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MARCH 12, 2024

INFLATION SOARED

Based on the latest data, inflation rose in February, leading the Federal Reserve to likely delay any interest rate cuts until summer. The consumer price index increased by 0.4% for the month and 3.2% from a year ago, surpassing expectations. Excluding volatile food and energy prices, core CPI also saw a rise, up 0.4% monthly and 3.8% annually. Energy and shelter costs were major contributors to the inflation increase, with gasoline up by 3.8% and housing expenses by 0.4%. Moreover, despite positive indicators like a strong economy and job market growth, concerns persist regarding sustained inflation levels and the potential necessity for rate cuts. Furthermore, the pace of economic growth, driven by consumer spending and labor market gains, has allowed the Fed to take a more measured approach to monetary policy, but lingering worries about the durability of inflation remain, especially in the housing market where rental costs continue to exert upward pressure on prices.

RECORD INFLOWS CONTINUE

Despite experiencing a slight decline this morning, Bitcoin has continued reaching an all-time high levels fueled by a record $2.7 billion inflow into crypto assets last week, with a significant portion going to Bitcoin. The launch of U.S. spot Bitcoin ETFs by BlackRock Inc. and Fidelity Investments has garnered $9.5 billion in net inflows, while the London Stock Exchange and Thailand are considering opening their own crypto ETFs. 21Shares highlights early institutional adoption in the U.S., suggesting a promising future. Analysts predict Bitcoin could reach higher levels, driving up open interest in CME Group’s Bitcoin futures market. The rise of Bitcoin creates approximately 1,500 new “millionaire wallets” daily, although lower than during the 2021 bull run. Moreover, with the upcoming halving event, decreasing the supply of new Bitcoin, along with growing ETF demand and favorable monetary policies, many investors continue to be optimistic about Bitcoin’s future despite lingering memories of the challenging 2022 bear market.

PUSHING THE LIMITS

Hedge funds are currently using leverage at near-record levels to increase their exposure in the equities trading market. This surge in leveraged trading activity has been driven by debt-fueled strategies that have expanded in recent years, along with a market upturn that has encouraged riskier bets. According to sources from Goldman Sachs, JPMorgan, and Morgan Stanley and recent client notes from other financial institutions, the use of leverage by hedge funds has reached historical highs. With leverage at near record levels, there is concern about potential impacts on market stability and financial institutions if highly leveraged positions turn sour. Consequently, the U.S. Federal Reserve and Securities and Exchange Commission are closely monitoring the situation. Nonetheless, it is worth noting that despite such concerns, some strategies have still seen positive returns.

HIGH FLYING ETF

Artificial intelligence bulls are showing a growing interest in an exchange-traded fund (ETF) that focuses on investing in Nvidia Corp. The fund, known as GraniteShares 2x Long NVDA Daily ETF, has been experiencing high trading volumes and inflows of money, reaching all-time highs. This ETF allows investors to double their daily returns on Nvidia’s stock. The fund has grown to $1.4 billion since its launch in 2022, with many investors believing in the long-term potential of Nvidia’s technology in the global economy. Furthermore, it is worth remarking that although there has been some retreat in Nvidia’s stock price, the ETF has still remained popular among investors, with significant trading activity and inflows of capital.

INTERNATIONAL NEWS

Multiple Chinese market indicators, such as the Hang Seng Tech Index and the ChiNext Index, have experienced significant rallies, surging over 20% from their recent lows. This surge marks the beginning of a bull market in certain sectors of both the traditional and emerging Chinese economy. The momentum can be attributed to growing investor confidence in the potential benefits of President Xi Jinping’s efforts to strengthen the economy and financial markets. As a result, investors are increasingly seeing potential upside in current market valuations, indicating a shift toward optimism about the future prospects of Chinese markets. Moreover, the positive sentiment is further evidenced by the recent performance of key benchmarks such as the CSI 300 gauges for telecommunication and information technology, a Goldman Sachs index of renewable energy stocks, and MSCI Inc.’s materials benchmark.

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