SignalPlus Macro Research Report (20230714): Inflation Slows Down, US Stocks Restart "Siphoning" Effect.
The most important news recently is the CPI of the United States, which rose by 3% compared to the same period last year in June, and the growth rate fell again.
If we look at the macroeconomic situation of the American market with a slightly longer time frame, it is roughly:
The growth rate of CPI has fallen and inflation has cooled down.
Throughout the interest rate hike cycle, employment data has remained stable.
openai brings imagination space for productivity improvement.
Importantly, the benchmark interest rate is at a high level, and there is a lot of policy space in the future.
Reflected in the US stock market, mainstream indexes have ignored the interest rate hike cycle and surged all the way, and the VIX index has returned to the historical bottom range.
However, if we look further, we can see that the US stock market has generated a "siphon" effect compared to other markets, that is, whenever the US stock market rises, other assets such as btc eth will fall relatively. The correlation between these two types of assets has changed from positive correlation last year to negative correlation this year. To a large extent, this is because during the interest rate hike cycle, there is only so much liquidity, and limited liquidity cannot take care of various types of assets.
This limited liquidity situation is reflected in the options market, where the volatility of btc eth has further decreased, while open interest and trading volume are still at historical levels.
The trend of slowing inflation in the United States continues, with PPI data (month-on-month growth of 0.1% vs the expected 0.2%) and core PPI (year-on-year growth of 2.4% vs the previous value of 2.8%) both lower than expected. The number of initial jobless claims of 237,000 is also lower than the market expectation of 250,000 as indicated by Bloomberg. The four-week average in July dropped to 239,000, lower than the 18-month average of around 250,000. The decline in PPI, coupled with the continued strength of the labor market, has renewed market expectations for the ideal economic prosperity of the United States. Market pricing reflects a probability of around 90% of a rate hike at the end of July, but the probability of another rate hike before the end of the year is only about 30%, and it is expected to start cutting interest rates afterwards.
In addition, despite the still strong job market, the booming stock market, and the rapidly easing financial situation, terminal interest rates have still dropped from 5.44% to 5.37%, reflecting market confidence in the Federal Reserve's ability to complete a difficult task and achieve soft landing with perfection.
Against this backdrop, for hedge funds, the "obvious" trades are to buy stocks or short the US dollar, because strong growth, rising risk sentiment, and the relatively dovish stance of the Federal Reserve compared to the European Central Bank/Bank of England/Bank of Canada are all expected to exert continued downward pressure on the US dollar.
As a counterbalance, it is expected that most of the liquidity extraction from quantitative tightening will occur in the second half of this year, and the impact of liquidity is still uncertain and is currently likely underestimated.
In the field of cryptocurrency, it is another day filled with regulatory news. First, former CEO Alex Mashinsky of Celsius was arrested by the U.S. Department of Justice, SEC, CFTC, and FTC, and was charged with fraud. The charges are quite extensive, including price manipulation of CEL tokens, false statements, and wire fraud.
On the other hand, in the highly anticipated Ripple case ruling, Judge Analisa Torres ruled that XRP does not constitute a security when sold to the public, but it does when sold to institutional investors. Her reasoning is that "institutional buyers would understand that Ripple was marketing XRP for its speculative value and had the opportunity to obtain potential profits from Ripple's business and managerial efforts," but this does not apply to retail investors, as there is no evidence that these investors could interpret Ripple's statements regarding XRP.
Although some may argue whether Ripple "won or lost" in this ruling, the market has made it clear through price action that it is a victory for Ripple. After the ruling, the prices of all major tokens soared. XRP rose by 60%, tokens like Cardano, Solana, and Polygon, which were considered "SEC securities," increased by 20-35%, and ETH increased by 8%. It outperformed BTC in this wave of regulatory positive news. This favorable ruling is also expected to alleviate the recent severe regulatory pressure. Encouraged by this, Coinbase also surged by 24% on the same day, doubling its price since the June low point.
Lastly, turning to BTC, with intensified miner competition and more devices deployed, especially after ETH's upgrade to proof of stake, Bitcoin's hash rate has recently reached a new all-time high. In addition, recent institutional investments and support for Bitcoin miners have improved efficiency and professionalism in the field. Although the percentage of transaction fees paid to miners has returned to normal levels after the sharp increase dominated by Ordinals in May.
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