This month, the Federal Reserve's FOMC meeting decided to maintain interest rates unchanged, and raised future GDP expectations and lowered inflation expectations; Japan's interest rate hike attracted world attention, but the Fed's interest rate cut cycle may not worry about liquidity issues; European investors are also betting on interest rate cuts; the crypto market It is temporarily stuck in a correction, but supply-side analysis shows that there may be sufficient momentum for subsequent increases.
On March 20, U.S. time, the much-anticipated Federal Reserve interest rate decision conference was held as scheduled, announcing that the federal funds rate target range would remain unchanged between 5.25% and 5.5%. Although February's CPI data exceeded market expectations (3.2%, expected 3.1%), the Federal Reserve still chose to "stand still."
The Federal Reserve has chosen not to raise interest rates three times in a row, and the market has basically determined that the interest rate hike cycle is over. But regarding interest rate cuts, the Fed believes that "it is not necessary for the time being." The Federal Reserve expects that the median GDP growth rates from 2024 to the end of 2026 will be 2.1%, 2.0%, and 2.0% respectively (the expectations in December last year were 1.4%, 1.8%, and 1.9% respectively), and the unemployment rate in 2024 is expected to be 4.0% (the expectations in December last year) monthly expected to be 4.1%). As for future interest rate cuts, I am afraid that they will not be considered until the labor market weakens.
In addition, the performance of the manufacturing industry has always been one of the areas of concern to the Federal Reserve. In recent years, the United States has been seeking to return manufacturing to try to get rid of its dependence on external manufacturing. Last month, WealthBee analyzed that the United States may be in the expansion stage of a new round of inventory cycle, and the changes in manufacturing data in March confirmed the previous view: U.S. manufacturing activity in March hit the largest increase since mid-2022, and production, employment and price indicators accelerated. S&P Global's initial U.S. manufacturing purchasing managers' index for March rose slightly by 0.3 points to 52.5, above the boom-bust watershed of 50 for the third consecutive month. Driven by improved domestic and foreign demand, manufacturing output growth reached the strongest since May 2022, and the employment index hit an eight-month high. These data reflect the performance of the manufacturing industry in the current economic environment, but they also need to be comprehensively evaluated in combination with other economic indicators and long-term trends.
In summary, it can be seen that the most important economic data in the United States currently show that there is no need to cut interest rates for the time being. Although the Federal Reserve has previously stated that it plans to cut interest rates three times this year, the market expects that there will be no interest rate cut in May.
This month, in addition to the attention-grabbing U.S. FOMC meeting, Japan, on the other side of the Pacific, announced an interest rate hike for the first time in 17 years. For a long time, due to negative interest rates, the Japanese yen has become the most popular speculative arbitrage tool for overseas speculators with its almost zero-cost borrowing advantage. A large number of speculators have lent Japanese yen and exchanged it for other sovereign currencies (mainly the U.S. dollar) to purchase other countries' assets. It can even be said that assets such as Bitcoin have been able to rise all the way during the Fed's interest rate hike cycle, and the liquidity brought by the Japanese yen has also contributed. Now that the yen's interest rates are rising, borrowing costs are rising, which will cause speculators to sell other countries' currencies and exchange them for the yen. Furthermore, the international market is generally worried that this behavior will drain liquidity from the international market, leading to the decline of US dollar assets. At the same time, huge amounts of liquidity will return to the Japanese market, which will help the Japanese bond bubble to further rise.
However, WealthBee believes that the impact of Japan's interest rate hike on the market is more about "psychological panic." In fact, international capital has long expected the behavior of the Bank of Japan. Starting from 2022, capital has noticed that the era of Japanese yen arbitrage may have to In the end, the sharp rise in the Japanese stock market did not bring about turmoil in US dollar asset prices. Moreover, the end of the Fed's rate hike cycle and the imminent arrival of a rate cut cycle will dispel some of investors' concerns about liquidity. Therefore, WealthBee temporarily holds a neutral attitude towards Japan's interest rate hike, and there is no need to worry too much about its impact.
The performance of the three major U.S. stock indexes this month has caused more market concerns: the Nasdaq has exceeded 16,538 points, the Dow has exceeded 39,889 points, and the S&P 500 has exceeded 5,261 points. In CNBC’s Delivering Alpha stock survey, most investors predicted that the U.S. stock market will soon Entering a period of adjustment.
AI is still one of the core driving sectors of the US stock market and even the global stock market. This month, NVIDIA GTC 2024 was held and released a number of products. However, this month, some investors took profits: NVIDIA (NVDA) experienced several sharp rises and falls, TSMC (TSM) and AMD (AMD) seemed to have gone out of the characteristics of the stage top, and Microsoft also went out of the trend of volume and price divergence.
However, careful analysis can reveal that semiconductor-related stocks have not completely stalled. Micron (MU) jumped higher after announcing its financial report, indicating that the AI investment boom is still continuing: Investors may be afraid of high prices for companies with higher early gains. In the near future, The pullback in semiconductors is not a complete disappointment with AI.
As analyzed in the previous section, the Fed's expected interest rate cut this year will most likely offset the impact of Japan's interest rate hike. The two major investment logics of U.S. stocks (especially the Nasdaq) - interest rate cuts and AI - have not encountered significant negative impacts for the time being.
In terms of European stock markets, at a time when U.S. stocks are showing signs of sluggishness and profit-taking, the Stoxx Europe 50 has had five positive monthly lines in a row. The reason is simple - European investors are also pressing for interest rate cuts. The European Central Bank lowered its inflation expectations for the Eurozone on the 7th local time, lowering the inflation rate in 2024 to 2.3%, and the inflation rates in 2025 and 2026 to 2.0% and 1.9% respectively. WealthBee predicts that the Eurozone will most likely start an interest rate cut cycle along with the United States.
The crypto market is in a state of turmoil this month: it experienced sharp pulls and pins at the beginning of the month, reaching a record high above $73,000 in the middle of the month, and then began to correct, with the price falling below $61,000 at the lowest, and then rebounding to above $70,000.
At present, the US Bitcoin spot ETF seems to have dominated the trend of Bitcoin: around March 20, ETFs continued to have net outflows, and the Bitcoin price was correcting on the corresponding days. In particular, on March 19, ETF funds had the largest net outflows, and the Bitcoin price fell below $61,000 on that day. Currently, the number of Bitcoins held by 11 ETFs is about to reach 1 million, and this force can obviously affect the market trend.
This round of selling is mainly composed of investors who invest through ETFs who have "stock thinking" and are accustomed to "sell high and buy low" and a certain degree of gray-scale selling. However, according to the analysis of on-chain analyst Phyrex, high-net-worth investors did not significantly reduce their holdings during this correction, and retail investors were the main force in selling during this round of correction. Therefore, the situation of this callback can be summarized as "leeks" running around and "big trees" taking root.
Although this bull market is slightly different from the previous one due to the entry of ETFs, the increase in mining costs caused by the halving is still one of the fundamental driving forces of the bull market. When we analyze the price trend of Bitcoin, we often focus on the impact of the demand side, but in fact, supply-side reasons should also become the focus of attention. In a sense, the demand side determines the short-term trend, while the long-term trend is most affected by the supply side. Take gold as an example. As humans mine gold, the average global production cost of gold has risen to approximately US$1,400 per ounce. The current gold price is US$2,100 per ounce. Gold mining and production costs are one of the key factors driving the rise in gold prices. one. After the 22-year bull market ended, the price of Bitcoin did not cover costs until 2024, and miners began to make profits. From the supply side, the bull market may have just begun, because for "electronic gold" like Bitcoin, as the value recognition increases, Bitcoin mines will most likely achieve long-term stable profits like gold miners, that is, Bitcoin The currency price is stable and higher than the mining cost in the long term.
Finally, this month, Ethereum was once again recognized as a security by the SEC, pouring cold water on the market. However, BlackRock CEO Larry Fink said in an interview with Fox Business that launching an Ethereum ETF is still possible even if the U.S. Securities and Exchange Commission (SEC) designates Ethereum as a security. When asked whether BlackRock would list an Ethereum spot ETF if Ethereum was recognized as a security, Fink responded in the affirmative. Eight potential issuers, including BlackRock, have submitted Ethereum spot ETF applications to the SEC, and the SEC’s final decision will be made in May. In addition, the final judgment on Zhao Changpeng has been postponed to the 30th of next month, which may have an impact on the encryption market.
The Fed's stay on hold and Japan's interest rate hike did not dampen investor enthusiasm. At present, European investors have begun to place heavy bets on the arrival of the interest rate cut cycle, and there is a high probability that the encryption market will not fall behind. However, although the halving cycle will give a strong boost to the price of Bitcoin from the supply side, there are still many controversies and uncertainties in the encryption market, and every move of the SEC still affects the hearts of encryption investors. However, WealthBee believes that short-term reasonable fluctuations cannot affect the general trend. The bull market is still in its infancy, and there are still greater opportunities in the future.
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