Month: July 2024

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Market rotation helps Dow to a 743-point one day gain to close at a record high. Russell 2000 and crypto benefit

Broad market Bull run

The Dow Jones Industrial Average closed at a record high Tuesday 16th July 2024, rallying 743 points for its biggest one-day increase in more than a year, as the bull run appeared to broaden.

The small cap-focused Russell 2000 also rose for the fifth straight day, rising 3.5% fast closing in on a new record high as the money continues to rotate from tech stocks.

Russell 2000 index one year chart

The Dow Jones finished at 40,954, marking an increase of 1.85% for the day. It has experienced consistent daily gains since the previous week, culminating in an overall rise of over 4% over the past five trading days. The closing value on Tuesday 16th July 2024 represents the largest single-day gain since June 2023.

Dow one year chart as at: 16th July 2024

The market saw an uptick amidst a broader rally, driven by the news that June retail sales exceeded expectations, strong earnings reports to date, and the expectation of a benchmark interest rate reduction by the Federal Reserve in September.

Positive remarks from the Federal Reserve about potential interest rate cuts are bolstering market sentiment. Additionally, the buzz surrounding Trump’s re-election campaign and the recent assassination attempt on Trump at one of his election rallies seem to be influencing market movements as well.

However, Donald Trump reportedly said Taiwan should pay the U.S. for defence, in an interview with Bloomberg Businessweek published on Tuesday 16th July 2024. His comment had a negative impact on chip and tech stocks.

Crypto is enjoying the market rotation as more money is being ploughed back into cryptocurrencies. Bitcoin jumped from a low point in July 2024 of just below $56,000. Altcoins are also enjoying a mini-recovery.

Bitcoin benefitting from markets rotation – one year chart

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Gold gains again to hit new record high!

Gold price

Gold prices climbed to $2,482 per ounce, hitting an all-time high. 

Gold prices continued to peak at new record highs Tuesday and Wednesday 15th and 16th July 2024.

On Monday 15th July 2024, Powell reportedly said the Fed won’t wait for inflation to reach the central bank’s 2% target before it begins cutting, due to the ‘lag’ in policy effects. He reportedly said the Fed is looking for ‘greater confidence’ that inflation will return to the 2% level. The monthly inflation rate dipped in June 2024 – the first time in over four years.

The price increase has been aided by encouraging comments from the Federal Reserve that it will now more likely cut interest rates in September 2024 following comments from Fed Chair Jerome Powell.

And that has given market investors and traders more confidence. According to the CME FedWatch tool, traders are convinced the FOMC will cut rates by September 2024.

As interest rates fall, gold usually becomes more appealing compared to fixed-income assets such as bonds and general savings accounts.

One year gold chart to 17th July 2024 (am)

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What the Fed said

Federal Reserve

Jerome Powell appears to be further paving the way for a rate cut at the next meeting in July 2024.

Federal Reserve Chair Jerome Powell reportedly said Monday 15th July 2024 that the central bank will not wait until inflation hits 2% to cut interest rates.

Powell referenced the idea that central bank policy works with ‘long and variable lags’ to explain why the Fed wouldn’t wait for its target to be hit.

‘The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,’ Powell reportedly said.

Instead, the Fed is looking for ‘greater confidence’ that inflation will return to the 2% level, Powell remarked.

‘What increases that confidence in that is more good inflation data, and lately here we have been getting some of that,’ he reportedly said.

Powell also said he thinks a ‘hard landing’ for the U.S. economy was not ‘a likely scenario.’

It looks like it is time for that rate cut, he didn’t say that!

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Burberry share price slides as company announces profit warning

Luxury goods

Burberry shares slide on Monday 15th July 2024 after the UK luxury fashion group announced a profit warning and a dividend halt and said its chief executive officer (CEO) was being replaced.

The maker of the iconic trench coat described a ‘disappointing’ fiscal first-quarter 2025 in a trading update.

Burberry reportedly said that if the recent trading slowdown continues, it expects to report an operating loss for the first half of this year and full-year operating profit below current consensus.

Shares in the 168-year-old British luxury giant were down 15% on Monday 15th July 2024 in early London trading.

Burberry share price falls to around 745 on Monday 15th July 2024 – one year share price chart

Burberry share price falls to around 745 on Monday 15th July 2024 – one year share price chart
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Dow rises more than 400 points to hit intra-day of 42000 then trims back before close

Stock rotation

Let the rotation begin

The Dow Jones Industrial Average surged on Friday 12th July 2024 as investors began to diversify beyond the technology sector.

The Dow closed at 40,000.90, after hitting a new all-time high of 40,257.

The Dow closed at 40,000.90, after hitting a new all-time high of 40,257.

The S&P 500 added 0.55% to 5,615, and the Nasdaq Composite went up 0.63% to 18,398. However, on Thursday 11th July 2024 the S&P 500 experienced its worst day since late April due to a major market rotation, with Nvidia dropping 5.6%.

Investors rotated from tech to industrial stocks in the Dow on Friday, hoping that slowing inflation might lead to a Federal Reserve rate cut in September.

The Dow gained 1.6% for the week, spurred by a report showing a 0.1% decline in the consumer price index for June. Recent reports suggest that the Federal Reserve might indeed consider a rate cut in September if inflation continues to slow.

While the AI growth has been dominant, other market catalysts, such as potential rate cuts, can also drive different sectors, including utilities.

Good earnings, improving economic news and the promise of a rate cut are combining to become the perfect storm for U.S. stocks.

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Which governments hold the most Bitcoin?

Bitcoin cartoon

U.S., UK and Germany hold more Bitcoin than you may think.

According to the Arkham website, the United States’ government holds some 212,847 BTC making it one of the biggest holders of Bitcoin, while the treasuries of the U.K. and Germany reportedly hold around 61,245 BTC and 49,858 BTC each. (These values alter daily).

In addition to Bitcoin, the U.S. government also holds around $200 million in other cryptocurrencies like Ether (ETH), as well as major stablecoins like USDC.

U.S. Bitcoin holding by current value according to Arkham

Data from Arkham (as of 12th July 2024)

Arkham, a crypto intelligence platform focused on deanonymizing entities on the blockchain network, has introduced a dashboard featuring the governments with the largest crypto holdings.

The U.K. government, reportedly ranked second, holds around $3.5 billion worth of Bitcoin at current valuations, according to Arkham’s data. The German government owns roughly $2.5 billion.

UK Bitcoin holding by current value according to Arkham

Data from Arkham (as of 12th July 2024)

Other world governments holding Bitcoin

China, Russia, Ukraine, El Salvador, Finland, Bhutan and many others.

In 2021, El Salvador became the first country to make Bitcoin legal tender and mandated all local businesses to accept payments in BTC. 

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China’s exports beat forecast – but imports drop

Bust container port

In June 2024, China’s imports fell by 2.3% year-on-year in U.S. dollar terms, missing the expected 2.8% growth forecast by analysts.

However, exports rose by 8.6%, surpassing the anticipated 8% growth. This resulted in a 2% increase in year-to-date imports and a 3.6% rise in exports for the first half of the year compared to the same period last year.

Additionally, China’s trade with the Association of Southeast Asian Nations (ASEAN) surged by 7.1% in the first half of the year, solidifying ASEAN as China’s largest regional trading partner, followed by the European Union.

Trade with Brazil grew rapidly in the first half of the year, with Chinese exports to the country surging by 24.4%.

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UN report suggests the world population to peak at 10.3 billion in 2028 – then decline

World population

According to the organization’s biennial World Population Prospects report, the global population is projected to grow from 8.2 billion in 2024 to peak at around 10.3 billion in the mid-2080’s.

It is then expected to gradually decline to 10.2 billion by 2100, which is 6% lower than anticipated a decade ago.

The UN in 2022 had reportedly estimated the world population would peak at 10.4 billion by the 2080’s. 

Front page of the UN World Population Report

See full report here.

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U.S. inflation falls 0.1% from May to June 2024 further adding to speculation of an imminent Fed rate cut

Sale

The Consumer Price Index (CPI), a comprehensive gauge for goods and services costs, saw a 0.1% decrease from May 2024, bringing the annual rate to 3%, which is near its lowest point in over three years.

When removing the unstable food and energy prices, the core CPI rose by 0.1% monthly and 3.3% annually. This year-over-year core rate increment is the least since April 2021.

Inflation for the month was tempered by a 3.8% drop in gasoline (petrol) prices, which balanced out the 0.2% rises in both food prices and housing costs.

Date: U.S. Bureau of Labor Statistics

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Big Tech and AI stocks push S&P 500 and Nasdaq to new all-time highs!

Record highs

On Wednesday, 10th July 2024, the S&P 500 reached a new record high, surpassing 5,600 for the first time, propelled by a significant surge in semiconductor stocks.

The S&P 500 index rose by 1.02%, ending the day at 5,633 and marking its seventh consecutive day of gains. The Nasdaq Composite increased, achieving a new all-time high closing at 18,647.

This year has seen the S&P 500 close at record highs some 37 times, with the Nasdaq following closely with 27 record high finishes.

S&P 500

S&P 500

Nasdaq Composite

Nasdaq Composite

The Dow Jones Industrial Average grew by 429 points, finishing at 39,721.

Note: figures rounded

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Japan’s Nikkei blast through 42000 to reach all-time high

Nikkei Lift Off!

Japan’s Nikkei 225 surpassed the 42,000 threshold for the first time ever during a widespread increase in Asia-Pacific markets on Thursday 11th July 2024.

This surge followed a rally in U.S. Big Tech stocks, fueled by optimism over a potential Federal Reserve rate cut moving ever closer.

The Nikkei climbed almost 1% to close at 42,224 driven by gains in technology shares, while the comprehensive Topix index advanced to finish at 2,929.

Nikkei index

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“One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors.” – Plato

Soapbox politician

Plato – was an ancient Greek philosopher of the Classical period who is considered a foundational thinker in Western philosophy and an innovator of the written dialogue and dialectic forms.

Plato’s most famous contribution is the theory of forms (or ideas). Along with his teacher Socrates, and Aristotle, his student, Plato is a central figure in the history of philosophy.

Visit Wikipedia for more information about Plato.

Soapbox politician
“One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors.” – Plato
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Federal Reserve chair Powell says keeping rates high for too long could jeopardize growth

Banker giving a speech

Jerome Powell on Tuesday 9th July 2024 reportedly expressed concern that holding interest rates too high for too long could jeopardize economic growth. This comment came ahead of the consumer price index reading due this week.

Preparing for a two-day session on Capitol Hill, the central bank chief stated that the economy and labour market continue to be robust, even with some recent slowdown. Powell noted a slight reduction in inflation, affirming that policymakers are determined to reduce it to their target of 2%.

“At the same time, in light of the progress made both in lowering inflation and in cooling the labour market over the past two years, elevated inflation is not the only risk we face,” he reportedly said. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

Sounds to me like he is paving the way for the first interest rate reduction.

The comment ties-in with the upcoming one-year period since the Federal Open Market Committee (FOMC) last increased the benchmark interest rates.

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China’s inflation data missed projections – rising 0.2% in June 2024

China CPI data

China’s consumer price inflation rose by 0.2% in June 2024 from a year ago, falling short of expectations. Meanwhile, producer prices remained in line with forecasts.

Main points

Consumer Price Index (CPI)

China’s CPI was expected to rise by 0.4% year-on-year in June, according to poll conducted by Reuters. However, the actual increase was only 0.2%. Lacklustre domestic demand has contributed to keeping inflation subdued in China, unlike major economies such as the U.S., where prices have remained elevated.

Producer Price Index (PPI) 

The PPI, which measures factory-gate prices, dropped by 0.8% from a year ago, aligning with expectations. This reflects the ongoing challenges faced by manufacturers and businesses.

Core CPI

Stripping out more volatile food and energy prices, core CPI rose by 0.6% year-on-year in June. While this is slightly slower than the 0.7% increase for the first six months of the year, it indicates a relatively stable inflation trend.

Pork and beef

Notably, pork prices surged by 18.1% in June compared to a year ago, while beef prices fell by 13.4%.

In summary, China’s inflation remains subdued due to weak demand, even as other global economies experience higher price pressures. Policymakers will closely monitor these trends to ensure economic stability.

Note: this information is based on data from the National Bureau of Statistics and reflects the situation as of 10th July 2024.

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Japan, India and U.S. stock markets continue to hit new record highs!

Record highs

Asia-Pacific markets witnessed highs on Tuesday 8th July 2024, mirroring the gains on Wall Street where the S&P 500 and the Nasdaq Composite ended at record highs. India’s Nifty 50 index also hit an all-time high of 24401.2

Investors are anticipating the forthcoming U.S. consumer price index release to discern the Federal Reserve’s direction on interest rates.

Pundits

Pundits have moved this year from four 0.25% rate reductions to one and now maybe to two with the first in September 2024. The Fed trickles decisions out from its fickle stance and each time the markets move in anticipation like a lap dog eagerly awaiting a pat. It almost doesn’t matter what the Fed does – markets want to go up. However, a rate reduction and good economic and earnings news will drive the markets even higher, for a while.

Fickle Fed

Markets are currently anticipating earnings reports. The Federal Reserve, having considered the latest economic reports, has influenced the markets with a mix of indifferent decisions. AI and technology have significantly shifted the stock market landscape, with the potential for further growth – provided that earnings sustain the pace of AI investments and expenses.

Both the S&P 500 and the Nasdaq Composite achieved record highs again overnight, alongside Japan’s Nikkei and Topix reaching new highs too.

The Nikkei 225 climbed to settle at 41580.17 after hitting a new high of 41769.35. The Topix also gained, closing at 2895.55, having touched a peak of 2907.21.

Nikkei

Topix

S&P 500

Nasdaq Composite

Nifty 50

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Is the world shackled to debt?

World Debt

The world is in debt to the tune of $315 trillion, and counting.

$315,000,000,000,000

$315 trillion or $315,000,000,000,000 is a daunting number, it’s massive. In 2024, the global GDP reached just $109.5 trillion, just over a third of the global debt figure.

Perspective

To provide some perspective, with the world population at roughly 8.1 billion, if the debt were distributed evenly, each person would shoulder about $39,000 in debt.

As global debt reaches unprecedented levels, concerns naturally arise about its implications and origins.

Global debt

Global debt includes borrowings by households, businesses, and governments.

Household debt

Household debt, which many are familiar with, comprises mortgages, credit cards, and student loans. At the beginning of 2024, it stood at $59.1 trillion.

Corporate debt

Corporate debt, utilized by businesses for operations and growth, reached $164.5 trillion, with the financial sector contributing $70.4 trillion.

Government debt

Government debt, on the other hand, finances public services and projects without raising taxes. It can be obtained from other nations or institutions like the World Bank and the IMF, or through bond sales, which are essentially promises to pay with interest from the state to investors.

Public debt

Public debt was reported to be $91.4 trillion. While often perceived negatively, debt can be advantageous, supporting individuals in education and homeownership, aiding business expansion, and providing governments with means for economic development, social expenditures, or crisis management.

History

Historical evidence shows that public debt has been around for at least 2000 years, mainly for establishing settlements and financing wars, with governments accruing significant debts from conflicts such as the Napoleonic Wars.

Debt engulfs us all and is here to stay, but at what cost to society?

And who do we owe?

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Europe wants to place data centres in space and Microsoft wants to place them under the sea

Space data centre

Data centres are expected to consume over 3% of Europe’s electricity demand by 2030

The surge in artificial intelligence (AI) has significantly increased the demand for data centres, essential for the ‘exploding’ tech sector. This necessity has led Europe to consider spatial alternatives for digital storage, aiming to diminish reliance on energy-intensive ground facilities.

The Advanced Space Cloud for European Net zero emission and Data sovereignty (ASCEND), a 16-month study investigating the viability of deploying data centres in orbit, has reportedly reached a ‘very encouraging‘ conclusion, according to the report.

The ASCEND study, coordinated by Thales Alenia Space for the European Commission and valued at 2 million euros ($2.1 million), asserts the technical, economic, and environmental viability of space-based data centres.

“The idea [is] to take off part of the energy demand for data centres and to send them in space in order to benefit from infinite energy, which is solar energy,” according to a spokesperson for ASCEND.

Data centres are crucial for advancing digitalization; however, they demand substantial electricity and water to operate and cool their servers. The total global electricity consumption from data centres could reach more than 1,000 terrawatt-hours in 2026 – that’s roughly equivalent to the electricity consumption of Japan, as reported by the International Energy Agency.

The ASCEND study is not alone in exploring the potential of orbital data centres. Microsoft, which has already trialed the use of a subsea data centre – positioned 117 feet deep on the seafloor, is collaborating with companies such as Loft Orbital to explore the challenges in executing AI and computing in space.

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Tesla shares recover 2024 losses with a 27% rally in one week

EV

Following a dismal beginning to 2024, Tesla’s stock has experienced a sharp rally, erasing its losses for 2023.

Tesla’s shares ended on Friday at $251.55, marking a 27% increase for the week.

The automaker announced on Tuesday 2nd July 2024 that its second-quarter vehicle deliveries surpassed forecasts.

Tesla 5-day chart – share price closed at 251.55

Tesla 5-day chart – share price closed at 251.55
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S&P 500 and Nasdaq hit record highs again as job data raises chance of a Fed interest rate cut

U.S. market record highs

Markets respond positively to job data as the S&P 500 and Nasdaq break record highs, again!

S&P 500 record high

S&P 500 record high Friday 5th July 2024

Nasdaq Composite record high

Nasdaq Composite record high

Nasdaq 100 record high

Nasdaq 100 record high

U.S. non-farm payrolls increase

The U.S. economy added slightly more jobs than expected in June 2024 though the unemployment rate increased, the U.S. Labor Department reported Friday.

Non-farm payrolls increased by 206,000 for the month, better than the 200,000 Dow Jones forecast though less than the downwardly revised gain of 218,000 in May, which was cut sharply from the initial estimate of 272,000.

The unemployment rate unexpectedly rose to 4.1%, matching the peak since October 2021, presenting a conundrum for Federal Reserve officials as they consider their next steps in monetary policy. Projections had indicated that the unemployment rate would remain stable at 4%.

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Bitcoin in a spin as it drops below $55000

Bitcoin in a downward spiral

More than $170 billion has been erased from the cryptocurrency market due to concerns over the Mt. Gox bitcoin payout.

Bitcoin’s price plummeted over 6% in 24 hours, reaching $54,237, marking its lowest point since late February 2024.

The total cryptocurrency market lost over $170 billion in market capitalization within the same timeframe, according to CoinGecko.

The Mt. Gox bankruptcy estate’s trustee announced on Friday that repayments in Bitcoin have commenced for certain creditors via specified cryptocurrency exchanges.

What is, or was, Mt. Gox Bitcoin?

The Mt. Gox Bitcoin payout pertains to the reimbursement process for creditors of the defunct Mt. Gox cryptocurrency exchange. Previously the world’s largest Bitcoin exchange, Mt. Gox fell in 2014 due to a significant hack, leading to the loss of about 740,000 Bitcoins.

Following extensive legal battles and postponements, the exchange is poised to start disbursing roughly $9 billion in Bitcoin and Bitcoin cash to its creditors. This payout is noteworthy as it entails a substantial return of bitcoin to users, which may influence the cryptocurrency market dynamics.

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Labour Party win 2024 UK election in landslide victory after giving the Conservative Party a drubbing!

Labour Party win 2024 election

The U.K.’s opposition Labour Party secured a significant parliamentary majority in the 2024 general election, displacing the incumbent Conservatives after 14 years in power.

Labour surpassed the threshold of 326 majority required to govern without coalition support as outgoing Prime Minister Rishi Sunak acknowledged the loss. Sir Keir Starmer, the leader of the centre-left Labour Party, is set to become the next prime minister, having declared victory in the early hours.

The Labour Party’s massive majority was achieved as Europe lurches to the right and the UK turns left – very contrasting differences.

The strength and size of the win mustn’t allow the Labour Party to railroad policy.

The Labour Party campaigned on the slogan ‘change’ – but what does that really mean? A change from what to what exactly? Time will tell – but I have my doubts. Having lived through many political changes and many Party promises that slowly drifted away to reality.

It looks very much to me that the win was a vote against rather than a vote for.

However, it was refreshing to witness democracy very much at work in the UK election.

Change!

Come on then Labour – let’s now see what you can do for the people of the UK now that you have trashed the Tories!

You have the majority!

Time for that change.

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Japan’s Nikkei passes 41000 – then trims gain slightly

Nikkei hits new record

On 5th July 2024, Japan’s benchmark Nikkei 225 index climbed above 41,000 before retreating from its record close of 40,913.65.

The Nikkei 225 serves as a crucial barometer for the Japanese stock market, representing the performance of prominent companies on the Tokyo Stock Exchange. It continues to stand at historically elevated levels.

Nikkei one year chart closes at 40912 after passing 41000 for the first time

Nikkei one year chart closes at 40912 after passing 41000 for the first time