SVET Reports
SVET Markets Weekly Update (December 9–13, 2024)
On Week 50, equities were mixed, with the Nasdaq reaching new ATHs while the S&P and Dow declined ahead of the Fed’s rate decision. Core inflation remained steady at 3.3%. Although prices for services such as shelter and transportation slowed, overall core inflation remained elevated. Producer prices increased unexpectedly.
In international news, the ECB cut its key interest rate, while China’s Politburo announced a shift to a “moderately loose” monetary policy stance for 2025. The Indian rupee hit a record low. Gold prices rose, driven by China’s decision to loosen monetary policy and ongoing geopolitical tensions in the Middle East.
Notably, BTC and ETH slowed down as many whales began to take profits after BTC reached a historic milestone of $100K.
On Monday, major indexes declined by more than half a percentage point, marking their third straight loss. Nvidia fell amid a Chinese anti-monopoly investigation. Other tech stocks were affected as well, with Palantir, MicroStrategy and Coinbase down up to 10%. Investors are now eyeing Wednesday’s inflation report for cues on potential Fed rate cuts. EU equities rebounded sharply as traders anticipated a drastic rate cut by the ECB on Thursday, driven by a rapidly weakening economy. Copper prices surged on promises of stimulus from China. BTC and ETH dropped like a rock due to massive de-risking by corporate traders prompted by geopolitical events.
Details
Consumer inflation expectations for the year ahead rose to 3% in November. Expectations increased for medical care, college education, and the three-year/five-year outlook. However, expectations declined for gas, food, and rent. 1Y trend: “Side” (NYFed)
Crypto
Google’s new quantum computing chip, Willow, can solve complex problems exponentially faster than traditional supercomputers. The chip’s ability to reduce errors as it scales up is a significant breakthrough in quantum computing. While not an immediate threat to crypto encryption, Willow represents a major step forward in quantum technology.(source)
World Markets
The Stoxx 50 and Stoxx 600 rose on Monday as investors awaited the ECB’s rate cut decision. China’s pledge for more accommodative policies boosted European stocks, particularly luxury brands. Volkswagen gained despite ongoing labor strikes. 1Y trend: “Up”
China’s Politburo announced a shift to a “moderately loose” monetary policy stance for 2025, signaling increased economic stimulus. This move, along with pledges for fiscal support and property market support, aims to counter economic slowdown and achieve the 5% GDP growth target. The announcement also comes amid potential US trade tensions. (PBC)
Mexico’s annual inflation rate slowed to 4.55% in November 2024, the lowest since March. Prices for housing, food, and non-alcoholic beverages slowed, while transportation costs accelerated. Core inflation also eased. 1Y trend: “Side” (MX)
Australia’s NAB business confidence index plummeted to -3 in November, driven by declines across most industries. Business conditions worsened, and forward orders fell. While labor and purchase costs increased, product and retail price growth slowed. NAB expects soft growth in Q4 2024. 1Y trend: “Side (NAB)
Commodities
Copper futures surged to a one-month high, driven by China’s announcement of more supportive economic policies. The Politburo’s pledge for a “moderately loose” monetary policy and “more proactive” fiscal stimulus boosted optimism for increased manufacturing demand in China, the world’s top copper consumer. 1Y trend: “Up”
Comment: What’s Up With Syria?
The collapse of Syria’s regime was influenced by economic challenges, but these alone do not fully explain the downfall. Many countries have endured worse economic conditions and remained politically stable.
Syria’s GDP grew by 1.3% in Q4 2021, rebounding from the 2013 low of -30%. Despite slow recovery, GDP averaged 3.14% annually from 1971 to 2021. Slow growth contributed to public discontent but was not uniquely catastrophic compared to other nations.
Unemployment fell to 13.5% in 2023 from a 2020 high of 15.3%, yet it remained far above the 8% seen in 2011. Rising unemployment fueled frustration but was not worse than rates in many other developing nations.
Inflation dropped to 120.4% in 2024 from a peak of 188.4% in 2021, far exceeding the historical average of 16.68%. Hyperinflation added strain, but examples like Argentina show higher inflation rates do not always topple regimes.
The trade deficit reached a record 17,383,055 SYP million in 2022, driven by a collapsed export sector, while the current account deficit improved drastically to -170 USD million in 2020. The trade deficit hurt elite support, while the improved current account reflected a temporary, misplaced optimism.
The personal income tax rate remained at 22% despite high inflation and unemployment. Rigid taxation alienated businesses but was not the primary cause of the regime’s collapse.
While Syria’s economic troubles — unemployment, inflation, and trade collapse — undoubtedly destabilized the regime, they do not fully explain its downfall. Many nations with worse conditions have maintained stability, pointing to a broader set of political and systemic factors driving the collapse.
On Tuesday, equities continued to decline as traders de-risked due to geopolitical concerns. Market sentiment became volatile, as some investors were worried about the state of the economy despite promises from the upcoming White House administration. They were also awaiting the release of the consumer inflation report, which added to concerns about tech stocks like Oracle and Nvidia. However, positive news from Alphabet and Tesla helped offset some of the negative impact. The market remains near record highs. China’s Politburo reaffirmed its loose monetary policy, leading to a slump in bond prices, while gold prices rose due to increased purchases by China. Cocoa is on a run again due to seasonal winds. Some OG crypto traders are taking profits, following stocks, which is leading to BTC and ETH fluctuating near their ATH levels.
Details
In November, the NFIB Small Business Optimism Index surged to 101.7, its highest since June 2021, up from 93.7 in October and exceeding predictions. This marks the first time in 34 months that the index has surpassed the 50-year average of 98, driven by presidential election outcomes. Business owners are optimistic about favorable tax policies and inflation relief, with a net 36% expecting economic improvement, the highest since June 2020. 1Y trend: “Up” (NFib)
Nonfarm business sector labor productivity increased by 2.2% in Q3, the highest level this year. Both output and productivity increased across the business and manufacturing sectors. (BLS)
Crypto
Argentina has approved crypto ETFs, allowing investors to trade Bitcoin, Ethereum, and other cryptocurrencies on the stock market. This move aligns with President Milei’s libertarian policies and aims to modernize Argentina’s financial system, attract foreign investment, and provide domestic investors with new investment opportunities.(source)
World Markets
China’s 10-year government bond yield held steady at 1.89% as investors awaited the start of the annual Central Economic Work Conference, where leaders will review the economy and set priorities for the year. Recently, the Politburo reaffirmed its “moderately loose” monetary policy for 2025 and pledged proactive fiscal measures to boost consumption and stabilize markets. This approach echoes China’s response to the 2009 financial crisis, reflecting a commitment to address current economic challenges. 1Y trend: “Down”
Currencies
The dollar index rose to a two-week high as investors anticipate rate cuts from the Bank of Canada and ECB. Rising US inflation expectations and a strong jobs report have also supported the dollar. However, the market is still pricing in a potential Fed rate cut this month, creating uncertainty for the dollar’s future direction. 1Y trend: “Side”
Commodities
Gold prices rose above $2,660 per ounce, driven by China’s decision to loosen monetary policy and geopolitical tensions in the Middle East. Increased demand for safe-haven assets and China’s gold purchases further supported the price increase. Investors are now looking towards inflation data for clues on future Fed policy. 1Y trend: “Up”
Silver prices rose to a one-month high, driven by China’s announcement of increased economic stimulus. The expectation of a Fed rate cut also contributed to the rise in silver prices. 1Y trend: “Up”
Cocoa futures surged to a multi-month high (>$10,200) due to concerns over supply shortages in West Africa. Dry weather conditions and a larger-than-expected global deficit have contributed to the price increase. 1Y trend: “Up”
Comment: What’s Up With France?
Is the current political disorder in France explained by the worsening economic situation?
The CAC 40 rose 1.3% to 7,427, marking its highest point in nearly a month, with a weekly gain of 2.8%. France’s GDP grew by 1.2% year-on-year in Q3 2024, up from 0.9% previously, yet remains below the historical average of 3.04% and higher than the EU average. Unemployment edged up to 7.4%, still lower than the 10% highs of 2014, but reflective of a stagnant trend compared to previous declines. Inflation stood at 1.3% in November 2024, historically low when compared to the early 1980s highs of over 13%. The current account deficit widened to EUR 2.6 billion, while the government budget deficit was 5.50% of GDP in 2023, trending worse than the historical average but better than the 9% deficit recorded in 2020. Manufacturing indicators reflected continued contraction, with the PMI at 43.1, indicating a 22-month contraction period.
Despite the economic data suggesting stagnation, the political turmoil is attributed more to a generational shift and societal discontent rather than solely economic hardships, reflecting a broader narrative shaped by geopolitical tensions and issues surrounding immigration.
On Wednesday, the Dow declined, while the S&P rose and the Nasdaq reached a new ATH, boosted by a better-than-expected inflation report. Tech stocks, led by Alphabet, Tesla, and Nvidia, fueled the rally. The yuan fall on expectations that China may weaken its currency in response to potential tariffs. Argentina’s inflation dropped to a yearly low due to Milei’s libertarian reforms. BTC rose above 100K, while ETH reached 3.8K.
Details
Core inflation remained steady at 3.3% in November, meeting market expectations. While prices for services like shelter and transportation slowed, overall core inflation remained elevated. 1Y trend: “Down” Annual inflation rose to 2.7% in November, driven by higher food and energy prices. Overall inflation remains elevated. 1Y trend: “Down” (BLS)
The budget deficit for November reached $367B, a 17% increase from the previous year. This was largely due to calendar adjustments and increased government spending. The cumulative deficit for the fiscal year so far is a record high of $624B. 1Y trend: “Down, Increasing” (TR)
Crypto
Florida’s $185.7B pension fund is set to invest $1.85B in BTC, aiming to be a leader in cryptocurrency adoption. This move, backed by state leaders and the Florida Blockchain Business Association, could pave the way for wider use of digital assets in state financial planning. The potential for an additional $1.16B investment from the state’s surplus further strengthens Florida’s commitment to BTC. (source)
World Markets
Argentina’s annual inflation rate decreased to 166% in November (a yearly low), down from 193% in October. While this marks a decline, inflation remains at historically high levels. 1Y trend: “Side” (AR)
The Central Bank of Brazil raised its interest rate by 100 basis points to 12.25% to combat persistent inflation (a year high). The decision was influenced by domestic economic strength and concerns about global economic conditions. 1Y trend: “Side” (BCB)
Net foreign direct investment in the Philippines declined by 36.2% YoY in September. However, equity capital increased, primarily from Japan, the US, and Singapore. For the first nine months of 2024, FDI inflows rose by 3.8%. 1Y trend: “Down (BSP)
Currencies
The offshore yuan weakened as concerns grew about potential tariffs on Chinese goods. China may consider weakening its currency to offset the impact of these tariffs. Investors are also awaiting the outcome of the Central Economic Work Conference for clues on China’s economic policies. 1Y trend: “Up”
Commodities
Crude oil prices rose 2.5% due to the EU’s new sanctions on Russian oil. However, concerns about weaker global demand, particularly from China, and increased US fuel inventories limited the price gains. 1Y trend: “Side”
On Thursday, equities fell following a hotter-than-expected inflation report, and despite the Department of Labor reporting a three-month high spike in jobless claims. Adobe dropped the most, plunging almost 14% after providing a disappointing outlook. The euro fell as the ECB cut its rate by 25 basis points, while the Indian rupee depreciated to its record low. BTC and ETH, both just under their ATHs, moved sideways as traders took a pause amid the stock tumble.
Details
Initial jobless claims surged to a three-month high of 242K in the first week of December, indicating a potential weakening in the labor market. This unexpected rise could impact the Fed’s monetary policy decisions. 1Y trend: “Up” (DOL)
Producer prices increased unexpectedly by 0.4% MoM in November, driven by higher food and energy costs. The annual producer price inflation rate also accelerated. While core inflation remained steady, it remains elevated. 1Y trend: “Up” (BLS)
Crypto
BlackRock suggests that a 1–2% BTC allocation in a diversified portfolio can offer similar risk to holding major tech stocks. The asset manager highlights BTC’s potential for diversification and its relatively low correlation with other assets, despite its volatility. (source)
World Markets
India’s annual inflation rate eased to 5.48% in November, remaining within the central bank’s target range. While food prices moderated, overall inflation remains elevated, potentially delaying the start of a rate-cutting cycle. 1Y trend: “Up” (Mospi)
The European Central Bank cut its key interest rate by 25 basis points in December, as expected. While inflation is expected to gradually decline, the ECB remains cautious and will adjust its policy stance based on incoming data. Economic growth is projected to be slower than previously anticipated. 1Y trend: “Side” (ECB)
Currencies
The Indian rupee hit a record low of 84.9 against the US dollar due to capital outflows and expectations of a rate cut by the RBI. India’s slower-than-expected economic growth and China’s stimulus package also contributed to the rupee’s weakness. 1Y trend: “Up, Depreciating”
Commodities
Comment: What’s Up With Germany? (2)
The DAX continues to perform well, closing at a record high of 20,429. Major manufacturers like BMW (+2%) and Rheinmetall (+1%) have buoyed market sentiment, signaling optimism for stockholders. However, GDP contracted 0.3% year-on-year in Q3 2024, marking five consecutive quarters of minor decline. Compared to historical contractions, such as -7% in 2008 and -11% post-WWII, this stagnation seems minor.
Inflation sits at 2.2% (November 2024), far below peaks like 8% in 2022 and 11% in 1951, while unemployment remains steady at 6.1%, historically moderate compared to 12% during 1997 or 2007 crises. Despite these manageable figures, Germany’s business climate has sharply deteriorated.
The Ifo Business Climate Indicator fell to 85.7, levels reminiscent of 2008’s financial crisis. SMEs face significant regulatory hurdles, with bureaucratic priorities focused on social spending over economic productivity. Government budget deficits, now at 2.5% of GDP, reflect unproductive expenditures that fail to bolster entrepreneurial activity.
Consumer confidence mirrors this decline. The GfK Consumer Climate Indicator dropped to -23.3, with income expectations at a nine-month low. Rising insolvencies and a lack of support for SMEs have left consumers pessimistic about the future.
Germany’s current political troubles stem not from severe economic contraction but from a rigid bureaucratic system unwilling to adapt. By neglecting SMEs and entrepreneurial freedom, Germany’s administration has prioritized short-term stability over long-term growth, exacerbating discontent among businesses and consumers alike. Unlike historical downturns, today’s issues are driven by systemic stagnation, not insurmountable economic hardships.
On Friday, equities were mixed, with the S&P and Nasdaq hovering near flat. Tech stocks like Nvidia and Marvell surged, while other giants like Meta and Amazon declined. The broader market was cautious ahead of the Fed’s interest rate decision on Wed next week as import prices suddenly jumped. Chinese economy deteriorated further which is reflected in sharply decreased number of new loans and absence of stimulus from CCP. Japanese yen declined on BoJ dovish stance faced by a slowing production. BTC (100K) and ETH (3.9) slowly push towards ATHs. Crypto adaption in the Nigeria exceeded 80%.
Details
Import prices increased by 1.3% YoY in November, up from 0.6% in October. This marks the highest annual growth rate since July 2008. 1Y trend: “Up”(BLS)
Crypto
Cryptocurrency ownership is rising globally. More than 50% of respondents in Nigeria (84%), South Africa (66%), Vietnam (60%), the Philippines (54%) and India (50%) reported owing a crypto wallet in 2024. Turkey (44%) and the USA (43%) rank lower. (source)
World Markets
European stocks declined as investors assessed the ECB’s rate cut and China’s economic outlook (contrary to expectations China’s Economic Work Conference ended without specific details on the policies). Despite a move by Macron appointing Bayrou — pro-EU centrist Boomer, concerns about economic growth and inflation weighed on the market. 1Y trend: “Up” Industrial production in the Euro Area declined by 1.2% YoY in October. This indicates a continued slowdown in manufacturing activity in the region although with a slowing speed of decline. 1Y trend: “Up” (source)
Chinese banks extended less than 50% new loans in November than in the previous year (1.2T CNY), indicating weak credit demand despite the central bank’s efforts to stimulate the economy. 1Y trend: “Down” (CN)
Currencies
The Japanese yen weakened to a two-week low against the dollar as market expectations for a rate hike by the Bank of Japan declined on worsening economy. The central bank’s cautious stance on further tightening and improving economic sentiment in Japan contributed to the yen’s weakness. 1Y trend: “Up, Weakening”
On Week 51, key economic events include the Fed’s interest rate decision, inflation data, and Chinese economic indicators. Central banks in the UK, Japan, and several other countries will also announce their policy decisions. Additionally, various economic data releases from the US, Europe, and Asia will be closely watched by investors.
Comment: What’s Up with EU? (2)
The EU, which was first launched in the post-war period as an economic union and worked effectively to combat communism, has been transformed by lazy, entitled, and overall ineffective Brussels bureaucrats into a human progress-slowing machine.
There are two main types of people: those who think every day about how to make the world a better place and those who think every day about how to make the world a better place for themselves. We refer to the first group as producers and the second as bureaucrats. Producers create; bureaucrats cannot do that because they lack the abilities to do so. Instead, they scheme to position themselves atop the producers to “manage” them based on an innumerable array of “ideologies” which bureaucrats steal from creators. To maintain their power over producers, bureaucrats use coercion and demagoguery.
Over the past 5,000 years, bureaucrats have always prevailed over producers by exterminating them in various types of wars and concentration camps. However, in the past ten years, producers finally invented the algorithmic consensus mechanism, which allows them to manage themselves without bureaucrats. In the past three years, bureaucrats have tried to exterminate those who invented and employed these mechanisms, but they have not succeeded.
EU bureaucrats have been at the forefront of efforts to eliminate decentralized algorithms by smearing and “regulating” them. However, as a result, these bureaucrats have demonstrated once again that all they can do is to imprison people — achieving nothing.
As a result of these bureaucrats being in power for the past 30 years since the European Union was created, the economy of this union has drastically underperformed compared to the less regulated transatlantic cousins’ economies. Moreover, EU bureaucrats, through their outrageous stupidity and arrogance, have managed to turn their allies into enemies and spark almost a nuclear conflict in the midst of their continent. All the individuals directly responsible for this still cling to power with all their might, despite their incompetence being apparent to everyone.
However, those who will replace them — thoughtless henchmen — are even more dangerous, and their ascent to power will lead to a complete disassembly of the European Union. But it will cost Europeans dearly, who will pay for their mental laziness with both money and blood.
In a time of impending global wars, the world needs a military coordinated but economically and politically decentralized Europe. Economics must be governed by direct democracy based on the consensus mechanism facilitated by machines. War must be conducted by several leaders, each of whom can be controlled by consensus and replaced quickly if needed, and that war must be won with high technologies produced by liberated producers and inventors not by blood of recruits.
The advance of bureaucratic class must be stopped if the world wants to continue to exist.