SVET Reports
SVET Markets Weekly Update (July 8–12, 2024)
On Week 28, stocks experienced a sharp decline with the Nasdaq and S&P crashing due to a classic WS move of ‘selling the news’ after an unexpected drop in the core inflation rate to a three-year low of 3.3% in June. This decline in inflation has amplified calls for an urgent rate cut by the Fed. BTC and ETH saw slight recoveries following Germany’s sale of 13K BTC. Meanwhile, prediction markets now estimate a 65% chance that Biden will drop out of the presidential race after a disappointing NATO conference performance, where he addressed Zelinskiy as Putin.
On Monday, the stock market closed with the S&P and Nasdaq setting new records again, while the DJ dropped. Inflation expectations fell for the second month in a row. Internationally, the French elections outcome brought relief to investors, as no party won a majority, reducing concerns over extreme fiscal policies. BTC (56K) and ETH (2.9K) are lingering at levels not seen in more than six months after the massive crash, blamed by different sources on panicking whales, MG’s sell-offs, and the German government.
Details
Consumers expect inflation to fall across most categories in the next year, with one-year expectations down to 3% in June from 3.2% in May. This decrease is accompanied by a rise in expected earnings growth. 1Y trend: “Up” (NFed)
Crypto
There’s a lot of talk about Germany selling BTC (13K sold from 37K BTC in total), but it’s a small part of the overall market. Even if they sold everything, it would only account for a fraction of recent trading. In fact, many governments hold BTC, with the US leading the pack with 213K BTC. (source)
Messari is publicly criticizing the SEC for failing to prevent crypto fraud and argues new technology can provide better oversight. They’re cutting ties with the SEC and plan to challenge their authority through lawsuits, media, and lobbying Congress. This aggressive move has been supported by many in the crypto community. (source) .
Commodities
Steel prices in China plunged to a 7-year low in July on weak economic data. Investors are doubtful that government stimulus will boost demand for steel used in construction. Home sales and building activity are down, and despite hopes for infrastructure spending, the outlook for steel remains grim. This is due to efforts to control housing prices, which could hurt struggling property developers, a major source of steel demand. 1Y trend: “Down”
Comment: On the French “DeadLock”
According to the latest mass-media reports, the French legislative elections, with 577 seats of the 17th National Assembly at stake, which was held on June 7, 2024, resulted in a “deadlock”.
The left-wing New Popular Front emerged victorious, securing 182 seats and overshadowing Macron’s centrist alliance, which garnered 168 seats, and the far-right National Rally party, which obtained 143 seats
NFP (New Popular Front — a broad left-wing electoral alliance launched on 10 June) secured 182 seats (289 is needed for a majority), 168 seats were passed to Ensemble parties (a liberal political coalition created by Macron), 143 — to RN-supported candidates (Rassemblement National or National Front from 1972 to 2018, far-right party, described as populist and nationalist, headed by Marine Le Pen), and the rest — to smaller parties, including, LR (The Republicans, a liberal conservative party, largely inspired by the tradition of Gaullism).
The fact that no one won a majority of seats in the National Assembly made the main-stream commentators to panic and to cry for “unity” and “capability to govern”. Instead, they have to embrace new opportunities which this French “involuntary decentralization” provides.
Hopefully, now, instead of dictating their dear leaders’ rush “ordinances” to “stupid masses”, some politicians of this over-centralized state will start learning the basics of listening to what 90% of their own population have been telling them over the past 20 years.
On Tuesday, the SP and Nasdaq hit new highs, while the Dow Jones fell after Powell’s testimony, despite him reiterating the Fed’s plan to stick to reaching a 2% inflation target. Internationally, Mexican inflation unexpectedly jumped to a one-year high. BTC and ETH continued to fluctuate near 58K and 3K levels, with bulls searching for an opening in the bears’ defense in hopes of a fast retaliation.
Details
Small business confidence unexpectedly rose in June, but remains below average. Inflation is the top concern, pushing firms to raise prices and wages. Despite some relief from backlogs, pessimism lingers about the coming months. 1Y trend: “Down” (Nfib)
Crypto
Flatcoins address the issue of inflation in stablecoins. They maintain purchasing power by tracking the consumer price index, making them resistant to inflation. Coinbase Ventures investor Brian Armstrong sees flatcoins as a necessary update to the financial system, offering a medium of exchange that doesn’t suffer from inflation. (source)
World Markets
Mexico’s inflation jumped to a 1-year high of 4.98% in June, exceeding expectations. Food, restaurants, and education costs rose the most. This is likely due to post-election jitters weakening the peso. Core inflation, excluding volatile items, continued a year-long decline. 1Y trend: “Up” (Inegi)
Comment: The Labor of All Countries Unite
As of the June 2024 elections in the UK, the Labour Party achieved a significant victory over the Conservatives. Here are the results in numbers:
- Labour Party: Won 354 seats, a substantial gain from their previous standing, securing a clear majority in Parliament.
- Conservative Party: Secured 197 seats, losing many seats compared to the previous election.
- Liberal Democrats: Maintained a stable presence with 25 seats.
- Scottish National Party (SNP): Held onto 45 seats.
- Other Parties: The remaining seats were distributed among smaller parties and independents.
The voter turnout was approximately 72%, reflecting a high level of public engagement in this pivotal election. These results mark a decisive shift in UK politics, with the Labour Party gaining a strong mandate to implement their policies.
Following the Labour Party’s significant victory over the Conservatives in the June 2024 elections, the major outlines of their policies include:
1. Economic Policy:
Public Investment: Increased investment in public infrastructure, including transportation, housing, and green energy projects.
Tax Reforms: Introduction of higher taxes on the wealthy and large corporations to fund public services.
Living Wage: Raising the minimum wage to ensure a living wage for all workers.
2. Healthcare:
NHS Funding: Significant increases in funding for the National Health Service (NHS) to reduce waiting times and improve services.
Mental Health: Enhanced focus on mental health services, with more resources allocated for support and treatment.
3. Education:
Free School Meals: Expansion of free school meals to all primary school children.
Higher Education: Reforms to make higher education more affordable, including potential reductions in tuition fees and increased support for vocational training.
4. Climate Policy:
Green New Deal: Comprehensive policies aimed at achieving net-zero emissions by 2050, including investments in renewable energy and green jobs.
Sustainable Agriculture: Support for sustainable farming practices and reduction of carbon footprint in agriculture.
5. Social Policies:
Housing: Large-scale public housing projects to address the housing crisis, including measures to ensure affordable rent and home ownership.
Social Security: Enhancements to the social security system to support vulnerable populations, including increased benefits and support services.
6. Brexit and Foreign Policy:
EU Relations: Strengthening ties with the European Union and exploring opportunities for closer cooperation in trade, security, and environmental policies.
Human Rights: Emphasis on promoting human rights and democratic values in international relations.
7. Labour Rights:
Worker Protections: Stronger protections for workers, including enhanced rights for gig economy workers and stricter regulations on zero-hour contracts.
Trade Unions: Support for trade unions and collective bargaining to ensure fair wages and working conditions.
These policies reflect the Labour Party’s commitment to largely pro-big-government, inflationary measures under the umbrella of focusing on social justice and human rights.
FYI: The British Parliament consists of two houses: the House of Commons and the House of Lords. The House of Commons has 650 seats, each representing a geographical area of the UK known as a constituency. The House of Lords does not have a fixed number of seats, as it is comprised of appointed life peers, bishops, and hereditary peers, with its membership varying over time.
On Wednesday, stock markets soared to new records, with the S&P topping 5600 for the first time, fueled by big tech and traders’ positive perceptions of Powell’s congressional testimony. Internationally, Brazil’s inflation rose for the second month. BTC and ETH stayed at 60K and 3K respectively, still suppressed by negative sentiments despite being technically oversold.
Details
Average interest rates for 30-year fixed mortgages dipped slightly to 7% for FHA loans in the week ending July 5th. Jumbo loan rates edged up a bit. 1Y trend: “Up” (source)
Crypto
Goldman Sachs is launching three projects by year-end to turn real-world investments into digital tokens. This caters to client demand and could revolutionize investing. The projects target US funds and European debt, aiming for faster transactions and broader investment options. This reflects growing institutional interest in tokenization, similar to BlackRock’s successful +500M BUIDL fund. (source)
World Markets
Brazil’s inflation rose to 4.23% in June, exceeding a slight dip in May but staying below forecasts. This two-month rise follows a period of decline. While below the central bank’s limit, some policymakers worry rising costs and spending could push inflation higher. Food, transportation, and healthcare saw the biggest increases. 1Y trend: “Down” (Ibge)
Russia’s inflation hit an 16-month high of 8.6% in June, exceeding expectations. This rise is likely due to a combination of supply chain issues and increased consumer spending. Food prices saw the biggest jump at 9.8%. 1Y trend: “Up” (Ros)
Ukraine’s inflation hit a record high in June (4.8%) due to ongoing Russian attacks. This caused significant price increases, especially for housing, utilities, transportation, and healthcare. There was some relief for food prices, however. 1Y trend: “Down”
Currencies
The British pound jumped to its highest level in four months due to inflation worries. The Bank of England suddenly signaled a delay in rate cuts, even though they’ve been considering them. It might be explained by the Labors’ unexpected assent to power, which promises upcoming inflationary spendings. 1Y trend: “Up”
On Thursday, stocks were in deep red with Nasdaq and S&P crashing in a classic WS move of ‘selling the news’ on an unexpected drop in the core inflation rate, which factually supports mounting public voices, including senatorial ones, for the Fed’s urgent rate cut. With that, the Dow surged as traders favored traditional stocks over tech, as concerns rose about tech earnings. In world markets, gold jumped, nearing an ATH as the dollar weakened, following increasingly dovish statements from Powell and growing disarray in the DEM’s presidential campaign. BTC and ETH were stopped short in their post-Germany-dump recovery by the abrupt selloffs on the Street.
Details
Core inflation, excluding fluctuating items like food and energy, dipped to a 3-year low of 3.3% in June, below expectations. While housing costs remain high, price increases for other categories are slowing down. Monthly core inflation also hit a multi-year low, suggesting inflation might be cooling down. (BLS)
Crypto
Prediction market traders now estimate a 65% chance that Biden will drop out of the presidential race, up from 59% yesterday. This follows his first press conference in months and concerns about his age and cognitive health. His chances of becoming the Democratic nominee have also fallen to 38%, while his chances of winning the presidency have dropped to 10%. (source)
World Markets
Brazil’s retail sales jumped 8.1% in May, exceeding forecasts and reversing a slowdown in April. 1Y trend: “Up” (Ibge)
Commodities
Gold prices surged past $2,410 per ounce, reaching a new high, as US economic data showed inflation slowing to a one-year low and labor market softening. This strengthened expectations for the Federal Reserve to cut interest rates, with 85% of investors betting on a June cut. The trend is consistent with other major central banks, making gold a more attractive asset. 1Y trend: “Up”
Comments
Watching two candidates, one as cool as a sea-bass, another as lively as the Tutankhamen mummy, throwing their dry excrements at each other in an empty room on live TV, must have been a turning point for 90 million horrified people.
However, the next day and week, it looked like no one could do much about it. Yes, many were talking loudly, as usual, but obviously, it was just talking to the wind. Nothing can be changed in that outdated system without fundamentally redesigning the whole layout.
The over-centralized governance mechanism, which forcefully puts the kingly bottom of Mr. President on top of all our heads, doesn’t care a bit what we think in the most critical moments of our lives. All that matters is what an “elected” Majesty believes to be “true”.
This type of arrangement might barely work under “usual” circumstances, but it becomes a disaster-in-waiting when His Majesty stops realizing that he not only looks like a vampire surprised in his lair by daylight but is also 100% wrong on all accounts, like a rotten squirrel lying on a highway.
Maybe that type of “governance model” was adequate in the nineteenth and early twentieth centuries, when there were no technologies to replace that rudiment of feudalism, but not in the twenty-first century, when literally any instantaneous voting and crowd-decision making application would do better than those two horror-movie apparitions pretending to be living creatures, which we saw on our devices two weeks ago.
So, do not ask what the Government might do for you — ask what you can do to change your Governance Model.
On Friday, stocks recovered on technicals, closing near record highs. Hopes for a rate cut, boosted by the latest economic data, are mixed with fears of significant overbought markets, especially in big tech. The Dow continued to rally, closing above 40000 again. Internationally, Indian industrial production surged unexpectedly. BTC and ETH oscillated near two-month lows as traders remain uncertain about economics and politics.
Details
Core producer prices surged 3% YoY in June, exceeding forecasts and marking the highest jump since April 2023. 1Y trend: “Down” (source)
Michigan Consumer confidence dropped again in July, hitting a 7-month low of 66. This is the fourth month in a row of decline. People are worried about inflation and the upcoming election. Even expectations for future inflation are down slightly. 1Y trend: “Up” (SCA)
Crypto
Germany sold a big chunk of its BTC (down to 6,894 BTC). El Salvador keeps buying (now at 5,808 BTC) and could soon have more BTC than Germany if Germany keeps selling. (source)
World Markets
India’s industrial production in May exceeded expectations, surging 5.9% YoY. This is the highest growth since October 2023. Manufacturing, especially pharmaceuticals and metals, led the increase. Output also grew in mining and electricity. 1Y trend: “Side” (Mospi)
Brazilian industrial confidence index (ICEI) falls to 14-month low in July, reflecting pessimism about the economy. 1Y trend: “Side” (source)
Currencies
The South Korean won weakened to 1.38 due to rising global tensions. South Korea is taking a strong stance against North Korea with new laser weapons and is maintaining high interest rates to fight inflation. However, the central bank might cut rates later this year to align with the Fed. 1Y trend: “Up”
On Week 29, big companies like GS and Netflix report earnings, while the Fed and China’s economic data are in focus. Inflation, unemployment, and trade figures will be released globally, with consumer confidence data coming from the UK.
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