5-Min Monday Macro & Crypto: 23rd Sept 2024
FED Cuts with a Bang, Risk on as Stocks and Crypto Rally
I spend hours reading, researching and talking to the smartest founders and investors every week. This is my attempt to give you a short 5-10 minutes summary on how I am thinking about Macro & Crypto markets and what lies ahead. Hundreds of hours summarised, so you don't have to.
You can also hear more detailed thoughts on our podcast “Greed is Good”
“Most geniuses—especially those who lead others—prosper not by deconstructing intricate complexities but by exploiting unrecognized simplicities.”
— Andy Benoit via Shane Parrish (Farnam Street)
MACRO - FED, Fast & Furious
The Hashtalk Poll that counts this week
Last Hashtalk Poll Results - Click here
THE BIG MACRO PICTURE
Embarking on a New Rate Cycle
The FED is recalibrating as a new macro rate cutting cycle begins. Market pushed them to deliver 50 bps, and FED seldom disappoints the market
Inflation appears under control, but weak Chinese data raises concerns that China could start exporting disinflation to other countries, including the U.S.
Everything then depends on the payroll numbers that seem in line but anything above 4.4% would be concerning.
FED is aware of the risk, which explains the 50 bps cut we predicted and discussed in detail two weeks ago here. While the Fed forecasts a total of 200 bps cuts by the end of 2025, I believe that path will depend more on labor market conditions than anything else.
THE MACRO ZEITGEIST
We have been writing about this risk on scenario for months now. Aggressive rate cuts will boost the economy provided inflation remains under control (which is our base case for the coming months) and payroll data stays under control. However, I’m 50/50 on the latter, as frequent revisions have undermined its credibility. If both conditions hold, we could be looking at a true 'Goldilocks' scenario for risk assets.
It’s important to remember that Powell’s actions represent a 'recalibration,' not a sign of distress. The Fed is simply late to the game and now attempting to be proactive with rate cuts.
I believe RISK ON from HERE ON
Not just FED, but global liquidity is also rising.
Global monetary liquidity is increasing at over 6% annually, the fastest since April 2022, and follows the four-year cycle. With rate cuts from the Fed and anticipated cuts from several central banks, including the ECB, this trend is positive for risk assets in the medium term.
GLOBAL MACRO - CONTINUING CHALLENGES
Swiss National Bank is likely to cut its target rate by 25 bps to 1% this coming Thursday.
DATA TO WATCH THIS MONTH
Sept 26-27: U.S. Initial Jobless Claims, GDP, Core PCE Price Index
To sum up this week’s macro outlook:
RISK ON and that’s great for both equities and crypto as we head into Q4.
STOCKS
The U.S. stock market saw a broad rally, with small-cap stocks (S&P 600) rising by 2.25%, large caps (S&P 500) up 1.4%, and the NASDAQ gaining 1.5%. We expect this trend to continue, supported by the ongoing rotation into value stocks.
All eyes on Q4 earnings reports now that will be the cornerstone of next leg up
BONDS & FX
Bond Market: The US Treasury yield curve has flattened, with 10-year bond yields increasing by 7 basis points to 3.73% and 30-year bond yields rising by 9 basis points to 4.07%.
FX - Dollar weakness continues as markets anticipate further rate cuts in the coming months.
CRYPTO
Bitcoin is soon coming out of summer lull and break to upside could be imminent. However, the true test of BTC's bullish momentum will come from a sustained rally beyond $64K, followed by a break above $68K. This scenario seems plausible as we shift from the broader $50K-$74K range into a narrower consolidation between $55K and $64K. Historically, Q4 has favored Bitcoin, with a median return of +56%, which strengthens the case for a ATH in the coming months.
SEC has also approved options trading on spot bitcoin ETFs and this is MASSIVE IMO. This means more structured products on BTC ETF’s with more participation from traders and banks alike.
Last week was the busiest week in crypto in Singapore with 20,000 attendees and 500+ side events. I have covered this in detail below along with a state of crypto report.
INTERESTING TITBITS
Some of the most interesting things we discovered this week:
Kamala Harris Advocates for Innovation in 'Digital Assets
What Credit Card Networks Can Teach Us About Stablecoin Opportunities
The Evolution of Prediction Markets: A Castle Research Report: Diving into Polymarket and Azuro
Why Society Doesn’t Want You To Get Rich
May your Monday be filled with coffee & profits.
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