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NOVEMBER 20, 2023

UPWARD TREND

AI-focused tokens have experienced a surge in value following significant developments in key AI companies and the growing excitement surrounding the long-term prospects of the emerging technology sector.This surge was driven by the latest announcement from tech entrepreneur Elon Musk in which it was revealed that shareholders of X Corp would hold a 25% stake in the new AI venture xAI, leading to heightened enthusiasm. In addition, reports of Sam Altman, founder of ChatGPT developer OpenAI, potentially returning to the board after being ousted last week, strengthened positive sentiment for the AI token sector. Furthermore, despite uncertainty surrounding corporate developments, AI tokens, including Bittensor’s TAO and Ocean Protocol’s OCEAN, experienced significant gains, outperforming bitcoin and other major cryptocurrencies. The sector as a whole saw an almost 8% increase, marking substantial growth for crypto traders. Also, small-cap AI token, ImgnAI’s IMGNAI, saw a notable 40% surge, indicating the growing interest and potential within the AI token sector. Moreover, the recent success and increasing attention received by AI tokens align with the growing narrative of a potential bull run in the coming years, akin to the rise of gaming applications and decentralized finance (DeFi) tokens in the 2020-2022 bull market cycle.

GOOD BUT STILL UNCERTAIN

Last week, investors drove up bank stocks, riding on a market rally fueled by optimism that the Federal Reserve would stop raising interest rates and the U.S. economy would undergo a “soft landing.” The surge in stock market prices was triggered by inflation data indicating a quicker than expected slowdown in pricing pressure, resulting in significant gains in major banking industry indexes. Nontheless, it is important to highlight that although these indexes have been performing well to the point of their best performance in almost three years experts are still cautious about the future because banks are going through a lot of pressure as making profits is still very challenging due to high interest rates, expensive deposits, and challenges for borrowers. Also, new rules proposed by U.S. regulators can make it even harder for some banks to keep doing well in the future.

MORTGAGE-FREE RISING TREND

Despite historically high mortgage rates and home prices that have deterred many potential homebuyers, a record number of Americans now own their homes without a mortgage, reaching a near 40% record, with many of these mortgage-free homeowners being at retirement age. The share of homes without a mortgage has increased by 5% between 2012 and 2022, indicating a significant rise, partly due to historically high mortgage rates and home prices that have hindered many Americans from entering the housing market, leading them to pursue other home ownership strategies. Moreover, many individuals have been able to transition to shorter-term loans at reduced rates, allowing them to own their homes outright. The rate of mortgage-free homes is particularly high in states like Florida and Texas, with many homeowners leveraging the lower tax advantages in these regions. Data reveals that from the onset of the pandemic in 2020 until 2022, 29% of new homes built in the US are in Florida and Texas, and this is part of the “biggest migration” in a generation. Texas and Arizona have also experienced an increase in homeowners, while West Virginia has the highest percentage of mortgage-free homes, comprising about 53% of the total homeowners in the state, with the median price being the country’s lowest at $157,498 in October. This data points to a significant number of individuals transitioning to mortgage-free homeownership, which is seen as an attractive proposition given current market conditions.

TREASURY MARKET OUTLOOK

Investors are closely monitoring the Treasury market to gauge if its recent uptrend will continue, with an upcoming bond auction set to be the litmus test for the market’s future trajectory. The market’s rally has gained momentum due to expectations of a shift in the Federal Reserve’s interest rate policy, prompted by indicators of a slowdown in growth and decreasing inflation. These factors have steered investors towards US government bonds, ending a series of monthly declines and ushering in a substantial 2.6% gain in November, the largest increase since March. However, the resultant drop in yields to levels not seen in recent months has cast doubt on the durability of this trend. MoThe impending 20-year bond auction, historically struggling to attract significant interest, has compounded this uncertainty. Nevertheless, while Treasury’s decision to downsize the auction has assuaged some supply concerns, questions linger about demand for these bonds, and despite concerns, some investors believe that supply will not be a pressing issue.

KEY EVENTS HAPPENING THIS WEEK

Monday: U.S. leading economic indicators report for October, and speech from Richmond Fed President Tom Barkin.

Tuesday: Existing home sales report for October, and Minutes from the Federal Reserve’s meeting of the Federal Open Market Committee (FOMC) held on October 31 and November 1.

Wednesday: Mortgage Banker Association (MBA) and initial jobless claims reports for week ending on November 18, final consumer sentiment, Michigan consumer and inflation expectations, and jobless claims 4-week average reports for November.

Thursday: Market closed due to the Thanksgiving holiday.

Friday: S&P flash U.S. services and manufacturing PMI reports for November.

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