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MARCH 13, 2024

LOW FEE BITCOIN ETF

Grayscale Investments is seeking to introduce a new exchange-traded fund (ETF) linked to its successful $28.5 billion bitcoin investment vehicle. This new fund, known as the Grayscale Bitcoin Mini Trust, is designed to trade under the ticker symbol BTC and is expected to have a lower fee structure compared to the current Grayscale Bitcoin Trust which charges a 1.5% fee. Investors in the original fund would see a portion of their holdings automatically moved to the new fund if it gains regulatory approval, with their overall exposure to bitcoin remaining unchanged. Grayscale’s initiative to launch a more cost-effective fund follows a recent shift in the market, with traditional asset managers introducing similar cheaper alternatives to woo a broader base of investors; and although Grayscale’s existing fund has seen significant outflows since converting to an ETF, the market has witnessed substantial inflows into newly launched bitcoin ETFs, which highlights the growing demand for exposure to digital assets.

BUDGET DEFICIT INCREASED

According to the latest report from the U.S. Treasury Department, the federal budget deficit in February reached $296 billion, marking a 13% increase from the previous year. This growth was driven by a record high outlay of $567 billion and a rise in receipts to $271 billion. So far in the fiscal year, the total deficit has expanded by 15% to $828 billion, mainly due to escalating interest costs on the national debt. Moreover, individual tax refunds and withheld receipts also saw an increase from the prior year, while interest expenses on the national debt surged to a record high of $76 billion in February, up by 67% compared to February 2023. Furthermore, for the year so far, interest on the public debt reached $433 billion, and the weighted-average interest rate on Treasury securities climbed to 3.2% in February. Ultimately, these figures highlight the financial challenges that the U.S. government has been facing in regards of managing its budget amidst increasing debt obligations and rising interest rates.

BRIGHT OUTLOOK

Bank of America Corp. strategists predict that the S&P 500 will experience robust earnings growth in the near future, driven by a strong economy and advancements in artificial intelligence technology. The strategists have increased their earnings-per-share estimate to $250 for 2024, putting them at the forefront of bullish profit forecasts on Wall Street. In addition, they also anticipate earnings-per-share to rise to $275 in 2025. This positive outlook follows a successful earnings reporting season and an upgrade in the U.S. GDP forecasts by Bank of America economists. The strategists note that companies have adapted well to changing conditions and are making significant investments in AI technology, which is expected to create a beneficial cycle. They predict that semiconductor and networking companies will be among the main beneficiaries, while utilities and commodities are also expected to see gains due to increased power usage and data centers. Moreover, Savita Subramanian has also recently raised her S&P 500 target to 5,400, which reflects the anticipated earnings growth.

STABLE AFTER TUMBLING

Following the significant drop gold prices experienced after concerns arose over high U.S. inflation potentially delaying an interest rate cut by the Federal Reserve beyond June, the price of gold stabilized. Currently at $2,158.70 per ounce, gold saw a slight increase, with U.S. gold futures also showing a modest rise at $2,168.80. The drop in prices is related to inflation data affecting the U.S. Fed’s decisions, as highlighted by Michael Langford, Chief Investment Officer at Scorpion Minerals Ltd, who anticipates a possible correction of up to 10% in gold prices. Moreover, yesterday’s.1% decline in gold prices was driven by robust consumer price increases in February, indicating persistent inflation. Consequently, expectationsthe likelihood of a rate cut in June is still high, nonetheless, it is worth noting that commodities like gold remain stable as funds flow into the market, supporting base metals and gold. Furthermore, the inflation data also led to rising U.S. Treasury yields and a stronger dollar, with the 10-year Treasury yield increasing after low demand at a recent auction of the benchmark note.

CAUTIOUS TREND

Global investors, such as Nomura Asset Management Co. and JPMorgan Asset Management, are taking a cautious stance on adding Japanese bank stocks to their portfolios, despite expectations of improved profitability following a potential rate hike by the country’s central bank next week. Nomura Asset has been selling some of its Japanese bank holdings due to concerns over crowded trading in the sector driven by the anticipation of higher interest rates. In addition, JPMorgan Asset has also reduced its bank holdings as market expectations surrounding the Bank of Japan’s (BOJ) policy shift have already been factored into stock prices. It is important to highlight that even though the prices of bank shares usually go up when interest rates rise, this connection has been getting weaker, as bank shares have been going down lately, even with the expectation of a rate increase. Moreover, Schroder Investment Management, which owns a lot of financial stocks, is also being careful about buying more bank shares. They are waiting to see how the central bank does with raising rates after keeping them low for a long time.

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