In October, the three major U.S. stock indexes, Europe, Asia-Pacific and other major global securities markets generally showed a state of fluctuation and adjustment. Among them, after experiencing a downward trend in the early October, the major global stock indexes rebounded rapidly, reaching a peak around October 16, and then fell again. In the meantime, due to the Mid-Autumn Festival and National Day holidays, domestic A-shares were not traded in the early part of this month. After a period of sideways trading in the middle of the month, the three major A-share indexes showed a unilateral downward trend.
In terms of cryptocurrencies, after a period of sideways trading at a low level, the price of cryptocurrencies has risen rapidly since mid-October. In particular, the expectation of the issuance of Bitcoin spot ETFs has increased, the US Treasury bond is "bearish", and the fourth halving is approaching. The price of Bitcoin once exceeded US$35,000, the first time since 2022. Some cryptocurrency practitioners believe that a new round of cryptocurrency bull market has begun to brew, and the peak price of Bitcoin is expected to exceed US$138,000 in the next few years.
Data from the U.S. Department of Labor showed that in September, the year-on-year growth rate of the U.S. Consumer Price Index (CPI) was the same as in August; the month-on-month growth rate was 0.4%, slightly slower than the 0.6% growth rate in August. During the same period, other relevant price indicators have approached pre-epidemic levels, and inflationary pressure has continued to weaken, gradually approaching the Fed's 2% target. Wealthbee believes that the U.S. "de-inflation" trend will continue in the fourth quarter, but it has achieved relatively obvious results.
Given the continued easing of inflationary pressures in the United States, the market generally expects that the Fed's current round of interest rate hikes is nearing its end. In the past few weeks, many Fed officials and members of the Federal Open Market Committee have expressed their views: U.S. bond yields have risen, the downward trend of U.S. core inflation is expected to continue, and the need for the Fed to further raise interest rates has weakened. On October 25, the Federal Reserve's federal funds rate swap market showed that the probability of the Fed raising interest rates by 25 basis points in November has dropped to below 1%.
It is worth noting that despite the obvious effects of "de-inflation", the US economy is still hot. According to data from the US Department of Commerce, US retail data increased by 0.7% month-on-month in September, exceeding the market expectation of 0.3%. In a report in October, Morgan Stanley also raised its forecast for US Q3 GDP growth to 4.9%. Affected by this, while inflation continues to decline, US energy and labor prices may still fluctuate at high levels in the fourth quarter.
Affected by the Fed's interest rate hike cycle, U.S. Treasury yields continued to rise in 2023. In September, despite the Fed's suspension of interest rate hikes, the 10-year U.S. Treasury yield continued to rise, with an increase far exceeding the short-term U.S. Treasury yield, resulting in a "bear steep" phenomenon in the bond market.
On October 20, the 10-year U.S. Treasury yield broke through 5%, hitting a 16-year high. After the U.S. Treasury yield rose, U.S. credit interest rates rose rapidly, and have had an adverse impact on U.S. economic development, stock and credit market operations. Among them, on October 19, the U.S. 30-year housing mortgage rate once approached 8%, the first time since 2000, which greatly affected the consumption desire of potential home buyers.
Considering that the Fed's interest rate hike cycle is coming to an end, although it cannot be ruled out that the Fed will have an insurance rate hike, investors' expectations have begun to shift. Given the uncertain global geopolitical background and the possible short covering after the surge in yields in the previous few weeks, it is unlikely that U.S. Treasury yields, especially 10-year U.S. Treasury yields, will reach new highs.
While Treasury yields continue to be strong, U.S. stocks and major global stock markets are showing fluctuations and adjustments. Around October 16, the three major U.S. stock indexes reached their peaks this month. On October 18, the three major stock indexes in the New York stock market fell significantly: the Nasdaq fell by -1.62%, the S&P 500 fell by -1.34%, and the Dow Jones fell by -0.98%. In addition to U.S. stocks, major global indexes such as Europe and East Asia also showed fluctuations and adjustments. Affected by the Mid-Autumn Festival and National Day holiday, the domestic A-share market did not open at the beginning of the month. After a period of narrow consolidation in mid-October, the three major A-share indexes showed a downward trend.
Considering that the Federal Reserve will maintain high interest rates for some time, as well as the continuation of the recent conflicts between Russia and Ukraine and between Palestine and Israel, there is still a lot of uncertainty in the capital market, and investors, especially short-term investors, are still mainly on the sidelines.
In October, the cryptocurrency market showed a trend of bottoming out and recovering. In particular, the price of Bitcoin rose rapidly in mid-to-late October, influenced by factors such as the expected approval of the Bitcoin spot ETF and the "steep bear" of US Treasury yields.
In fact, as the SEC has lost lawsuits against crypto asset management institutions, market expectations for the approval of spot ETFs have increased. As far as Bitcoin trading is concerned, the approval of spot ETFs not only means that investors can enter the crypto market in a compliant manner, but also that investors do not need to directly hold and trade Bitcoin. They can also obtain investment returns by simply purchasing ETFs, greatly improving trading efficiency.
Compared with the cryptocurrency market with a market value of one trillion US dollars, traditional market funds do not need to "enter in a big way" or "run into the market". Even if there is only 1% of basic allocation, it is a huge amount of positive capital inflow. Data shows that from June to August 2023 alone, many asset management institutions, including leading platforms such as BlackRock, have successively submitted 11 Bitcoin spot ETF applications, taking the lead in laying out Bitcoin spot ETF transactions.
On October 16, it was reported that the U.S. Securities and Exchange Commission approved the ISHARES Bitcoin spot ETF. Although it was later confirmed that this was fake news and the application for the listing of the Bitcoin spot ETF is still under review by the U.S. Securities and Exchange Commission, the market's expectations for the listing of the ETF have been brought forward from November next year and May next year to the end of this year. Affected by this, since mid-to-late October, the price of cryptocurrencies, especially Bitcoin, has seen a rapid rise. On October 24, the trading price of Bitcoin once exceeded US$35,000 per coin, which was also the first time since 2022.
Since mid-October, in view of the intensified Israeli-Palestinian conflict and the "bearish" trend of US Treasury yields, investors have increased their expectations for future economic growth slowdown and downward Fed interest rates, and the investment logic has also shifted from risk aversion to diversified asset allocation. Some funds have flowed out of long-term US Treasury bonds and increased holdings of assets such as Bitcoin, which has also boosted the strong rise in the crypto market. In addition, the fourth halving in Bitcoin's history is about to come, and the number of new Bitcoins recorded on the blockchain will be reduced by 50%, which has also affected investors' trading mentality to a certain extent, driving up this round of Bitcoin trading prices.
Overall, this round of strong rise in the Bitcoin market is the result of the global asset repricing and the seasonal law of the crypto market after the expectation of Bitcoin spot ETF approval and the steep decline in US Treasury yields. The nature of this wave of market is not driven by a single event, but a structural market, and will last for a long time.
With the end of the Fed's interest rate hike cycle, the global digital transformation of the economy is advancing, and a new round of industrial expansion cycle has begun to brew. With the increasing expectations of the approval of the Bitcoin spot ETF and the "steep bear" of US Treasury yields, the cryptocurrency market is expected to usher in a new round of bull market. However, with the outbreak of the Israeli-Palestinian conflict and the increase in global economic uncertainty, the market's wait-and-see sentiment is still high. Investors should pay close attention to market trends and rationally plan their investment strategies and directions.
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