NOTABLE RISE
Although as of 8:00 AM CST, Bitcoin was trading just above $68,000, it is worth highlighting that earlier this morning, the cryptocurrency came close to $70,000. The increase was fueled by a surge in investments in exchange-traded funds for digital assets and positive outlook regarding U.S. regulations. Bitcoin ETFs witnessed nearly $2.4 billion in net inflows over a six-day period leading up to October 18, with expectations of more favorable regulations after the November 5 presidential election. The stark divergence in views on cryptocurrency between the two leading candidates, with Trump considered pro-crypto and Harris backing a regulatory framework, is a key factor influencing market trends, and as a result market experts are closely monitoring the election. Moreover, it is worth noting that the recent price surge marks Bitcoin’s strongest weekly performance in over a month.
POSSIBLE SLOWDOWN
According to Goldman Sachs strategists, there is a forecast of a slowdown in the U.S. stock market performance over the next decade, with experts predicting a modest 3% annual return on the S&P 500 Index. This projection marks a considerable decline from the robust 13% returns observed in the previous decade. Additionally, there is a strong likelihood that the benchmark index will lag behind Treasury bonds and potentially struggle to keep up with inflation rates. As a result, investors are being advised to anticipate lower returns on equities in the upcoming years. The recent uptrend, primarily fueled by a surge in technology stocks, is anticipated to become more diversified, potentially leading to broader market gains. Furthermore, the performance of corporate America is deemed crucial to the future success of the stock market, as it is expected to have a more significant impact than factors such as the results of the upcoming U.S. presidential election or decisions made by the Federal Reserve.
UNCHARTED WATERS
Experts are currently anticipating that Benchmark Treasury yields could reach 5% in the next six months, and this could be due to concerns about inflation and U.S. fiscal spending. It is worth noting that this forecast differs from the general expectation of lower yields following the recent rate cut by the Federal Reserve. Moreover, the rise in yields is attributed to an increase in Treasury bond supply and reduced demand due to the Federal Reserve’s efforts to shrink its balance sheet. Thus, as a precaution, investors are being advised to prepare for higher long-term Treasury yields as part of their investment strategy. Furthermore, it is important to remark that the possibility of a recession is also being considered. Overall, the bond market’s future is uncertain, with various factors influencing the direction of Treasury yields in the coming months.
ELECTRIFYING GAINS
It has been revealed that the Utilities sector is experiencing a significant uptrend this year, with the S&P 500 Utilities ETF (XLU) leading the charge by achieving a remarkable 29% increase, surpassing the broader market performance. This surge can be attributed to the increasing demand for electricity driven by the electrification boom, particularly fueled by tech giants’ needs for AI data centers and electric vehicles. In addition, it is worth highlighting that as tech companies such as Microsoft and Amazon ramp up their electricity consumption, utilities are under increased pressure to meet this growing demand. Moreover, as projections suggest that electricity will become the primary global energy source by 2050, thus, energy companies are currently delivering significant returns. In fact, independent power producers like Vistra Corp (VST) have seen exceptional growth, capitalizing on the shift in power demand and favorable industry trends. Furthermore, analysts at JPMorgan anticipate that IPPs will continue to prosper due to rising power demands, manufacturing trends, and data center developments, ultimately creating opportunities for long-term profitability.
KEY EVENTS HAPPENING THIS WEEK
Monday: U.S. leading economic indicators report for September, and speeches from Dallas Fed President Lorie Logan, Kansas City Fed President Jeff Schmid and San Francisco Fed President Mary Daly.
Tuesday: Speech from Philadelphia Fed President Patrick Harker, and earnings reports from General Motors, Lockheed Martin and Verizon (before market opens).
Wednesday: Existing home sales report for September, Fed Beige Book, speech from Fed Governor Michelle Bowman, and earnings reports from AT&T, Coca-Cola, Boeing (before market opens), Tesla and IBM (after the market closes).
Thursday: New home sales report for September, S&P flash U.S. services and manufacturing PMI reports for October, initial jobless claims report for week ending on October 19, speech from Cleveland Fed President Beth Hammack, and earnings reports from UPS, Southwest Airlines and American Airlines (before market opens).
Friday: Durable-goods orders and durable-goods minus transportation reports for September, and final consumer sentiment report for October.
