June Macro Report: US stocks “turn downward”, while the crypto market “faces challenges”
June Macro Report: US stocks go down, crypto market faces challenges.
In mid-June, the US stock market experienced a correction, temporarily extinguishing the “small bull market,” with many global stock indexes showing signs of reversal in June, “overheated gains” or a “preliminary cooling.” In contrast, although the cryptocurrency market was “not peaceful” this month, the prices of cryptocurrencies have shown a wave of upward trends. Is a new wave of the cryptocurrency bull market coming?
Let’s start with the macro perspective. The biggest macro news this month is undoubtedly the Fed’s pause to raise interest rates, which undoubtedly gives global capital markets a breathing room. On June 14, US time, the Fed announced that it would maintain the current federal funds rate target range of 5% to 5.25%, in line with market expectations. Since the start of this round of interest rate hikes in March 2022, the Fed has raised interest rates 10 times in a row, with a cumulative increase of 500 basis points, the fastest pace of interest rate hikes since the 1980s, and is considered “aggressive.” Although the US has temporarily pressed the “pause button” for interest rate hikes, Powell said this does not mean that the Fed’s interest rate hike cycle is completely over, and he supports further interest rate hikes and believes that interest rates will not be lowered in the short term.
Why did the US choose to pause after aggressively raising interest rates? One is because the US interest rate hike “has shown initial results.” The US released its CPI index for May this week, which rose 4% year-on-year. This is the 11th consecutive decline in the growth rate, reaching a new low since March 2021, and is lower than the market’s expected 4.1%, indicating that inflation pressure has been significantly curbed. At the same time, the PPI growth rate in May was 1.1%, which also fell more than expected, showing that inflationary pressures in the industrial sector have eased. Second, the US financial system is under tremendous pressure after aggressively raising interest rates. A report by the World Federation of Large Enterprises shows that the consumer confidence index in May has fallen, and consumers have shown a “serious deterioration” in their assessment of the current employment situation.
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As the market is immersed in the joy of the pause in aggressive interest rate hikes, Powell made another hawkish speech mentioning interest rate hikes on June 22, followed by a drop in US and most Asia-Pacific stock indexes. However, the decline in the stock market is not all due to Powell’s speech, and a major reason is the short-term excessive gains in the stock market.
Since the beginning of this year, the US stock market, boosted by the AI wave, has been led by technology stocks into a bull market, and Nvidia’s market value has exceeded one trillion US dollars, with Adobe’s highest increase this month exceeding 25%. Since June, the highest increase in the Nasdaq has been 7.43%, and the highest increase in the S&P has been 6.63%. The Asia-Pacific market has also performed very well, with the Nikkei 225 index being the best-performing index in the Asia-Pacific region, rising continuously since mid-March, reaching a 33-year high, and the highest increase in June was 9.45%.
However, whether it is the US stock market or the Asia-Pacific stock market, the upward trend is likely to face a round of adjustment. The current economic fundamentals of the United States are below expectations. In June, the initial value of the Markit Manufacturing PMI in the United States was 46.3, with an expected value of 48.5, a previous value of 48.4, and a new low in the past six months. The initial value of the Markit Service PMI in June was 54.1, with an expected value of 54 and a previous value of 54.9, hitting a new low in the past five months. The data for the June Markit Composite PMI was 53, which was also lower than the previous value of 54.3.
Due to the decline of the European and American economies, the capital market generally has high expectations for emerging markets in the Asia-Pacific region, so the stock market trends of some emerging market countries in the Asia-Pacific region have been very eye-catching this year. However, according to Vietnamese media Vnex Press on June 23, there are signs of a sharp decline in Vietnam’s economy, which has led to a sharp decline in exports and a shrinking factory output. Vietnam, as the second largest economy in Southeast Asia, may make funds chasing emerging market countries more calm and rational due to its poor economic performance.
The reason for the rise in the Japanese stock market is that Japanese stocks have “cost-effectiveness” compared to the European and American markets. Compared with the stock markets of developed countries in Europe and the United States, the Japanese stock market has been undervalued for a long time. In order to improve the long-term undervaluation, the Tokyo Stock Exchange issued a new regulation at the end of March 2023: “For listed companies whose PBR is less than 1 times in the long term, they are required to disclose specific improvement plans.” This is similar to China’s “Zhongtegu” logic of rising, so it is also called “Nittegu” in the market. At the same time, Buffett has continuously increased his holdings of Japan’s five major trading companies, and the influence of the stock god has also added a catalyst to Japan’s hot market. However, with the continuous rise of the Japanese stock market, the “cost-effectiveness advantage” of Japanese stocks compared to European and American stocks is gradually decreasing. At the same time, because the pricing power of Japanese stocks is in the hands of foreign capital, the historical trend of Japanese stocks is strongly linked to that of US stocks. Therefore, in addition to the expectation that US stocks may weaken, attention should also be paid to the risks of Japanese stocks.
Although the economic fundamentals of the United States are slightly weaker than expected, international capital is more likely to favor US dollar assets because the US dollar continues to appreciate. After the bearishness of the fundamentals has been absorbed by the market, there is still a high possibility that international capital will flow back to US stocks.
Bitcoin has been rebounding since its lowest point this year and has been on the rise. On the 20th of this month, the price of Bitcoin rose by more than 10% in a single day, followed by further gains on the 21st. Since May 2021, Bitcoin has regained 50% of the entire cryptocurrency market share.
Although the US SEC sued Binance for violating securities laws on June 5, this had little impact on the cryptocurrency market. The price of Bitcoin plummeted on June 5 and then rebounded on June 7. Today, the price of Bitcoin has reached a new high in a year. Many media outlets have analyzed that the SEC’s lawsuit aims to compete for regulatory power in the field of crypto assets, but this move has not been recognized by others, and US judges have rejected the SEC’s request to freeze Binance’s assets.
However, even against this backdrop, global asset management giant BlackRock persisted in applying to the SEC to launch a Bitcoin spot ETF on June 15th. The price of Bitcoin rose more than 5% in response over the next two days. BlackRock’s move surprised many people, as the SEC has been “somewhat hostile” to crypto assets. David Bailey, CEO of Bitcoin Magazine, said that BlackRock’s BTC ETF (Exchange-Traded Fund) may soon be approved by the SEC, representing a breakthrough after multiple attempts by other companies failed.
As Bitcoin becomes an increasingly popular asset allocation option for more and more people, traditional financial giants are also seeking pricing power in this field. Renowned KOL AutismCapital believes that BlackRock’s choice to launch an ETF under SEC supervision may mean that the SEC is conducting a cleanup action. The goal is to clear out the “low-level scammers” in the crypto field, making it easier for US traditional financial elites to rebuild the game platform according to their own rules. Therefore, although BlackRock’s actions are bullish for crypto assets, many crypto communities do not buy into its actions, believing that it is disrupting the existing ecosystem of the crypto circle.
The arrival of a bull market does not necessarily mean a unilateral rise. The future Bitcoin price may fluctuate around $30,000 and there may also be downward pressure on the washout. WealthBee believes that the bottom features of the Bitcoin price trend are obvious, so any downward move is a good buying opportunity.