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NOVEMBER 9, 2023

POSSIBLE APPROVAL NEAR

Analysts from Bloomberg have noted that the Securities and Exchange Commission (SEC) is about to review and potentially approve twelve pending Bitcoin exchange-traded fund (ETF) applications, including the BlackRock iShares Spot Bitcoin ETF and the conversion of the Grayscale Bitcoin Trust. The SEC’s recent extension of the deadline for ETF applications until November 8, has widely been seen as a window for potential approvals, and speculation has arisen that the SEC may greenlight multiple ETFs before November 17, with the stipulation that all funds commence trading on the same day. However, it is important to remark that the process entails two stages, as a rule change to allow ETF trading must be sanctioned in addition to the approval of the fund’s registration statement, prior to the launch of any of the pending Bitcoin ETFs. Moreover, the increase in Bitcoin prices is believed to be a reflection of investor optimism surrounding the likely approval of spot Bitcoin ETFs, and it is anticipated that a spot Bitcoin ETF could potentially attract significant institutional investment, with analysts projecting inflows of anywhere between $50 billion to $100 billion over the next five years, which could have a substantial impact on the Bitcoin market dynamics. As a result of the positive sentiment surrounding the prospect of spot ETF approvals, Bitcoin has surged way above the $37,000 level as of 8:00 AM CST.

BOND REVIVAL

Bond prices slumped severely after the pandemic began, but have recently staged a comeback, particularly in Treasury bonds, due to fading concerns about potential Federal Reserve rate hikes. Influential investors like Warren Buffett and Stanley Druckenmiller have remained supportive of the asset class, likely drawn by the prospect of higher yields. These both high-profile investors showed a preference for shorter-duration bills, signaling a possible end to the market rout. Furtheremore, although the bond market has faced a tumultuous period in the last few years, recent weeks have brought about positive momentum, reflected in the upward movement of measures like BlackRock’s iShares 20+ Year Treasury Bond ETF (TLT) and the decline in 10-year Treasury yields. Additionally, investor confidence in the Federal Reserve potentially halting interest rate increments and the appeal of “safe-haven” assets amid concerns about a possible U.S. recession have contributed to the resurgence. This has been evidenced not only through the increased interest of high-profile investors, but also in the surge of interest in bond funds among retail investors.

CLAIMS DROPPED

The latest report from the Labor Department revealed a decline in the number of Americans filing for new unemployment benefits, indicating a relatively stable labor market. The data showed that initial claims for state unemployment benefits fell to 217,000, slightly below the projected 218,000, and while the growth in hiring has slowed down and unemployment has experienced a slight increase, the overall joblessness rate remained historically low at 3.9% in October. This has been reflective of a job market that remains solid, despite some signs of a cooling off. Additionally, the Federal Reserve opted to maintain interest rates at their current levels, acknowledging the resilience and strength of the economy, however, the possibility of further rate increases has not been ruled out. Moreover, it is worth noting that despite a recent increase in continuing claims for unemployment assistance, experts attribute this more to seasonal adjustments rather than a substantial shift in the underlying trend of the labor market. The data indicates that layoffs remain remarkably low, as demonstrated by announced job cuts by U.S. based employers, which fell by 22% last month compared to September, despite a 9% increase from the previous year. Taken together, the current trends suggest an economy that is continuing to show resilience and stability in its labor market, with ongoing positive potential for future improvements.

DOUBLING DEDUCTIONS

A House panel has passed a bill that would temporarily increase the standard tax deduction by $2,000 per person for 2024 and 2025. The bill is intended to provide tax relief from inflation, but critics argue that it would make inflation worse by increasing disposable income. If the bill becomes law, it would benefit most U.S. households, but the benefits would disproportionately go to higher-income households. This is because the standard deduction nearly doubled in 2017 and fewer taxpayers are itemizing deductions. As a result, the majority of taxpayers now claim the standard deduction. Moreover, according to the IRS, 90% of taxpayers opted for the standard deduction for their 2021 taxes. This means that the bill would benefit approximately 130 million households, however, the average tax cut would be much higher for higher-income households. For example, the top 20% of earners would receive an average tax cut of $1,000, while the poorest fifth of Americans would receive an average tax cut of just $30. The bill is now headed to the full House for consideration.

INTERNATIONAL NEWS

In October, China grappled with mounting deflationary pressure when consumer prices dropped by 0.2% and producer costs slumped by 2.6%. This has led to mounting calls for additional stimulus measures to shore up the nation’s economic growth. The consistent weakness in prices has prompted demands for increased support to counteract the deflationary pressures that are threatening various sectors, and while the latest data has yielded a stable offshore yuan and Chinese 10-year government bond yields, it has also raised apprehensions about the nation’s growth recovery. Moreover, despite recent efforts to bolster the economy and stimulate demand for raw materials, this has failed to drive up prices, resulting in squeezed margins for numerous industries. Going forward, China is expected to register a paltry 0.5% Consumer Price Index (CPI) growth for the entirety of 2023, significantly below the government’s annual target, and in light of these circumstances, growing concerns have emerged about the resilience and sustainability of China’s economic rebound.

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