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NOVEMBER 6, 2023

OUTPERFORMANCE

The number of blockchain addresses holding at least $1,000 worth of bitcoin has surged to a record high of 8 million. This significant increase is a positive sign for bitcoin as it indicates a growing trend of monetization for the cryptocurrency. Monetization refers to the creation of income potential from an asset that does not generate revenue, and having a large number of addresses with substantial bitcoin holdings signifies a remarkable amount of purchasing power within the market. This record-breaking figure coincides with a notable 25% increase in bitcoin’s value over the past four weeks, amisdst the speculation surrounding the potential approval of bitcoin exchange-traded funds by the U.S. Securities and Exchange Commission (SEC), which has sparked optimism and encouraged extensive trading activity by major investors on the Bitcoin blockchain. Moreover, in other crypto news, XRP has experienced a remarkable spike in value, surpassing other major cryptocurrencies in terms of performance. Within the last 24 hours, XRP’s value rose by 11%, driven by spot trading and positive developments for Ripple, which obtained key approvals to operate and offer services in Georgia and Dubai.

DECREASING TREND

Gasoline prices have been steadily decreasing and are now below the national average of $3.50 per gallon, a pattern not seen since February. According to AAA data, the average price of gasoline currently stands at $3.45 per gallon, which is a 9% drop compared to last month. Even in California, where prices are typically the highest, there has been a significant decrease of $0.85 per gallon in the past 30 days, resulting in a state average of $5.21 per gallon. As for this week, experts believe that prices will continue to decline by an additional $0.05 to $0.10. This downward trend can be attributed to a decrease in seasonal demand along with refineries coming back online after maintenance, boosting the overall supply of gasoline. However, it is important to keep an eye on the oil market, as oil prices play a significant role in determining gas prices, accounting for around half of what we pay at the pump, and any escalation in the conflict between Hamas and Israel could negatively impact prices. Moreover, looking ahead, as the summer season approaches with longer days and better weather, it is expected that gas prices may gradually rise again, especially with the switch to summer blend gas and an increase in travel activity.

SHORT-LIVED RALLY

Jean Boivin, head of research at BlackRock Inc., warns that any year-end rally in stocks may be short-lived due to the failure of equities to fully reflect expectations of persistently higher interest rates. Although Treasury yields have surged, the impact on the stock market has been minimal so far. Boivin anticipates further downward adjustments in stocks, but sees a more favorable environment emerging in 2024 once the correction is complete. Since July 2022, his team has maintained a cautious stance on developed-market equities, citing stagnant global growth and the prevailing higher-rate environment. However, a significant economic boost or sustained decline in rates could shift their outlook on stocks towards a more optimistic stance. Despite the substantial gains in the S&P 500 this year, primarily driven by tech giants, Boivin notes that the equal-weighted S&P 500 index, which excludes these tech behemoths, better reflects the challenging macroeconomic conditions as it remains flat for the year. Savita Subramanian, a strategist at Bank of America Corp., shares similar views, emphasizing that long-term growth expectations for the broader S&P 500 index (excluding tech giants) are currently at all-time lows. However, she suggests that the bank’s indicator of recommended stock allocation is inching closer to a “buy” signal, indicating a potential 15.5% price return for the S&P 500 over the next 12 months.

INTERNATIONAL NEWS

According to an analysis conducted by Bloomberg Economics, it appears that Britain may already find itself in the midst of a recession as there seems to be a 70% probability of a contraction occurring in the third quarter. This economic downturn is attributed to the combination of soaring interest rates and increasing unemployment, which in turn has caused households to adopt a more cautious approach towards their spending habits.  The research conducted by Bloomberg economists Dan Hanson and Andrej Sokol suggests a 52% likelihood of a mild recession occurring in the second half of this year, as defined by two consecutive quarters of economic contraction. In a published note, Hanson noted that although it may be a close call between stagnation and a mild contraction, the odds marginally favor the latter. What’s more, there is a risk that the decline in output may be sharper than initially anticipated. Furthermore, many other economists have also predicted a recession in the UK, as surveys indicate a decline in output during the second half of the year and a substantial decrease in job vacancies. Moreover, it is worth highlighting that a recession could heighten the possibility of the Bank of England adjusting its position on reducing interest rates, especially if there is a significant decline in inflation rates. Furthermore, as a result of a loosening labor market, consumers may exhibit increased caution towards spending, even though projections indicate their real incomes will rise throughout the winter. The September money and credit data from the Bank of England supports this notion, revealing that households are saving more than they have in recent times.

KEY EVENTS HAPPENING THIS WEEK

Monday: Federal Reserve senior loan survey report for October, and speech from Fed Gov. Cook.

Tuesday: U.S. trade deficit and Consumer credit reports for September, earnings reports from Biogen, Under Armour, Warner Bros. Discovery, Walt Disney, Lyft, MGM Resorts, and speeches from Fed Vice Chair for Supervision Barr and Fed Gov. Waller.

Wednesday: Wholesale inventories report for September, Fed Chair Powell delivers opening remarks, earnings reports from Uber, Lucid, Rivian, and speeches from Fed Gov. Cook, Fed Vice Chair for Supervision Barr speaks, and Fed Vice Chair Jefferson.

Thursday: Initial jobless claims for week ending on November 4, and Fed Chair Jerome Powell on panel at IMF.

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