SVET Reports
SVET Markets Weekly Update (September 9–13, 2024)
On Week 37, stocks continued to rise, driven by strong performance in the tech and semiconductor sectors. Economic data, including inflation and the PPI, indicated signs of easing, bolstering expectations for a 50-point rate cut by the Fed. Internationally, gold reached a new ATH, and silver surged above USD 30 amid concerns about a slowing economy and potential rate cuts. BTC and ETH faced challenges in maintaining their positions ahead of the presidential debate. As investors anticipated a better performance from Trump, demand for digital assets slumped, causing BTC to dip below 57K. Meanwhile, ETH struggled to hold above 2.3K. However, both cryptocurrencies surged following MicroStrategy’s announcement of a USD 1B BTC purchase.
On Monday, stocks attempted to rebound after a rough week, driven by investor optimism about lower prices and a potential rate cut. Investors are now focused on Wednesday’s inflation data to gauge the Fed’s upcoming policy decision on September 18. Internationally, the Chinese yuan weakened as the latest inflation data showed weak economic performance despite the CPC’s efforts. BTC crossed above 57K, while ETH lingers above 2.3k, continuing to lag significantly behind BTC after three consecutive “red” months — the worst performance for ETH since 2018. In other news, El Salvador is marking the third anniversary of its BTC holdings, with more than 25% overall profits on its 5,800 BTC holding, placing it third in the world among governments.
Details
Consumer credit surged by 25.45B in July, exceeding expectations (12.5). Credit card balances and other loans both saw significant increases, indicating strong demand for credit despite economic concerns. 1Y trend: “Side” (source)
Crypto
El Salvador made its first BTC purchase in September 6, 2021, shortly before adopting BTC as legal tender. Since then, the country has significantly increased its BTC holdings. As of now, El Salvador owns over 5,800 BTC, with substantial profits (25.88% gain). The country is currently the third-largest government holder of BTC globally.
World Markets
Japan’s GDP grew by 0.7% at a stronger pace in Q2 2024 than previously expected, mainly due to higher wages and a recovery in the automotive industry. While private consumption and business investment increased, government spending and net trade contributed less to the growth. 1Y trend: “Down” (CAO)
Taiwan’s exports surged 16.8% in August, driven by strong sales of technology products. Shipments to the US, ASEAN, Europe, and China & Hong Kong all increased significantly. Overall, exports for the first eight months of 2024 were up 10.9% compared to the previous year. 1Y trend: “Up” (MOF)
Currencies
The dollar remained relatively stable as investors weighed the potential for a Fed interest rate cut on upcoming September 18 meeting. The recent jobs report showed mixed results, with fewer jobs added than expected but a lower unemployment rate and steady wage growth. Markets are divided on the size of the rate cut, with some expecting a larger reduction. Investors will closely watch inflation data this week for more clues on the Fed’s decision. 1Y trend: “Side”
The Chinese yuan weakened against the dollar (7.11) as inflation data revealed a modest increase in consumer prices but a sharper decline in producer prices. This indicates a challenging economic environment for China, with weak domestic demand and slowing growth. 1Y trend: “Side”
Commodities
Natural gas prices dropped 4% due to an incoming storm expected to reduce demand in Louisiana. The storm could cause power outages and disrupt LNG exports. While past hurricanes impacted supply, today’s storms mainly affect demand as most US gas comes from inland sources. Oversupply and mild winter weather have also contributed to lower prices. Production cuts have helped stabilize prices. 1Y trend: “Side”
Comment: What’s Up With Japan?
The Japanese yen has slipped toward 143 per dollar; however, it remains far from the record highs of 300 reached during the peak of Japan’s economic miracle in the 1980s, before the Plaza Accord, which devastated Japanese manufacturing.
Recently, the Japan Stock Market Index (JP225) achieved an all-time high (ATH) above 40,000, driven by a continuing appreciation of Japanese assets. Notably, this rise in asset values has not been accompanied by corresponding GDP growth, which has consistently stayed below 2% — a stark contrast to the impressive 8% growth experienced during the 1980s boom.
Traditionally, Japan’s unemployment rate has been very low, ranging from 2% to 3%, and was even below 2% during the 1980s. The rate tends to reach a maximum of approximately 5% during times of crisis, such as between 2007 and 2010. This low unemployment situation indicates a limited pool of additional labor resources available for Japanese entrepreneurs to enhance local productivity.
In terms of inflation, Japan has also historically maintained low annual rates. As of July 2024, the inflation rate was recorded at 2.8%. However, this is significantly lower than the peak inflation rates of around 25% in the 1970s and 10% in the 1980s. The Japanese central bank has sustained a very loose monetary policy, keeping interest rates below 1% since the 1990s, compared to an 8% rate in the 1980s. Despite this accommodative policy, economic growth has remained elusive.
Business confidence in Japan has been notably weak, rarely surpassing the 20 mark and remaining mostly below zero since the 1990s. Similarly, consumer confidence has been on a downward trend on average since the 1980s, declining from a level of 50 to recent figures of approximately 20 to 30.
In summary, the Japanese economy serves as a poignant example of how countries with limited natural resources but high-value human capital and excellent technological capabilities can mismanage their economic potential. This mismanagement is often driven by ingrained nationalistic tendencies and overly conservative political attitudes that shy away from “risky” initiatives and revolutionary social and political reforms.
On Tuesday, stocks traded mixed, with tech stocks outperforming banking shares as investors reacted to lower earnings expectations. The market awaited a crucial inflation report that could influence Fed rate cuts. Internationally, China’s car sales declined amid an ongoing economic slowdown. BTC strengthened its position slightly prior to the presidential debate, as investors anticipated Trump’s better performance and fueled demand for digital assets. However, BTC trading fluctuated based on how well the debates were unfolding dipping below 57K. Meanwhile, ETH continued to struggle to maintain a price above 2.3K.
Details
The NFIB Small Business Optimism Index fell to 91.2 in August to its lowest level in three months. Inflation remains a major concern for small business owners, as sales expectations decline and costs rise. Uncertainty among owners is increasing, and fewer expect improved business conditions in the future. 1Y trend: “Side” (Nfib)
Crypto
Wealth advisers (as opposed to TradeFi) are rapidly adopting BTC ETFs, despite their overall flows being overshadowed by other investors. Some argue that this adoption is unprecedented, even if it seems small compared to the total ETF inflows. BlackRock’s BTC ETF has attracted significant inflows. (source)
World Markets
China’s car sales declined YoY by 5.0% (vs. 5.2% in a previous month) to 2.45M units in August but outperformed expectations. New energy vehicle sales continued to grow strongly, accounting for nearly half of total car sales. Overall, vehicle sales for the first eight months of 2024 increased slightly. 1Y trend: “Down” (Caam)
The Reuters Tankan sentiment index for Japanese manufacturers declined (to +4 from +10) in September due to concerns about sluggish Chinese demand and a global electric vehicle slowdown. Manufacturers anticipate further deterioration in sentiment over the next three months. However, some respondents noted signs of recovery in the semiconductor market, particularly for high-end products. 1Y trend: “Side” (Tankan)
Brazil’s inflation rate slowed in August to 4.24%, falling below expectations. Prices for transportation, housing, health, and personal expenses declined, while food prices rose. Overall consumer prices remained relatively stable compared to the previous month. Housing costs contributed the most to the decline, offsetting increases in fuel and transportation prices. 1Y trend: “Side” (IBGE)
Currencies
The Brazilian real weakened past 5.66 against the dollar due to a stronger dollar and concerns about Brazil’s fiscal policy. There’s on-going fight between the presidential office and the central bank. On the one side, inflation eased slightly in August but didn’t change the central bank’s hawkish stance. On the other, rising inflationary pressures is exacerbated by increased government spending prompting a rate hike. The budget deficit has widened, raising concerns about the sustainability of the government’s expansionary fiscal approach. Overall, as inflation seems to be mild (3–4%) even compare to North America’s, this fight looks more politically than economically enhanced. 1Y trend: “Up”
Commodities
Urals oil prices fell sharply to a four-week low of 66 due to concerns about rising oil supply. Libya’s potential oil production resumption and OPEC’s planned output increase are adding pressure to prices. Weakening demand in China, a major oil consumer, further contributes to the decline in oil prices. 1Y trend: “Side”
Comment: What’s Up With BTC?
It appears that crypto hasn’t made the cut on Harris and Schumer’s to-do lists, which might mean that the DEM’s brief flirtation with crypto was just a knee-jerk reaction to Trump’s BTC bonanza in Nashville. Or maybe they’re holding out for the results of this month’s crypto-related hearings before taking a harder stance. Either way, if Harris takes the presidency, BTC could tank to $30K-$40K, but if Trump wins, it might soar to $80K-$90K. With Dems focusing on pro big-corporate AI policy chats, the crypto market now stakes on GOP.
On Wednesday, stocks rallied, led by tech stocks, as inflation eased. The S&P and Nasdaq surged, with chipmakers driving the gains. However, core inflation rose, suggesting a smaller Fed rate cut. Internationally, the British economy stagnated for the second month in a row as Chinese stocks approached their yearly lows. Meanwhile, BTC and ETH continued to dip after Trump’s lackluster performance during the debate.
Details
Inflation slowed in August to a 3-year low of 2.5% (from 2.9). Energy prices fell, while food and transportation inflation eased. However, shelter costs rose. Core inflation remained steady, but monthly core inflation increased slightly. 1Y trend: “Down” (BLS)
Crypto
Polymarket experienced significant changes in the betting odds for the upcoming election between Donald Trump and Kamala Harris following their recent debate. Trump’s odds dropped from 52% to 49%, while Harris’s rose from 47% to 50%, giving her a brief lead. The odds eventually evened to 49% each, with Trump slightly regaining a 50% lead. This shift also caused a flash crash in Trump-themed tokens, with some losing up to 30% in value. (source)
World Markets
The British economy stagnated (0%) in July for the second consecutive month, falling short of expectations. The services sector grew slightly, while manufacturing and construction declined. Despite this, the economy expanded by 0.5% over the three months to July. 1Y trend: “Up” (UK)
Argentina’s consumer prices rose by 4.2%, exceeding expectations (3.9%). While annual inflation eased to 236.7%, it remains high. Housing, transportation, and food costs rose more rapidly, while healthcare and restaurant prices increased at a slower pace. 1Y trend: “Up” (Indec)
Currencies
The Japanese yen strengthened to yearly highs (142) as interest rate differentials between Japan and the Fed widened. A Bank of Japan official indicated continued rate hikes to combat inflation. The Fed is expected to cut rates soon. Japanese manufacturing sentiment fell in September due to weak Chinese demand. 1Y trend: “Side”
Commodities
Crude oil prices rebounded after a sharp decline, driven by OPEC’s reduced demand forecast and slowing Chinese imports. Inventories rose less than expected, but demand concerns remain due to electric vehicles and hurricane threats. 1Y trend: “Side”
Natural gas prices rose to a two-month high (2.27) due to increased demand, record LNG exports, and China’s growing gas use. Despite record production, rising demand and potential supply disruptions could tighten the market and push prices higher. 1Y trend: “Side”
On Thursday, stocks continued to rise, fueled by strong performance in the tech and semiconductor sectors. Economic data, including the PPI, showed signs of easing inflation, supporting expectations for a 25-point rate cut by the Fed. Globally, gold reached a new ATH, while silver surged due to China’s revised green technology prospects. BTC and ETH remained at 58K and 2.3K, respectively, suppressed by political uncertainties.
Details
Factory gate prices (PPI) rose slightly in August (0.2%), driven by increases in services costs, particularly guestroom rentals. While goods prices remained unchanged, there were mixed trends within the category. Overall, producer price inflation slowed year-over-year, but core inflation increased to 2.4% from previous 2.3% while 2.5% was expected. 1Y trend: “Side”
The budget deficit soared to $380 billion in August 2024 — biggest in nearly 2 years — reversing previous year’s surplus. Spending surged due to increased Medicare and Social Security costs, while revenue grew at a slower pace. The yearly deficit reached $1.897 trillion, with interest payments exceeding $1 trillion for the first time. 1Y trend: “Down (deficit is growing)” (GOV)
Crypto
India has maintained its top position in global crypto adoption, despite strict regulations. Nigeria and Indonesia have also shown significant growth. The US, despite increased media attention, has fallen to fourth place. (source)
World Markets
The ECB lowered interest rates by 25 basis points to 3.5%. Inflation projections remain unchanged, but core inflation is expected to decline. The ECB remains committed to achieving its 2% inflation target, adjusting rates as needed. Domestic inflation pressures are elevated but are being moderated. 1Y trend: “Up” (ECB)
Commodities
Gold prices surged to a new record high (2561), driven by expectations of a Fed rate cut and signs of a slowing economy. Jobless claims rose slightly, while producer prices increased moderately. The ECB also cut rates, reflecting confidence in declining inflation. 1Y trend: “Up”
Silver prices surged on Thursday due to expectations of rate cuts by major central banks. The ECB recently lowered rates, and markets anticipate the Fed to follow suit. Also some traders are re-evaluating China’s demand for silver in renewable energy. 1Y trend: “Up”
On Friday, stocks continued to rise on momentum, fueled by expectations of a 50-basis-point Fed rate cut due to lower inflation and rising unemployment. Tech and semiconductor stocks led the rally. Internationally, gold reached a new ATH while silver surged past 30 as industrial production in the Eurozone declined. BTC climbed above 60K, while ETH broke past 2.4, following MicroStrategy’s announcement of purchasing 1B worth of BTC.
Details
The University of Michigan’s consumer sentiment index rose in September, reaching its highest point since May. Consumers’ optimism about future financial conditions and the economy improved, while inflation expectations for the coming year declined. However, long-term inflation expectations rose slightly. 1Y trend: “Up” (SCA)
Crypto
PolitiFi meme coins, inspired by political figures, have experienced a significant price drop after a strong first half of 2024. Despite the upcoming US elections and growing political interest in crypto, these tokens have lost nearly 90% of their peak value. The decline is attributed to a combination of factors, including the broader crypto market’s volatility and the waning excitement surrounding spot BTC ETFs. (source)
World Markets
Industrial production in the Eurozone fell by 2.2% in July YoY. This marks a decline from the average growth rate of 0.89% since 1991. The highest level (41.4) was recorded in April 2021, while the lowest point (-28.4) was in April 2020. 1Y trend: “Down” (EU)
Chinese banks increased lending in August to CNY 900B , but the total remained below expectations. Outstanding loans grew at a slower pace (8.5%), indicating weaker demand. Total social financing rose (CNY 3030B), but remained below year-ago levels (CNY 31279). The PBoC’s rate cuts have not significantly boosted credit appetite, partly due to government regulations. 1Y trend: “Down” (CN)
The IBC-Br, a leading indicator of Brazil’s economic activity, declined in July by 0.4% after three consecutive months of growth. Industry activity fell sharply, while services and retail sectors expanded. Despite the July decline, the IBC-Br remains higher compared to previous year. 1Y trend: “Up” (BCB)
The Russian ruble weakened past 91 as the central bank raised interest rates (19%) to combat rising inflation (7%). Increased government military spending has fueled inflation, leading to concerns about stagflation. 1Y trend: “Side”
Commodities
Gold hit a record high (2580) due to a weaker dollar and lower bond yields. Rising jobless claims and stronger-than-expected producer prices fueled expectations of more aggressive Fed rate cuts. The ECB also cut rates as anticipated, indicating confidence in declining inflation. 1Y trend: “Up”
Silver prices surged past 30 this week due to speculation of a larger-than-expected Fed rate cut. China’s economic outlook and growing renewable energy sector are also influencing silver demand. 1Y trend: “Up”
On Week 38, investors focus will be on the Fed meeting at Wed, Sept 18 as well on other central banks worldwide which will announce interest rate decisions, including the Bank of England and Bank of Japan. Economic data releases will focus on inflation, retail sales, manufacturing activity, housing indicators, and GDP growth.