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JULY 18, 2023

ONE MORE UNDER REVIEW

The U.S. Securities and Exchange Commission (SEC) has accepted a second spot Bitcoin ETF application for review, following BlackRock’s proposal. This time, it is Valkyrie’s turn, with their Valkyrie Bitcoin Fund (BRRR), which was submitted shortly after BlackRock’s groundbreaking one. Now that these two ETF proposals are under review, the next step in the process is the comment period, which allows the public and other institutions to share their thoughts on the ETF’s market impact, investor protection measures, and other relevant factors. This comment period will run for 21 days from the filing date, and once concluded, the SEC will evaluate the proposals and may request additional information from the applicants before making a final decision.

RETAIL SALES INCREASED

Retail sales in the U.S. increased by 0.2% in June, following a 0.5% rise in May. While this growth was slightly lower than expected, various sectors saw positive trends, with sales rising at miscellaneous store retailers, nonstore retailers, furniture, electronics and appliances, clothing, motor vehicle and part dealers, and food services and drinking places. Nevertheless, sales declined at gasoline stations, building materials and garden equipment stores, sporting goods, hobby, musical and book stores, food and beverage stores, health and personal care stores, and general merchandise stores. Moreover, excluding certain categories, core retail sales surged by 0.6%, signaling resilient consumer spending despite lower inflation rates in June.

STRONG RESULTS

Morgan Stanley and Bank of America (BofA) both delivered impressive results in the second quarter, surpassing analysts’ expectations. Benefitting from exceptional wealth management outcomes, Morgan Stanley reported earnings of $1.24 per share, exceeding the estimated $1.15, along with revenue of $13.46 billion, surpassing the expected $13.08 billion. Meanwhile, BofA saw a boost in interest income and reported earnings of 88 cents per share, outperforming the estimated 84 cents, and revenue of $25.33 billion, surpassing the expected $25.05 billion. Despite a challenging market, both banks demonstrated resilience, with BofA’s Wall Street operations driving revenue growth. However, concerns were raised about BofA’s net interest income due to slower loan and deposit growth. Furthermore, while Morgan Stanley’s shares experienced a slight increase, BofA saw a decline in shares, aligning with the 20% decline of the KBW Bank Index.

LOWER RECESSION PROBABILITY

Goldman Sachs has revised down the odds of a U.S. recession happening in the next 12 months, estimating it at 20% instead of 25%. The investment bank’s chief economist, Jan Hatzius, cited encouraging economic data as the primary reason for the revision. The resilient U.S. economic activity, with second-quarter GDP growth tracking at 2.3%, along with a rebound in consumer sentiment and a decline in unemployment to 3.6% in June, have contributed to Goldman’s optimism, as these results reinforced their confidence that inflation can be managed without a recession. While there may be some slowdown in subsequent quarters due to slower real disposable personal income growth, the easing in financial conditions, housing market rebound, and ongoing factory expansion suggest the U.S. economy will continue to grow, albeit at a slightly slower pace. Moreover, Goldman still expects a 0.25% increase in the upcoming Federal Reserve meeting, but Hatzius believes it could mark the last one in the current cycle.

IMF’S CONCERNS

During a meeting with financial leaders of the Group of 20 nations, the head of the International Monetary Fund (IMF), Kristalina Georgieva, expressed concerns about the slowing global economy, particularly in the manufacturing sector. Georgieva highlighted the persistent divergence in economic fortunes among nations and acknowledged that while inflation was finally trending downward, headline inflation and core inflation remained high despite significant monetary tightening. She stressed the importance of continued monetary policy measures and lowering inflation as key priorities for countries. Additionally, Georgieva emphasized the need to strengthen the global financial safety net and expedite debt restructuring processes for debt sustainability.

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