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MAY 16, 2024

WAVERING ETHER

Following yesterday’s announcement that the amount of things people bought in stores did not increase like experts thought it would, the cryptocurrency market reacted positively as the value of all cryptocurrencies rose by 5.5%. Notably, Bitcoin rose by over 7% in just 24 hours, surpassing the $66,000 mark. Nonetheless, despite the positive sentiment in the overall crypto market, Ethereum’s gains lagged behind, only increasing by 5% and struggling to break the $3,000 resistance level. The pending decision by the U.S. Securities and Exchange Commission (SEC) on May 23 regarding VanEck’s spot Ethereum ETF application significantly influenced Ethereum’s performance, with market participants adopting a wait-and-see approach before committing to new investments. And this regulatory uncertainty has spread into the Ether derivatives markets, with indicators revealing a neutral sentiment among traders and hesitancy towards the potential approval of a spot Ethereum ETF.

TRADER-LIKE SHIFT

Traditional bond investors are finding themselves in a new world of volatility as government bonds, which were once safe and steady, are now unpredictable, with hedge funds taking advantage of the market swings. This shift has forced long-term investors to adapt to a faster-paced trading environment or risk falling behind. Recent economic data, like rising producer prices and cooling consumer inflation, have kept the bond market on its toes, with expectations of Federal Reserve rate cuts adding to the uncertainty, and as a result of this, bond investors are now operating more like traders, adjusting their strategies more frequently due to the market’s ups and downs. It is worth noting that bond volatility has surpassed that of other assets, which leads to increased risks for holding positions overnight. Thus, these changes have required fixed-income investors to adjust their approach and embrace a more dynamic, trader-like mindset.

UNEXPECTED RISE

According to the latest announcement from the U.S. Labor Department, last week saw a higher-than-expected number of Americans filing for initial unemployment benefits, reaching 222,000. Although this was a decrease from the prior week’s total of 232,000, economists had anticipated a lower figure of 219,000. Furthermore, the four-week moving average, which serves to smooth out volatility in the weekly data, increased by 2,500 to 217,750. Additionally, recent data has shown the U.S. economy adding the fewest jobs in six months, along with annual wage growth dropping below 4% for the first time in almost three years. Let’s remember that these statistics are being closely watched by the Federal Reserve as they evaluate the strength of the job market, and any indications of a softening labor demand could relieve upward pressure on wages and inflation, possibly supporting a case for the Fed to lower interest rates from their two-decade highs.

UNCERTAINTY DESPITE SLOWDOWN

Despite the recent inflation reading, which revealed a slowdown in price growth excluding food and energy, comments from Federal Reserve officials, such as Neel Kashkari from the Minneapolis Fed, continue to suggest that maintaining current interest rates for an extended period is could still be possible, as there  are other factors that should be considered. For instance, Kashkari has emphasized the need to understand how much the current monetary policy is affecting the U.S. economy, stating that the uncertainty calls for caution before making any changes. In addition, Kashkari, who is closely monitoring the housing market and its impact on inflation, has noted the unexpected resilience of the economy despite high policy rates, suggesting that current interest rates may only be slightly slowing economic activity rather than significantly hindering it. Nonetheless, despite this cautionary stance, it is worth remarking that following the latest CPI report, investors are anticipating about two rate cuts happening this year.

THRIVING PERFORMANCE

Walmart’s recent financial performance has surpassed expectations, with the retail giant reporting strong earnings and revenue growth driven by a variety of factors. Notably, Walmart has seen significant gains in its e-commerce business and has successfully tapped into newer revenue streams such as advertising. The company’s ability to attract more high-income shoppers has also contributed to its success, as reflected in its improved earnings per share and revenue figures for the quarter. Walmart’s grocery business, in particular, has experienced a boost due to the growing price disparity between cooking at home and eating out, along with the convenience it offers to customers. Additionally, the company has observed increased customer frequency, especially among newer shoppers, across its virtual and physical stores. Moreover, although Walmart has been facing the impact of inflation, it has managed to adapt by prioritizing essential items to cater to consumer preferences.

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