BLACKROCK DOMINATING

BlackRock’s iShares Bitcoin Trust has emerged as the leading fund for the world’s largest cryptocurrency, accumulating close to $20 billion in assets since its listing in the U.S. in January, overtaking Grayscale Bitcoin Trust in total assets. Market analysts have been closely monitoring the performances of BlackRock’s ETF and Grayscale Bitcoin Trust following the approval of nine new ETFs by U.S. regulators in January, and they have witnessed that while Grayscale has been experiencing outflows since its conversion into an ETF, BlackRock has capitalized on its robust distribution network among financial advisors and wealth managers to attract substantial assets to its ETF. Early adopters have transitioned from direct ownership of digital assets to BlackRock’s ETF, drawn by its strong market presence. Nevertheless, it is worth noting that although some hedge funds have embraced the new ETFs, institutional investors have been more hesitant, indicating a slower adoption process that may require years to fully materialize.

CONSUMERS STILL POSITIVE

The conference board consumer confidence index rose in May, with the present situation index and expectations index both showing improvements. Consumers are more positive about the current business and labor market conditions, while also expressing a more hopeful outlook for income and job availability in the short term. Nonetheless, it is important to note that despite these positive changes, concerns about a possible recession linger, as inflation expectations and the perceived likelihood of a recession rose slightly. Additionally, consumers remain upbeat about the stock market, with increased expectations of stock price increases. Moreover, although purchasing plans for homes remain low buying intentions for autos and appliances saw some improvement.

UNCERTAINTY REMAINS

Currently, the Federal Reserve has maintained its stance on keeping interest rates steady, citing concerns related to inflation and economic growth. With the personal consumption expenditures price index surpassing the 2% target, officials are hesitant to consider rate cuts at this time. The labor market also plays a critical role in their decision-making process, as recent job growth has been below average. Despite a sluggish first-quarter economic growth rate, recent purchasing manager surveys indicate optimism for the future. Predictions from various economists are mixed, with some anticipating a rate cut by September, while others, such as Goldman Sachs, have adjusted their forecast to later in the year. Federal Reserve Chair Jerome Powell advocates for a gradual approach to rate adjustments, considering the progress in inflation and the overall economic performance. Uncertainties surrounding inflation levels and economic conditions have made it challenging to predict the timing of potential rate cuts. Overall, the financial market remains on edge, closely monitoring the Federal Reserve’s next move.

FUELING UP

Oil prices have increased as major producers are anticipated to uphold production cuts at an upcoming meeting. Concurrently, the onset of the peak summer demand season is expected to elevate fuel consumption, and a result of this, Brent crude and U.S. West Texas Intermediate futures saw a rise in prices. In addition, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) are likely to continue implementing production cuts to bolster prices, further boosting oil prices. Furthermore, the start of the peak demand season in the U.S. during the Memorial Day holiday further supported the increase in oil prices, as more people are expected to travel and boost fuel consumption. And lastly, the concerns about potential disruptions to oil supply in the Middle East due to escalating conflict in the Gaza Strip have contributed to the rise in oil prices. Moreover, looking ahead, investors are eagerly awaiting U.S. crude inventory data and inflation figures this week, which have the potential to influence expectations for Federal Reserve interest rate adjustments and, consequently, oil prices.

DROP IN DEMAND

Last week, mortgage rates rose after a brief decline in May, impacting the demand for mortgages. The average interest rate for a 30-year fixed-rate mortgage with conforming loan balances increased to 7.05%, while points rose to 0.63 for loans with a 20% down payment. This change marked the first increase in four weeks, leading to a decrease in total mortgage application volume by 5.7% compared to the previous week. Both refinance and purchase applications decreased, with total activity hitting its lowest level since early March. Refinance demand dropped by 14% for the week but remained 12% higher than the same week last year, while applications for home purchases fell by 1% and were 10% lower year over year. The limited availability of existing homes for sale has contributed to the challenges buyers face in finding suitable properties within their price range. Mortgage rates increased significantly at the beginning of this week following remarks from Minneapolis Federal Reserve President Neel Kashkari about the need for sustained positive inflation data before considering adjustments to interest rates.