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DECEMBER 1, 2023

INCREMENT AMIND INDUSTRY TURMOIL

The shares of Coinbase Global Inc. have increased by 62% this month, catching the attention of Wall Street following the recent issues faced by competitors FTX and Binance. Traders are buying Coinbase shares in the hope of increased business if Bitcoin-focused exchange-traded funds are approved. Consequently, this has driven the stock up by more than 300% in 2023 and added $12 billion to the company’s market value. In addition, the market remains optimistic, with some analysts, such as John Torado, belives that a new bull cycle may be just beginning for Coinbase, even as others express a need for caution in light of potential market shifts in the crypto industry. Moreover, despite the gains witnessed by Coinbase, , it is worth noting that more than 40% of Wall Street analysts covering the company have a hold-equivalent rating, and Cathie Wood’s Ark Investment Management LLC has sold over 30,000 shares of Coinbase in the past month, and 1.5 million shares in the third quarter of 2023.

SHIFT IN CONSUMER BEHAVIOR

Emerging signs of a shift in consumer behavior are beginning to signal a potential slowdown in the U.S. economy as recent data, warnings from major retailers like Walmart, and reports from local businesses indicate that households are starting to pull back on their spending after a year of robust economic activity. Factors such as increasing interest rates and reduced savings are impacting consumer confidence, raising concerns about potential economic challenges in 2024, especially as labor market growth decelerates and wage growth moderates. According to experts, the declining spending is significant given that consumer spending accounts for about two-thirds of the GDP, however, experts believe that while the economy is slowing down, it is not expected to crash. The cautious consumer sentiment is reflected in decreased spending on discretionary items like cars and furniture, as well as subdued holiday shopping activity, and it is worth noting that this gradual deceleration in spending may be welcomed by Federal Reserve officials concerned about inflation. Moroever, despite the slowdown, experts note that there are still signs of ongoing forward momentum and progress in the economy, and while there are still some cautious outlooks, there are no expectations of an impending economic downturn.

OUTLOOK STILL UNCLEAR

This week, there has been a noticeable shift in the tone of Federal Reserve officials, indicating a possible interest in cutting interest rates due to slowing economic growth and declining inflation. As a result, the possibility of rate cuts beginning as early as 2024 has caused a stir in financial markets, sparking debates and speculations among economists and investors. Nevertheless, it is imptortant to highlight that the decision-making process revolving around interest rate adjustments is complex and multifaceted, requiring a careful analysis of various economic indicators. Moreover, although some market participants believe that a rate cut in the first quarter of 2024 is likely, others, including Fed Chair Jerome Powell, may prefer to adopt a more cautious approach and refrain from committing to a specific timeline for such a decision. Ultimately, the decision to cut interest rates will depend on a thorough evaluation of a range of economic factors and their potential future outcomes, and the discussions and debates around this potential shift in monetary policy are likely to continue.

UNSTEADY PRICES DESPITE PROMISES

Following OPEC+’s promise of further output reductions, oil prices continued to slide, with Brent crude trading near $81 per barrel. The alliance announced plans to cut around 900,000 barrels per day in the coming year, however, concerns arose due to the voluntary nature of the cuts and reports of Angola rejecting its quota. This raised doubts about the effectiveness of the agreement, especially as it took a long time to negotiate and is not formalized within the quota system. Moreover, despite the initial optimism that prices would stabilize, analysts believe that the lack of clarity from the meeting suggests limited commitment from OPEC countries to implement the promised cuts. Meanwhile, increased production from non-OPEC countries, such as the U.S. and Brazil, poses a risk of oversupply in the market. Consequently, there is skepticism about whether the intended cuts will happen or have a significant impact, leaving many disappointed and confused about the situation.

INTERNATIONAL NEWS

With escalating geopolitical tensions and strained U.S.-China relations, investing in China has become increasingly unpredictable. The complex economic ties between the two countries have led to significant uncertainty, marked by U.S. restrictions on investing in specific Chinese industries and companies, which, in turn, resulted in a substantial market exodus with over $24 billion withdrawn from China A shares listed in Shanghai or Shenzhen. This has raised concerns among financial analysts about the potential impact on Chinese businesses and the overall economic landscape. Consequently, many investors have adopted a cautious stance, waiting for substantial improvements in U.S.-China relations and China’s growth prospects before considering re-entry into the Chinese stock market. Furthermore, geopolitical complexities associated with Taiwan have further heightened international investors’ apprehensions, prompting market strategists to emphasize that the reentry of hedge funds and active-fund managers into the Chinese stock market is contingent on significant enhancements in the country’s growth outlook and U.S.-China relations.

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