Wednesday's Markets Update (October 16, 2024)

17 Oct 2024 by rate3

On Wednesday, equities rose as utilities and financials outperformed, while communication services and consumer staples lagged. Gold reached a new ATH as the Mexican peso weakened following Trump's comments about re-shoring car production. BTC is edging towards 68K as the presidential race appears to be heading in a pro-crypto direction, while ETH is still stuck at 2.6K.

Details

Export prices fell 0.7% in September, exceeding expectations. Non-agricultural export prices fell 0.9%, while agricultural export prices rose 0.6%. For Q3, export prices fell 1.1%, the most since December 2023. YoY, export prices fell 2.1%, the most since January. 1Y trend: "Up" (BLS)
30-year fixed-rate mortgage rates rose to 6.52% in the week ended October 11th, the highest in two months. This follows three straight increases after hotter-than-expected inflation reinforced expectations for slower Fed rate cuts. Jumbo mortgage rates rose to 6.76%, and FHA mortgage rates rose to 6.42%. 1Y trend: "Down" (MBA)

Crypto

The a16z State of Crypto report reveals trends in the digital asset industry, noting a significant overlap between crypto and AI users. Thirty-four percent of crypto projects utilize AI, up from 27% last year. Monthly active addresses exceed 220 million, a 300% increase since September 2023. Solana leads with 100 million active addresses, while stablecoins show continuous growth despite declining trading volumes. The report also highlights crypto's influence on U.S. elections, with notable interest in battleground states like Pennsylvania and Wisconsin. (source)

World Markets

India's merchandise trade deficit was $20.8B in September, the lowest since April and below expectations of $24.6B. Imports rose 1.6% to $55.4B, while exports grew 0.5% to $34.6B. (IN)
The Bank of Indonesia maintained its interest rate at 6% during its October meeting to achieve an inflation target of 2.5% ± 1% while supporting economic growth. Mr. Warjiyo (BoI head) said it was influenced by rising global uncertainties. This decision followed a surprise 25 basis points cut in September, the first decrease since January 2021. The annual inflation rate fell to 1.84% in September, near a three-year low. Meanwhile, the Rupiah depreciated 2.82% as of October 15, 2024, and the central bank kept its economic growth forecast at 4.7-5.5% for the year. 1Y trend: "Up" (ID)

Currencies

The Mexican peso weakened to 19.9 per USD in October, reaching a one-month low. Trump's threat of tariffs on Mexican cars raised concerns about disruptions to the automotive sector. The IMF forecast a slowing economy, projecting growth to decelerate to 1.5%. Bank of Mexico minutes highlighted the need for a less restrictive monetary policy, and economists estimate a 50 basis point rate cut for the rest of the year. 1Y trend: "Up"

Commodities

Gold surged to $2,680 per ounce, reaching a record high as Treasury yields fell. The Fed is anticipated to implement rate cuts in its last two meetings this year, continuing into 2025 amid a slowing economy. 1Y trend: "Up"

Comment: What Does "Data Depended Fed" Mean?

Since Powell's anointment to the Fed throne, all we keep hearing from him is that he's 'data dependent.' Ask yourself: what does that mean? Were previous Fed heads also 'dependent' on data? What about Paul Volcker, who caused one of the deepest recessions—in fact, the stagflation—in our history?

It would be absurd to say that Volcker couldn't read statistics and not to see the dark abyss to which his stubbornness was leading businesses and consumers. Why wasn’t he reversing his detrimental policies then? Because he was not 'data dependent' and believed in the 'cause,' perhaps?

Isn’t that right? Those individuals upstairs now possess such unprecedented powers that it has led them to view the rest of us as lab rats. Some of those 'scientists' are megalomaniacs like Volcker, who insist on proving their outlandish 'economic theories' no matter what.

Of course, some are well-intentioned and genuinely seek 'universal good and prosperity,' or are, more likely, ordinary bureaucrats interested in their careers first and foremost. In that case, they try to navigate between opposing political forces pressuring them and label themselves 'data dependent.'

In fact, if they truly are, then they can only act in unison with a prevailing macro-trend by magnifying it—injecting more or less liquidity into the markets. In other words, being 'data dependent' means they are always late, by definition. So the question is, why do they exist at all if they can only exacerbate market volatility instead of preventing it?

If, by contrast, they see themselves as Volcker-like missionaries, it means they claim a divine power to know what the future holds and are able to direct us to or from it. This is preposterously foolish, and most bureaucrats who have taken Financial History 101 understand that.

No wonder, then, that we are now stuck with Powell—one of those learned bureaucrats who feeds us 'data dependent' fallacies in order to keep his job longer despite all good reasons.