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SEPTEMBER 11, 2023

INVESTORS FRENZY OVER ETP

The potential approval of a bitcoin exchange-traded product (ETP) by the Securities and Exchange Commission (SEC) has stirred up excitement among investors, who have been reaping the rewards as the price of bitcoin and the value of the Grayscale Bitcoin Trust (GBTC) begin to converge. Nonetheless, as investors celebrate the recent court decision pushing the SEC to reassess its rejection of GBTC’s application, it is important to acknowledge that there are still obstacles to navigate before the conversion to an ETP becomes a reality. One crucial factor is the SEC’s response within the 45-day window, which might necessitate adjustments to GBTC’s application to align it with other spot bitcoin ETFs. In addition, the timing and volatility of the bitcoin market need to be carefully considered. Moreover, although the narrowing of the GBTC discount is promising, the need for confidence in bitcoin’s value remains paramount for investors aiming for substantial returns.

POTENTIAL NEGATIVE GROWTH

Apartment rents have been cooling off significantly for the past few months and are now on the verge of turning negative compared to last year. According to real estate tech platform RealPage, rents in August were only 0.28% higher than the previous year, a sharp contrast to the 11% annual growth seen before. This decline is not due to a recession, as apartment occupancy rates remain healthy at around 94%. The main issue lies in the abundance of new apartment construction, with over 460,000 units completed this year alone. This surge in supply has given renters more options, resulting in landlords having less pricing power and lower rental prices. Several local markets, including Austin, Phoenix, Las Vegas, Atlanta, and Jacksonville, have already experienced negative rent growth. However, the Midwest and Northeast regions continue to see strong rent increases, with the exception of New York, where the market has been affected by a significant increase in supply. Looking ahead, rental supply is projected to remain high throughout next year, potentially causing rents to decline further until 2025, nevertheless, as the rate of construction has slowed down due to financial challenges, rents may partially rebound by 2026.

POSSIBLE FALL ON SPENDING

According to a recent Bloomberg’s Markets Live Pulse survey, the U.S. consumer is expected to experience a decline in personal consumption in early 2024, marking the first quarterly contraction since the pandemic began. This projection, however, contradicts the prevailing optimism that has been driving the U.S. stock market throughout the summer. If consumer spending contracts, it could result in further drawbacks for stocks, which have already decreased from their previous highs. However, for now, the U.S. economy is showing signs of acceleration, with forecasted growth in the third quarter attributed to increased household spending. Nonetheless, concerns remain about the sustainability of this consumption surge, as it may be driven by temporary factors such as summer entertainment spending. On the other hand, it is worth noting that the robust job market in the U.S. has so far bolstered household spending despite rising prices, leading certain economists to push back or even dismiss recession expectations. As a case in point, economists at Goldman Sachs Group Inc. anticipate continued strength in consumer activity throughout 2024, supported by consistent job growth and wage increases that outpace inflation.

INTERNATIONAL NEWS

The European Commission has announced that the euro zone economy is expected to experience slower growth than previously predicted due to high inflation affecting consumer demand and Germany slipping into a recession this year. The Commission’s interim forecasts show that GDP is projected to expand by 0.8% in 2023 and 1.3% in 2024, compared to earlier forecasts of 1.1% and 1.6%, respectively. Weakness in domestic demand, particularly consumption, is contributing to the slower growth, despite declining energy prices and a strong labor market. Furthermore, the Commission also forecasts higher consumer inflation of 5.6% in 2023 and 2.9% in 2024, exceeding the European Central Bank’s target of 2.0%. This situation has led to credit becoming more expensive, impacting the growth outlook. Moreover, the report highlights a slowdown in economic activity, with concerns regarding industry and diminishing momentum in services. Nonetheless, it is worth noting that although Germany is expected to contract by 0.4% this year, other countries in the euro zone such as France and Spain are forecasted to have faster growth in 2023 than previously anticipated.

KEY EVENTS HAPPENING THIS WEEK

Monday: Consumer inflation expectation report, and 3-Month, 6-Month Bill and 3 Year Note auctions.

Tuesday: NFIB business optimism index report for August.

Wednesday: Mortgage bankers association (MBA) reports, and Consumer price index (CPI) report for August.

Thursday: Initial jobless claims report for week ending on September 9, and Producer price index (PPI) and U.S. retail sales reports for August.

Friday: U.S. import prices, Industrial production and Consumer sentiment reports for August.

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