies

Brazilian real weakens (4.98 per USD) on inflation concerns. Higher than expected inflation in Brazil (4.5%) and potential Fed rate cut delay weigh on the real. China’s economic slowdown further weakens foreign demand for Brazilian exports.
Commodities

Oil prices jump past $78/barrel on OPEC’s upbeat demand forecast. They predict 2.25 million bpd growth in 2024 and raised 2023 economic outlook (+2.8%). Despite production increase (led by Nigeria, Libya), OPEC cuts and Middle East tensions support prices.
On Wednesday, stock markets dip after record highs. The S&P 500 and Nasdaq fell slightly, while the Dow Jones gained. Nvidia, Tesla, and Intel dropped, while Amazon rose. On world markets, silver, soybean, and copper prices surged due to a combined effect of a lower dollar, bad weather, and monopolistic manipulation of pricing. BTC shot above 73K, stimulating the rest of the crypto market with BNB (+10%) and MATIC (+8%) leading the way.

Crypto and AI

MicroStrategy raises $500 million through convertible notes to buy more Bitcoin. These notes mature in 2031 and pay interest twice a year. (source)
The EU passed a law regulating AI. It bans harmful applications like facial recognition databases used for mass surveillance and social scoring. “Deepfakes” must be clearly labeled. High-risk AI in areas like law enforcement and education requires strict oversight, transparency, and human involvement. Citizens have the right to challenge AI-based decisions. (source)
World Markets

Russia’s inflation surges to 7.7% in Feb, exceeding forecasts (7.4%) and central bank’s target (4%). Food and services prices contribute most. Monthly inflation slows slightly. (ROS)
Currencies

Mexican peso strengthens (near 16.66/USD) on hawkish central bank signals. Policymakers prioritize inflation control and advocate for gradual interest rate adjustments. Strong industrial production growth (2.9%) and lower-than-expected inflation (4.4%) support their stance.
Commodities

Silver surges to $24.7/oz (highest since Dec 2023), mirroring gains in other metals. Expectation of central banks easing rates (Fed, ECB in June, BoE in Aug) fuels the rise. However, Bank of Japan is predicted to tighten policy soon.
Soybean prices climb near 3-week highs (~$11.8/bushel) due to lower supply concerns. Brazil revised production estimates downward due to bad weather in key regions like Argentina. However, prices remain down over 9% for the year due to a 2023 surplus.
Copper prices soar above $4/pound (7-month high). Chinese smelters cut production due to low concentrate prices affecting profitability. Specific limits not set, but adjustments planned. Exploring alternatives like using more copper blister to reduce reliance on concentrate.
On Thursday, stocks fall after inflation data raises concerns. Higher yields and mixed economic data (strong producer prices, weak retail sales) cause investor jitters. The energy sector rises with strong oil prices. Internationally, the South African manufacturing sector is experiencing slow growth due to rising energy prices. BTC corrected sharply following stocks, bringing down the rest of the crypto market, while some coins such as Polygon and Stellar dropped more than 5%.

Details

Producer prices (PPI) jump 0.6% in Feb, highest since Aug 2023. Exceeds expectations (0.3%). Goods surge 1.2% (energy +4.4%, food +1.0%). Services rise 0.3% (transportation +0.9%, trade -0.3%). Core inflation slows to 0.3% (Jan: 0.5%) but tops estimates (0.2%). Yearly inflation hits 1.6% (Jan: 0.9%), exceeding forecasts. (BLS)
Jobless claims drop below expectations: 209th in the week ending March 8th (vs. expected 218th). (DOL)
Crypto

Major banks are creating digital tokens (crypto) for real-world assets like bonds and deposits ($108 trillion+). This tokenization is being explored cautiously. Regulators in the US and Hong Kong are involved, with the Fed allowing some exploration by member banks. Banks are primarily using private, permissioned blockchains endorsed by regulators, not fully public ones. (source)
Blockchain gaming surges: daily active wallets jump 20% in February. Play-to-airdrop campaigns and rising crypto game token prices are seen as key drivers. This trend suggests growing interest in this sector. (source)
World Markets

South Africa’s manufacturing sector surges 2.6% YoY in January, exceeding expectations. This marks the fourth month of consecutive growth, driven by chemicals, wood products, textiles, and others. (STATSA)
Currencies

Stronger dollar (above 103) reflects persistent inflation. Higher producer prices, lower jobless claims, and weaker retail sales data raise concerns. Reduced hope for Fed rate cuts in 2024 (56.7% chance for June cut, down from 58.2%).
Commodities

Oil prices surge to highest since November ($81.26/barrel) due to several factors: IEA predicts higher global oil demand in 2024; oil inventories unexpectedly declined last week; attacks on Russian refineries and ongoing conflicts add uncertainty; OPEC+ decision to limit supply strengthens prices.
On Friday, stocks fell on the triple witching expiration due to a tech sell-off and concerns over a Fed rate hike. Amazon and Microsoft led the decline. Despite the daily drop, the market saw small weekly gains. On the world’s markets, the central bank of China kept its key rate unchanged at 2.5%. The crypto market was in the deep red as BTC plunged below 70K on traders’ following stocks. Among major alts, only Solana (+5%), Avalanche (+5%), and Binance (+1%) showed a positive dynamic.

Details

Manufacturing activity in New York State plunged in March, with the Empire State Index reaching a much worse than expected -20.9 (down from -2.4 in February). This reflects a significant decline in demand, new orders, shipments, and unfilled orders. Employment and working hours also weakened. Despite some hope for future improvement, overall sentiment among firms is cautious. (NYFed)
Consumer confidence dips slightly to 76.5 in March, a 3-month low. Mixed signals: modest decline in business condition expectations, flat current conditions. Inflation expectations remain unchanged. Consumers cautious about long-term outlook due to upcoming elections. (UM)
Crypto

The Dubai International Financial Centre (DIFC) recently passed a new Digital Assets Law, aiming to: clearly define regulations for those using and investing in digital assets; modernize the DIFC to attract international investment; establish the DIFC as a hub for innovation in digital assets and blockchain technology. However, it’s unlikely that any of bureaucrats ‘regulatory initiatives’ will really improve anything except for bureaucrats themselves. However, you can read this law yourself and make your own conclusions. (Dubai’s Digital Assets Law also other Digital laws are accessible here)
Bank of America reports record investments: the groundbreaking inflow in stocks of $56.1 billion, the highest ever for a single week; significant milestone with $3.4 billion in crypto-investments. (source)
World Markets

India’s trade gap widens to $18.7 billion despite strong export growth (11.9% YoY). Imports surged even faster (12.2% YoY) due to robust domestic demand and higher oil prices. Officials remain optimistic about exports holding steady. (IC)
French inflation dipped slightly to 3% annually in February (down from 3.1%). This is the lowest level since early 2022, driven by slower price increases in food, manufactured goods, and services. However, energy costs, particularly electricity and fuel, are rising faster, causing a 0.8% jump in monthly consumer prices. While a slight improvement is seen, rising energy prices remain a concern. (INSEE)
Currencies

Japanese yen weakens against the dollar (below 148.5) as traders anticipate the Bank of Japan’s policy decision. Rumors suggest the bank might end negative rates due to wage growth, but the market seems to expect this already. Governor Ueda acknowledges a moderate economic recovery with some data showing weakness.
On Week 12 it gets busy: Fed meeting on 20th of March: Economic forecasts, interest rate projections in focus Macro data: Manufacturing, services activity, housing market on watch. Global focus: Interest rate decisions in several countries (Japan, UK, etc.). Inflation: Data releases from Canada, UK, South Africa, Japan. Purchasing Managers’ Indexes (PMIs): Flash updates from various regions. China: Key economic indicators like industrial production, retail sales, and investment monitored.

Comment: Why High Fed Rates Do Not Bother Them?

We have a lot of self-congratulatory comments coming from mainstream media on how “brilliantly” the Boomer-led Fed managed to keep rates at an astronomically high level without hurting economic growth. Let’s look at this.

They claim that unemployment is low. It’s wrong. It’s low among low-paid employees in government, transportation, manufacturing, and healthcare. This is supported at an unsustainable level by corporations, which have pushed SMBs — incapable of financing their businesses with such overpriced loans — out of the markets. Unemployment is high and rising among the most valuable and productive parts of the workforce in technology, finance, and high-value-added services. This is especially true for new, fledgling, and the most innovative businesses.

They claim that stock market highs increase the wealth of consumers, who then spend it in retail shops. It’s not true, too. In the USA, institutional investors, which include both active and passive funds, own ~80% of all stocks. So, private investors only hold USD ~$8 trillion of the ~$40 trillion worth of the local stock market.

Moreover, for an “average” asset holder, real estate makes up ~50% of holdings (including primary residence) and stocks & investments only ~25%. The rest is cash & savings (15%) and other (10%, including vehicles, retirement accounts, and valuables). With that, only 40% of homes in the USA are mortgage-free, according to various sources.

You might not be a genius to see that a positive impact on private asset holdings from rising stock prices (~30% YoY, or +5% (15%*0.3) to individuals’ wealth) can’t beat the combined effect of almost doubled prices on food, shelter, or -7% (15%*0.5) and cosmically high mortgage rates (~10%), or -3% (50%*0.1*0.6).

So, we have a combined effect of -5% yearly decrease in private wealth or -8.2% if you count the +3.2% inflation. Only brain-empty Boomer politicians can’t see this obvious fact and continue to preach the great “success of economic policies”.

That’s not all. If the present political trends of establishing a “strong government” with high taxes, high rates, and increasing regulatory burden continue, the economy might enter a Japanese-style stagnation. Here’s how it plays out.

The decades-long economic stagnation in Japan can be attributed to various factors, including a surplus in corporate savings (check), policy mismanagement (check), structural impediments (check), and the close ties between economic bureaucracies and corporations (double check).

Policy mistakes, such as the consumption tax hike in 1997 (check) and slow disposal of nonperforming loans (check), exacerbated the economic challenges. The complex structure of Japan’s political economy, characterized by symbiotic relationships between economic bureaucracies and corporations (check), also played a role in impeding progress.

The link between Japan’s economic stagnation, high asset prices (check), and low levels of innovation and entrepreneurship is multifaceted. The prolonged economic slowdown has hindered innovation and entrepreneurial activities due to risk aversion (rapidly growing with Millennial and Gen Z generations) and limited opportunities for growth (almost check).

The aging population (check, if immigration channels are closed) impacted the labor force and innovation landscape. Moreover, the dominance of large corporations and conglomerates in Japan’s economy (check) has created barriers for small businesses and startups to thrive (check), contributing to a lack of dynamism in the entrepreneurial ecosystem.

So, as you can see, we are on a straight road into the classical economic dystopia, where the current abyss between the haves and have-nots will widen for the next 20–30 years before the current system collapses and the new free-market, supplemented by UBI and politically decentralized system is built.