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MAY 15, 2024

SLIGHT EASING

Although inflation is still above levels that would prompt immediate interest rate cuts, the latest consumer price index (CPI) report has revealed that inflation showed a slight easing in April, offering some relief to consumers. The CPI, which measures the cost of goods and services, rose by 0.3% from March, slightly below expectations. On an annual basis, the CPI increased by 3.4%, in line with forecasts. The core inflation reading, which excludes food and energy prices, remained at 0.3% monthly and 3.6% annually as expected. Retail sales stayed flat for the month, indicating consumers may not be keeping up with rising prices. The uptick in inflation was mainly driven by higher costs in shelter and energy. Shelter costs rose by 0.4% monthly and 5.5% annually, while energy prices increased by 1.1% monthly and 2.6% annually. Food prices remained steady, and used and new vehicle prices showed a decrease. Following the release of softer inflation data, U.S. Treasury yields retreated, with the 10-year Treasury yield falling by more than 8 basis points.

TURNING TIDES

Last week, Spot Bitcoin ETFs in the United States experienced a turnaround, with net inflows totaling $116.8 million, following a period of consecutive outflows exceeding $1 billion. Fidelity’s FBTC was the top performer, attracting $111.3 million in net inflows, followed by Ark Invest’s ARKB with $82.8 million. Let’s remember that BlackRock’s IBIT saw its first net daily outflows on May 1, however, despite this, the ETF still managed to secure $48.1 million in net inflows, ranking third. Furthermore, while Grayscale’s Bitcoin Trust experienced net outflows of $171.1 million, it witnessed a reversal with $63 million in net inflows on May 3. Thus, although the overall flow of funds into U.S. spot Bitcoin ETFs has decreased since its peak in March, with trading volume declining to $7.4 billion last week, cumulative trading volume for U.S. spot Bitcoin ETFs has surpassed $250 billion since their launch in January, reaching a total of $254 billion last week.

DEFICIT URGENCY

JPMorgan Chase CEO Jamie Dimon is calling for urgent action to address the U.S.’ escalating fiscal deficit, as with substantial spending during and post-pandemic and a current deficit of 6%, Dimon cautions that overlooking this issue could lead to future challenges. It is worth noting that although there have been efforts to reduce the deficit, the government has spent $855 billion more than it collected in 2024 and $1.7 trillion in 2023, and this is why Dimon stresses the necessity of immediate intervention to prevent potential economic repercussions. Dimon underscores the significance of striking a balance between addressing the deficit and fostering economic growth while advocating for bipartisan collaboration. Furthermore, Dimon has emphasized the importance of respectful communication and effective policies to benefit both the nation and the global economy.

STAGNANT DEMAND

Mortgage rates recently dropped to their lowest level since April, providing a potential boost for homebuyers looking to enter the housing market. Nonetheless, despite this decrease, many buyers are still finding it challenging to afford properties in today’s competitive market. Thus, as a result of this financial struggle, demand for mortgages has remained relatively flat. Refinancing applications saw a slight increase of 5% while applications for purchasing a home experienced a decrease of 2%. Notably, FHA applications saw a significant decline of 9%, suggesting that first-time or lower-income buyers are especially feeling the financial strain. Moreover, although the lower rates have benefited prospective homebuyers, mortgage rates are still higher compared to the previous year, and to make the environment for potential buyers more challenging, the limited availability of homes for sale continues.

FADING FRENZY

Shares of GameStop and AMC have dropped, signaling a decline in the meme stock trading frenzy. The brick-and-mortar video game retailer fell by 13%, while the movie theatre chain dropped by 12%. This came after both stocks saw significant increases earlier in the week. AMC announced a debt-for-equity swap involving 23.3 million shares for $163.9 million of bonds due in 2026, alongside a $250 million stock sale. Despite experiencing notable rallies and trading surges, retail interest this time is notably lower and short-lived compared to previous instances. The recent social media update by Keith Gill, also known as “Roaring Kitty,” reignited speculation around meme stocks, leading to increased trading activity. However, the enthusiasm seemed to wane by the end of the trading session, with some investors and analysts criticizing the meme stock phenomenon as risky gambling.

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