SVET Reports
SVET Markets Weekly Update (November 18–22, 2024)
On Week 47, equities closed positively, buoyed by ongoing “Trump trade” momentum, despite mostly subdued economic fundamentals. The dollar remained strong at a two-year high, as oil, gold, and silver prices surged due to heightened geopolitical tensions. This week saw Ukraine using supplied long-range weapons inside Russia, following Russia responding with long-range ballistic missile strikes on Ukraine.
Brent crude oil prices rose sharply as tensions escalated in the EU. Gold prices rebounded following a weakening dollar and continued geopolitical unrest. Conversely, the Euro dipped to a one-year low, impacted by concerns regarding trade tariffs and geopolitical developments, which weighed on investor sentiment.
In the cryptocurrency market, BTC approached the 100K mark, while Ethereum (ETH) surged to 3.4K. Additionally, SEC Chair Gary Gensler announced his resignation, effective January 20, 2025, stirring speculation in regulatory circles.
On Monday, stocks closed mixed, with the S&P and Nasdaq rising by about half a percent, while the Dow fell slightly. The tech sector was led by Tesla’s +5% increase amid potential regulatory easing for self-driving cars. Apple and Netflix also gained. Foreign investors increased their holdings of domestic securities, with a record inflow in September, but caution prevails following Powell’s remarks. The dollar remains at a two-year high as oil, gold, and silver prices rise due to sharply increased geopolitical tensions, with Ukraine receiving the approval to use supplied long-range weapons inside Russia. BTC (91K) and ETH (3.1K) are in the green but remain subdued as investors continue to accumulate, with a growing number anticipating BTC to surpass the landmark 100K level before January.
Details
The NAHB/Wells Fargo Housing Market Index increased to 46 in November, the highest in seven months. Builders are optimistic about future market conditions due to potential regulatory relief under the Republican administration. This optimism is reflected in increased sales expectations and a slight decrease in price cuts. 1Y trend: “Side” (Nahab)
Foreign investors increased their holdings of securities by $398.4B in September, with Treasuries reaching a record high ($8.673T, 15.4% higher than a year ago). This reflects strong demand for home assets amidst global economic uncertainty. Residents also increased their foreign investments. 1Y trend: “Up” (TR)
Crypto
MicroStrategy purchased 51,780 Bitcoin in just one week for $4.6 billion, raising its total holdings to 331,200 BTC valued at over $29 billion. Funded through stock sales and convertible debt, the company plans to raise $42 billion over the next three years. Its stock price, which closely mirrors BTC’s movements, rose 8.48% after this acquisition. Co-founder Michael Saylor has transformed the software firm into a major BTC player as its stock remains highly correlated with BTC’s price fluctuations. (source)
World Markets
The Eurozone recorded a trade surplus of €12.5B in September. This marks a significant improvement from previous months, indicating a strengthening trade balance for the region. 1Y trend: “Up, Strengthening” (EU)
Spain’s trade deficit narrowed in September, as both exports and imports increased. Exports were boosted by food, beverages, chemicals, and consumer goods, while imports rose for chemicals, consumer goods, and food. However, lower imports of capital goods and energy products contributed to the narrowing trade gap. 1Y trend: “Up, Narrowing” (ES)
Commodities
Brent crude oil prices rose above $71 per barrel, driven by escalating tensions between Russia and Ukraine. Concerns over potential supply disruptions due to increased attacks on Ukraine’s energy infrastructure have boosted oil prices. However, weaker Chinese demand and uncertainty about the pace of Fed rate cuts have also weighed on the market. 1Y trend: “Side”
Gold prices rebounded towards $2,600 per ounce as the dollar weakened and geopolitical tensions escalated with Ukraine using US-supplied long-range weapons inside Russia. Uncertainty surrounding the Fed’s rate cut timeline and potential inflationary pressures from geopolitical events have also boosted gold’s appeal as a safe-haven asset. 1Y trend: “Up”
Silver prices rebounded above $30.50 per ounce as the dollar weakened and investors reassessed Fed rate cut expectations. The recent rally in the dollar, driven by Trump’s election and potential inflationary policies, has started to fade. Investors are now looking for more clarity on the Fed’s future policy moves. Additionally, rising geopolitical tensions between the US and Russia have provided some support to silver as a safe-haven asset. 1Y trend: “Up”
Natural gas prices rose above $2.90/MMBtu due to increased winter demand and higher LNG exports. Lower domestic production and rising global demand have contributed to the price increase. However, rising US natural gas inventories could limit further price gains. 1Y trend: “Up”
Comment: What’s Up With EU?
EU equities have drastically underperformed since March. At the same time, TIC investments in Treasuries reached a historic ATH in September, which raises the question: why? Of course, the Fed’s decision to maintain historically high rates for an extended period, while the ECB begins to lower them due to a looming recession in the Eurozone — especially in the manufacturing sectors of France and Germany — has played a significant role in this massive capital outflow. Additionally, rising political uncertainties in EU, along with the impact of the Trump trade, have contributed to this capital fly.
However, I argue that the situation has been further exacerbated by the generally aging and wavering state of EU bureaucracy. This bureaucracy stubbornly refuses to confront reality and continues to impose outdated agendas on EU residents — agendas that are 30 to 40 years old and increasingly inappropriate given the current political, economic, and technological landscape. The world is becoming more divided between the statist “Global South,” which claims to defend “social goods” through a highly centralized governance model, and the profit-focused, capitalist, more decentralized West. The EU is trying to straddle this divide, but this approach is not working miserably. Maintaining this middle ground is costing the EU economy people and money, leading to an exodus of capital.
The latest example of the EU’s outdated approach is its excessively regulatory stance toward blockchain and AI. On both fronts, the EU bureaucracy is convinced that it is entitled to dictate what is permissible based solely on its own self-designed “rules,” which it promotes as “universal.” However, this statist attitude is not enough to deter innovators and investors, who are fleeing from the suffocating embrace of these frightfully outdated “EU sages.” And there’s only one direction they can go, right?
Overall, it appears that the concept of EU unity is a thing of the long-gone past, as more countries disillusioned with the ‘union’ increasingly affiliate themselves either with the South or the North, leaving very few capable of maintaining the middle ground for more than a limited time. In this situation, a massive EU bureaucracy finds itself fighting tooth and nail for its own survival, which relegates all other agendas to a secondary position, grossly undermining European countries’ collective progress toward peace and prosperity.
On Tuesday, equities rebounded slightly at the start of the session but ended mixed, with the tech and retail sectors leading the gains, boosted by falling housing starts and building permits that emboldened the “rate-cutters” camp. Nvidia and Tesla rose ahead of their earnings reports, while Walmart’s strong results boosted its stock. However, geopolitical tensions and potential Fed rate changes remain concerns for the market. Gold rose as Russia broadened its conditions for using atomic weapons, just days after Ukraine was granted permission for long-range missile strikes on Russian territory. The dollar is holding on to profits as the euro falls to a one-year low due to geopolitics, while the yuan dropped to a 3-month low amid wavering support from the CCP for the economy. Oil prices have fluctuated as traders remained confused, caught between a rising probability of a Russian tactical nuclear strike on Ukraine — now estimated at 14% on Polimarket — and easing tensions in the Middle East. Meanwhile, BTC reached a new all-time high at 93.9K, while ETH remains stuck at 3.1K.
Details
Building permits declined 0.6% in October, below expectations. While single-family permits increased, permits for multi-family units decreased. Regional data showed mixed results, with declines in the Midwest, South, and West, but a significant increase in the Northeast. 1Y trend: “Down” (Census)
Housing starts fell 3.1% in October, primarily due to a sharp decline in the South. Single-family home starts decreased significantly, while multi-family starts increased. Despite the recent decline, housing starts remain challenged by rising mortgage rates and an increasing inventory of unsold homes. 1Y trend: “Down” (Census)
Crypto
Trump’s campaign prominently featured his branding as the ‘Crypto President,’ which many believe contributed significantly to his election success. Now, as President-elect, he is poised to fulfill his promises to the crypto industry. Following his victory, Trump met with Coinbase CEO Brian Armstrong to discuss appointments for his administration. Additionally, Trump’s media company is reportedly in talks to acquire the crypto trading firm. (source)
World Markets
Eurozone annual inflation rose to 2% in October, reaching the ECB’s target. This increase was primarily due to a smaller decline in energy prices and faster growth in food, alcohol, tobacco, and non-energy industrial goods prices. Core inflation remained steady at 2.7%. 1Y trend: “Down” (EU)
Currencies
The euro weakened to a one-year low as concerns over trade tariffs and geopolitical tensions weighed on sentiment. Additionally, ECB officials’ warnings about the potential impact of tariffs on the Eurozone economy have further pressured the currency. 1Y trend: “Up, Devaluing”
The offshore yuan weakened to a three-month low as concerns over potential US tariffs and a slowing Chinese economy persist. Investors are awaiting the PBOC’s LPR decision and the Hong Kong investment summit for further clarity on China’s economic outlook. Despite these headwinds, the PBOC’s efforts to stabilize the currency have provided some support. 1Y trend: “Up, Devaluing”
The Russian ruble weakened to a one-year low below 100 rub/usd as geopolitical tensions escalated following Ukraine’s use of US-supplied missiles on Russian territory. Putin’s updated nuclear doctrine and Russia’s relaxed capital controls further pressured the currency. Additionally, concerns about slowing Chinese demand for Russian goods added to the downward pressure on the ruble. 1Y trend: “Up, Devaluing”
Commodities
Gold prices rose 1% to $2,630 per ounce, driven by increased geopolitical tensions between Russia and Ukraine. Russia’s expanded nuclear doctrine and Ukraine’s use of US-supplied missiles have heightened concerns about a potential escalation of the conflict. This has led investors to seek safety in gold, despite a stronger US dollar and reduced expectations for Fed rate cuts. 1Y trend: “Up”
WTI crude oil prices hovered around $69 per barrel, influenced by both geopolitical tensions and easing concerns. The ongoing conflict in Ukraine and Iran’s nuclear deal have created volatility. However, weaker Chinese demand and potential OPEC+ production increases are exerting downward pressure on prices. 1Y trend: “Side”
Lithium carbonate prices in China surged to CNY 79K per tonne, driven by increased demand from battery manufacturers and supply cuts. The Chinese government’s subsidies for electric vehicle purchases and potential trade tensions under the Trump administration have further boosted demand. Despite high stockpiles, lithium producers have reduced output, leading to a tighter supply market. 1Y trend: “Down”
Comment: What’s Up With SME?
In the situation of global “South-North” divide, entrepreneurs face two options for profit as cross-border trade in physical goods becomes more constrained. The first option is monopolization within national production boundaries and cross-border trade, which is primarily the domain of large corporations, not small and medium-sized enterprises (SMEs). The second option is to focus on seamless intellectual goods and services, which can more easily cross the divide between the South and the North.
This doesn’t mean physical production won’t be possible for SMEs; it simply indicates that until labor and material costs trend downward again — like they used to in a globalized scenario — SMEs won’t have an advantage over large international corporations in manufacturing. They can, however, excel in the services and intellectual sectors, where SMEs can be faster and more inventive compare to larger corporations.
On Wednesday, equities closed mixed, with Nvidia’s earnings report and geopolitical tensions impacting market sentiment. The S&P closed flat, while the Nasdaq declined slightly. Retail stocks, led by Target’s disappointing earnings, fell sharply. Investors are also monitoring Trump’s potential cabinet picks and their impact on trade policy. Gold is up due to worsening conditions on the EU war’s front, while the Bank of China kept its lending rates unchanged due to inflation concerns. BTC surpassed $94K, continuing its rise toward $100K, while ETH remains in the red as traders sell it to capitalize on the BTC rally.
Details
30-year mortgage rates rose for the fourth consecutive week to 6.9%, the highest since early July. This increase is driven by rising Treasury yields and expectations of limited Fed rate cuts due to Trump’s policies and potential inflationary pressures. 1Y trend: “Side” (MBAA)
Crypto
The Shanghai High Court ruled that cryptoassets possess “property attributes” under Chinese law, but only as commodities, not for use as currency or business instruments. This decision arose from a fraud case involving illegal token issuance and condemned the actions of the companies involved. Despite acknowledging crypto’s value as a commodity, the Court maintained a strict anti-crypto stance, citing concerns over illegal financing and potential financial system disruption. China’s rigorous crypto policies remain unchanged, even amidst rising global interest in the sector. (source)
World Markets
Eurozone construction output declined by 1.6% YoY in September. This decline reflects ongoing challenges in the construction sector, including rising costs and supply chain disruptions. 1Y trend: “Down” (EU)
UK annual inflation rose to 2.3% in October, exceeding expectations. This was primarily driven by higher energy prices. While food inflation remained steady, services inflation accelerated. Core inflation also edged up. 1Y trend: “Down”
Argentina recorded a trade surplus of 888M in October, a significant improvement over the previous year. Exports surged 30%, driven by agricultural and manufactured goods. Imports also increased, but at a slower pace. This positive trade balance is a result of increased global demand for Argentine commodities and improved export conditions. 1Y trend: “Side” (AR)
Currencies
The Chinese yuan weakened further, trading above 7.24 per dollar. The People’s Bank of China kept key lending rates unchanged, signaling a cautious approach to further monetary easing. While the central bank remains committed to supporting economic growth, concerns about the global economic slowdown and potential US trade tensions continue to weigh on the yuan. 1Y trend: “Up, Depreciation”
Commodities
Gold prices rebounded to $2,650 per ounce, driven by increased geopolitical tensions between Russia and Ukraine. Russia’s expanded nuclear doctrine and Ukraine’s missile strikes fueled concerns about a potential escalation of the conflict. While the Fed is expected to cut rates in December, the magnitude of future cuts is uncertain due to persistent inflationary pressures. 1Y trend: “Up”
Silver prices eased to $31 per ounce, halting a recent rebound. While geopolitical tensions between Russia and Ukraine provided some support for silver as a safe-haven asset, weaker demand for industrial uses, particularly from the solar panel industry, limited price gains. Additionally, concerns about the impact of potential US tariffs on Chinese solar panels further weighed on silver prices. 1Y trend: “Side”
On Thursday, equities closed higher, with the Dow leading the gains despite major manufacturing indexes continuing their decline. After-hours trading saw positive results for Gap and Ross Stores, driven by strong earnings reports, as traders shifted towards cyclical stocks. Risk-on investors are disregarding worsening economic fundamentals and focusing on long-term perspectives, overweighting some positive but shaky data, such as strong employment and rising consumer sentiment. At the same time, markets are notably undervaluing sharply increasing geopolitical risks. Consumer confidence in the Euro Area declined, while it rose in Argentina, marking a growing success of Milei’s libertarian economic reforms. BTC came a whisker close to making a historic 100K, while ETH surged 10%, jumping to 3.4K as some momentum traders quickly shifted to it from BTC. In other news, Gensler announced his resignation, effective Jan 20, 2025.
Details
The Philadelphia Fed Manufacturing Index declined to -5.5 in November, indicating a contraction in regional manufacturing activity. While new orders and shipments remained positive, employment increased. Firms expect future growth, but inflationary pressures persist. 1Y trend: “Up” (Phil)
Jobless claims fell to a seven-month low of 213K, defying expectations of an increase. This indicates a resilient labor market, despite recent rate hikes. The four-week moving average also declined, suggesting continued strength in the labor market. However, outstanding claims rose to a three-year high. 1Y trend: “Up” (DOL)
Existing home sales increased 3.5% in October, rebounding from a 14-year low. The median sales price rose 4%, and housing inventory increased slightly. While the housing market shows signs of stabilization, high mortgage rates remain a challenge for first-time buyers. 1Y trend: “Down” (NAR)
The Kansas City Fed Manufacturing Index improved to -2 in November, indicating a slight improvement in regional manufacturing activity. While this is a positive sign, the index remains in contractionary territory. 1Y trend: “Side” (KFed)
Crypto
SEC Chair Gary Gensler announced his resignation effective January 20, 2025, coinciding with President-elect Trump’s inauguration. Gensler’s tenure, marked by aggressive crypto regulation and enforcement actions, ends as Trump’s pro-crypto agenda begins. His departure, three months short of a 4-year term, fulfills Trump’s campaign promise to remove him. The SEC credited Gensler for market reforms and investor protection, while the crypto industry anticipates a shift in regulatory approach under the new administration. (source)
World Markets
Consumer confidence in the Euro Area declined in November, falling below its long-term average. This suggests a worsening consumer sentiment in the region. 1Y trend: “Up” (EU)
Argentina’s consumer confidence index rose to a one-year high in November. Consumers expressed increased optimism about their personal finances, the overall economy, and future purchases. However, compared to the previous year, consumer confidence remains lower. 1Y trend: “Up” (Utdt)
Mexican retail sales declined 1.5% YoY in September, extending a five-month downward trend. While online sales increased, categories like hardware, stationery, and healthcare saw significant declines. This suggests a continued slowdown in consumer spending. 1Y trend: “Down” (MX)
Macau’s tourist arrivals increased by 13.7% YoY in October 2024 reaching 97.7% of the October 2019 level. The number of visitors from mainland China, Taiwan, and international destinations rose, contributing to the overall increase. However, the average length of stay decreased slightly. For the first ten months of the year, overall visitor arrivals increased by 28.1%. (Dsec)
Currencies
The dollar index remained near 2-year highs, supported by concerns about geopolitical tensions and expectations of less aggressive Fed rate cuts. Fed officials’ comments on inflation and the economy have added to uncertainty about the future path of monetary policy. The dollar strengthened against the Euro and Pound but weakened against the Yen. 1Y trend: “Side”
Commodities
Gold prices rose to $2,660 per ounce, driven by increased geopolitical tensions between Russia and Ukraine. Russia’s expanded nuclear doctrine and Ukraine’s use of Western-supplied missiles have heightened concerns about a potential escalation of the conflict. While the Fed is expected to cut rates in December, uncertainty remains about the magnitude of future cuts. 1Y trend: “Up”
WTI crude oil prices rose 2% to $70.1 per barrel, driven by escalating geopolitical tensions between Russia and Ukraine. The use of long-range missiles by both sides has increased concerns about a wider conflict. While OPEC+ is expected to delay output increases, rising US crude inventories may limit further price gains. 1Y trend: “Side”
Natural gas prices surged 7%, reaching a one-year high. This increase was driven by forecasts of colder weather, leading to higher heating demand. Additionally, lower-than-expected natural gas storage levels and increased LNG exports have contributed to the price rise. 1Y trend: “Up”
Comment: What’s Up With The Nukes
Currently, the markets are notably undervaluing geopolitical risks. If it’s true, Russia firing an ICBM (AlJazeera) at a Ukrainian city (after Ukraine launched British Storm Shadow cruise missiles, following its use of ATACMS missiles earlier) is a very serious and unprecedented development that significantly increases (by at least 2x-3x from current ~9%) the risks of a tactical weapon deployment in the next 6–12 months.
It’s, of course, difficult to predict how the market will behave if Russia decides to deploy a tactical warhead. However, we can assume it won’t be as positive as in August-September 1945 (**).
According to various estimates, the least yield will be about 70 kilotons (Hiroshima was about 12 kilotons). If it is deployed in a populated area, the immediate casualties are in the hundreds of thousands (depending on how far from a concentrated population location it will explode), with potentially millions directly affected as a result of fallout.
However, that scenario is the least likely. The most considered variant is an atmospheric or underwater explosion. In that case, the casualties will be very limited, if any, but the political ramifications will be tremendous, leading to a sudden sell-off across a broad range of markets, primarily risky assets. In that scenario, BTC might drop at least 40–50% at once.
Therefore, before geopolitical conditions clarify (e.g., due to new Trump initiatives), it’s advisable to keep taking some profits regularly and maintain a portion of cash readily available.
*) There has been no confirmed instance of Russia deploying an intercontinental ballistic missile (ICBM) equipped with a conventional (non-nuclear) warhead against a foreign city.
**) When the United States dropped atomic bombs on Hiroshima (Monday, August 6, 1945) and Nagasaki (Thursday, August 9, 1945), the immediate reaction of the stock markets, including the Dow Jones Industrial Average, was influenced by the general sentiment during this period, which leaned towards optimism regarding the end of the conflict. After the surrender of Japan and the formal end of World War II on September 2, 1945, the stock market saw a boost, reflecting hopes for economic recovery and peace.
On Friday, equities closed higher as purchasing managers index showed growth in services sector. Investors rotated from tech stocks to cyclicals such as financials, industrials, and consumer discretionary. Nvidia and Alphabet declined, while Tesla and Walmart gained. The market is awaiting the announcement of Trump’s pick for Treasury Secretary. The dollar hit a two-year high due to the ongoing Trump trade, while the Euro touched a one-year low as the EU economy slows down. BTC is still holding below 100K, waiting for a catalyst to break through, while ETH pushes toward 3.4K again.
Details
The S&P Global Composite PMI rose to 55.3 in November, indicating strong growth in the private sector. The service sector expanded significantly, while manufacturing continued to contract. New orders increased sharply, and firms’ expectations for the coming year are optimistic. However, employment declined for the fourth consecutive month. 1Y trend: “Up” (PMI)
Consumer sentiment rose to a seven-month high in November. However, post-election sentiment was more moderate than initially expected. While inflation expectations for the year ahead remained low, long-term expectations increased. Uncertainty about the implementation of Trump’s economic agenda persists. 1Y trend: “Up” (SCA)
World Markets
The Eurozone’s composite PMI fell to 48.1 in November 2024, signaling a contraction in private sector activity. Both manufacturing and services sectors experienced declines, driven by falling new orders and increased input costs. Businesses reduced their workforce due to lower demand. The outlook for the year ahead remains uncertain. 1Y trend: “Side” (PMI)
The French manufacturing PMI fell to a 22-month low of 43.2 in November. This indicates a sharp contraction in manufacturing activity, driven by falling orders and weak demand. Input prices rose while output prices declined, squeezing profit margins. The outlook for the French manufacturing sector remains bleak. 1Y trend: “Down”
India’s manufacturing PMI fell slightly to 57.3 in November, but remained in expansionary territory. Strong new orders and output growth contributed to the positive reading. However, rising input costs led to increased output prices. 1Y trend: “Up”
Japan’s annual inflation rate fell to 2.3% in October, the lowest in six months. This decline was mainly due to slower increases in energy prices. However, core inflation remained elevated at 2.3%. Monthly inflation increased by 0.4%. 1Y trend: “Side” (JP)
Mexico’s GDP grew 1.6% YoY in Q4. This marks a continued recovery, but growth remains below an average levels (an average for a period 1994–2024 is 2.07%). 1Y trend: “Side” (MX)
Argentina’s economic activity contracted 3.3% YoY in September. While some sectors like mining and quarrying showed growth, others like utilities, construction, and manufacturing continued to decline. Seasonally adjusted data indicated a slight increase in economic activity. 1Y trend: “Down” (Indec)
Currencies
The dollar index rose to a 2-year high (107.5), driven by a weaker euro and expectations of a less dovish Fed. The Eurozone’s weak PMI data and rising geopolitical tensions have also supported the dollar’s strength. The market is now focused on Trump’s policies and their potential impact on inflation and interest rates. 1Y trend: “Up”
The euro fell to a one-year low as concerns about the Eurozone’s economic outlook intensified. Weak PMI data, geopolitical tensions, and potential risks from trade disputes have weighed on the currency. The ECB’s concerns about financial stability and economic shocks have also contributed to the euro’s weakness. 1Y trend: “Down”
Commodities
WTI crude oil prices rose above $71.1 per barrel, driven by stronger demand expectations. The US S&P PMI showed strong growth, and China announced measures to boost foreign trade. However, weaker Eurozone PMI data and geopolitical tensions between Russia and Ukraine could limit price gains. 1Y trend: “Side”
Week 48 will be busy for investors, with several key economic indicators and central bank decisions. Data releases include FOMC meeting minutes, PCE inflation, GDP growth, consumer confidence, and housing data. Global economic data will include inflation figures from various European countries, GDP data from India and Canada, and interest rate decisions from South Korea and New Zealand.
Comment: What’s Up With Market Risks?
The risk-off market sentiment seems to be driven solely by promises from the new White House administration to “fix the economy.” However, at the moment, there is no evidence (except for unreasonably high employment and rising consumer sentiment) suggesting that the economy is heading towards a different direction than stagflation. While stocks and other equities often rise in an inflationary environment, there’s no guarantee of other underlying factors of economic growth, such as increased productivity and corporate profits.