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OCTOBER 16, 2023


The Securities and Exchange Commission (SEC) has made an important decision by choosing not to appeal a recent ruling that allows Grayscale Investments LLC to convert its Bitcoin trust into an exchange-traded fund (ETF). This development has attracted significant attention from analysts, who are now closely monitoring and eagerly anticipating the next steps in the process. In the upcoming weeks, discussions between Grayscale and the SEC are expected to shed more light on the approval process for ETFs, bringing much-needed clarity to the industry. This milestone achieved by Grayscale carries significant weight and has the potential to pave the way for the first Bitcoin ETF in the U.S. Moreover, with other companies actively pursuing Bitcoin ETFs, the optimism for SEC approval continues to grow steadily.


According to a recent note from Goldman Sachs, global hedge funds swiftly made a strategic move last week, strategically selling off stocks of food, beverage, and tobacco companies. The rationale behind this sudden selling frenzy was the inability of these previously sought-after stocks, often seen as a safe alternative to bonds, to keep pace with the rapidly rising U.S. Treasury yields. Consequently, short bets on consumer staples shot up to a three-month high, signaling one of the highest levels seen in the past five years. Furthermore, U.S. consumer staples stocks have suffered a decline of approximately 10% this year, significantly underperforming in comparison to the soaring government bond yields. This downturn has positioned the consumer staples sector as the weakest performer within the S&P 500 and the most sold U.S. sector, as emphasized by Goldman Sachs’ prime brokerage.


The housing market is undergoing a notable deceleration in home sales due to soaring mortgage rates, which as previously reported, have reached their highest point in 23 years. Consequently, sales of previously owned homes are expected to plummet to levels not seen since 2011. This differs from the previous housing downturn, which occurred after the bursting of the housing bubble in the early 2000s, resulting in a severe recession and numerous foreclosures. The current slowdown is influenced by rising borrowing costs, record-breaking home prices, and a limited supply of homes for sale. Moreover, the rapid increase in mortgage rates has dissuaded all but the most determined buyers, causing home sales to reach their lowest level since January. Furthermore, with mortgage rates predicted to remain elevated, next year’s sales are also expected to remain lackluster, leading to an extended stagnation in the housing market. This downturn in housing may have far-reaching effects, affecting the overall economy and hindering economic growth by reducing expenditure on housing-related products and potentially curbing new construction by home builders, amd while some well-maintained homes in desirable neighborhoods continue to sell swiftly and above asking price, approximately 18% of listed homes saw price reductions in September, indicating a more widespread impact. This challenging market environment is causing sellers to employ various tactics, from hosting open houses and reducing prices to offering incentives to attract buyers. Additionally, affordability has become a pressing concern, as the combined effects of rising mortgage rates and stagnant prices make it difficult for many aspiring homeowners to enter the market. These dynamics may force some individuals to continue renting, potentially leading to a rise in rental costs and undermining efforts to end interest rate increases by the Federal Reserve.


Sovereign bond yields in the euro area havd witnessed an upward trend due to mounting concerns over inflationary pressures, and with persistently high inflation levels, European Central Bank officials have emphasized the need for a restrictive monetary policy to effectively address the issue. Nonetheless, despite facing challenges like a near-recessionary economic environment and multiple interest rate hikes, the labor market in the euro zone surprisingly demonstrated resilience, however, this positive development was overshadowed by prevailing jittery sentiment, resulting in Germany’s benchmark 10-year bond yield rising by 5 basis points to 2.78%. At the same time, Italy’s 10-year bond yields surged to 4.81%, intensifying worries about the country’s financial stability. Furthermore, the widening spread between Italian and German yields reflects diminishing investor confidence in heavily indebted nations within the euro zone, and contributing to this growing yield spread is the approval of Italy’s 2024 budget, which includes revised growth forecasts along with higher deficit targets.


Monday: Speech from Philadelphia Fed President Patrick Harker.

Tuesday: Business inventories report for August, U.S. retail sales and Industrial production reports for September, Home builder confidence index reports for October, earnings reports from Goldman Sachs, Bank of America, Johnson & Johnson (before the market opens), United Airlines (after market closes), and speeches from Fed Gov. Michelle Bowman, Richmond Fed President Tom Barkin and Minneapolis Fed President Neel Kashkari.

Wednesday: Housing starts report for September, Fed Beige Book, earnings reports from Morgan Stanley, Procter & Gamble (before the market opens), Tesla and Netflix (after market closes), and speeches from Fed Gov. Chris Waller, New York Fed President John Williams and Fed Gov. Lisa Cook.

Thursday: Initial jobless claims for week ending on October 14, earnings reports from American Airlines (before the market opens), and speeches from Fed Chairman Jerome Powell, Chicago Fed President Austan Goolsbee, Fed Vice-Chair for Banking Michael Barr, Atlanta Fed President Raphael Bostic and Dallas Fed President Lorie Logan.

Friday: Speech from Cleveland Fed President Loretta Mester.

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