5-Min Monday Macro & Crypto: 14th Oct 2024
Decent data, ATH markets, BTC started to make moves
Hey!!!! It’s Monday again. Welcome to another fantastic week!
I spend hours reading, researching, and talking to the smartest founders and investors in macro, crypto, and AI every week. This is my attempt to give you a short 5-10 minute summary on how I am thinking about the macro and crypto markets and what lies ahead. Hundreds of hours summarized, so you don't have to.
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“In the long run the market is a fair value machine, and in the short run it’s a gambling and pain-delivery machine.”
- Benjamin Graham
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Last Weeks Poll Results - I am with you my degenerate brethren!!!!
THE MACRO ZEITGEIST - Goldilocks Expansion
We’ve been shouting at the top of our lungs for months now – don’t believe the recessionary bears. It’s not happening—at least not anytime soon. With GDP at a solid 3.2%, inflation under control, and a relatively stable job market, the economy is holding up well. You can dig as deep as you want and poke the bear with that recessionary stick. You won’t find any recession. Furthermore, a Trump win will add fire to liquidity like fireworks in Diwali, causing a massive Goldilocks expansion, IMO.
Two numbers matter to me as far as data is concerned. My readers know that I am a firm believer of KISS - Keep it Simple Silly. And simply put:
Inflation is at 2.7% on Core PCE. That is acceptable. That mild rise is fine. If those numbers start to shoot off towards 4% again, we worry but we watch. For now sit tight and enjoy.
Jobless claims jumped to a 14-month high at 258k, with continuing claims rising to the highest level since late July at 1.86 million.
Polymarket is betting that Trump has 4% more chances of winning vs. Kamala as of today. And that is a good thing.
A Trump victory means larger US deficits, less immigration, and more tariffs. That could be inflationary (not necessarily, though), and that is far out in 2025. So I’m not going to worry about that just yet. The inflationary bears cannot ruin the Goldilocks party just now. Move on. Santa rally is coming. My primary take is Trump = Buy Mag7 & crypto.
GLOBAL MARKETS - All about China
China announced its stimulus over the weekend. Expectations were for a minimum $1T stimulus, but China fell short. Don’t lose hope. I think there are more announcements to come. They have no choice, as we covered in last weeks’ Newsletter. It’s not easy when the property market is down by about 100T Yuan, by some estimates. How much stimulus does it take to bring back that confidence? Can you put a number on that? I can’t. Key takeaways from Saturday’s announcement:
China will borrow more to raise money and help local governments finance their “hidden debt” or off-balance sheet borrowing, easing debt pressure for regional authorities.
Local governments can use money raised from their special bonds to buy unsold homes and turn them into subsidized housing, in an attempt to address the country’s property slowdown.
Officials say there is still 'large' room for the central government to raise debt and for the headline fiscal deficit to increase, but they stopped short of offering specifics. Attention now shifts to the upcoming meeting of China’s top legislature, possibly as soon as the end of this month, for any announcements.
Major state banks will receive help to replenish their capital. The top six lenders have capital levels that far exceed requirements, but the support will help ease any pressure after the central bank announced reductions to mortgage and key policy rates.
DATA TO WATCH THIS MONTH
October 17 - U.S. Retail Sales / Initial Jobless Claims
October 25 - BTC CME October (BTCV24) Options Expiry
November 1 - U.S. ISM Manufacturing PMI
November 7 - U.S. FOMC Interest Rate Decision
November 13 - U.S. Consumer Price Index for October
MACRO SUMMARY
US macro looks good. Add liquidity and Trump and we are going to have an amazing EoY rally.
STOCKS, BONDS & FX
Stocks
US stock market is at all-time highs
But all eyes are on China, as major alpha (upside) is there if you believe in the stimulus.
An ATH every day makes the US market so boring. Lol, you degens. While all eyes are on China, keep in mind there are major structural issues, but stocks are not the economy, and economic conditions are not stocks. They can run independently of each other. This is more true in China than in the US, where there is still some sense of correlation between data and stocks.
NVIDIA continues to lead the outperformance, as we discussed a few weeks ago when we took a position around $105. I believe that can continue into 2025, and $185 is a reasonable target.
Bonds & Fx
10Y bond yields are approaching 4.15%—near the 200MA. With data coming in strong, the chances of another cut are fading (that is not our base case), but the market is looking at a 25 bps cut next, and the yields are going back up again.
DXY (red line) is also rising along with the yields in anticipation of a lower FED cut.
CRYPTO
Inflation and employment remain strong, equities are at all-time highs, and US Treasuries continue to sell off—we smell a regime shift.
Last weeks commentary still holds true:
The macro and liquidity landscape is looking quite favorable right now. The U.S. is showing signs of recovery, with unemployment hovering at a solid 4.1% and inflation easing off its historic highs. As a result, central banks across the globe seem to be conspiring (in a good way!) to cut interest rates and unleash a fresh wave of liquidity.
To prevent further contractions in manufacturing across major economies like the U.S., EU, and China, we can expect even more rate cuts, boosting global liquidity to new levels. This is great news for risky assets, especially crypto. However, crypto has found itself in a bit of a pickle lately.
Crypto was stuck between memecoins and institutional adoption, which is slowly coming. Once BTC goes to $90K, everyone will come back, and that is when you offload what you have been hoarding for the last 6 months.
IMO, China will unleash more stimulus, and stocks will benefit. The economy may or may not; I am not sure. But the euphoria from global and local investors will bring in more liquidity. With that newfound liquidity, coupled with the start of the second half of October, I believe BTC will outperform in October. UPTOBER will happen. Don’t lose hope.
A word on Solana killer SUI: SUI is trading at a $23 billion FDV, which is already too high compared to the activity it has on the chain versus Solana. Insiders are dumping, and retail will be left behind again as exit liquidity. Rather, focus on the next Solana killers if you really believe that—FTM & SEI, IMO.
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