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SEPTEMBER 28, 2023

PUSHING FOR REGULATIONS

The need for comprehensive regulations in the crypto industry has been underscored by high-profile voices like Coinbase, prompting the “Stand with Crypto” movement’s push for clearer guidelines in Washington. This movement specifically addresses the gaps between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), and it emphasizes the need for clear rules as the U.S. lacks regulatory framework while 83% of the G-20 countries have already established guidelines. Meanwhile, SEC Chairman Gary Gensler’s view on cryptos remains as concerning as he highlights the potential for fraud and manipulation in the crypto market, particularly in decentralized finance (DeFi) platforms and initial coin offerings (ICOs). Nevertheless, the crypto industry believes that the SEC’s approach to regulating crypto has been hostile and punitive, while the lack of regulatory clarity hinders innovation and job creation.

UNCERTAIN ECONOMIC DATA

The possible U.S. government shutdown threatens to delay key economic data publication, testing the trust of policymakers and investors in less-regarded third-party indicators. Without crucial figures like the Labor Department’s employment report and the Commerce Department’s inflation gauge, attention shifts to data from private-sector sources and alternative indicators such as business activity gauges from the Institute for Supply Management, private payrolls from ADP Research Institute, and existing-home sales from the National Association of Realtors. However, while these have played valuable roles in guiding policy decisions in the past, their reliability is often seen as less than the gold-standard data provided by government agencies. Consequently, the absence of reliable data raises concerns as missteps in policy decisions could potentially push the economy into a recession, posing a challenge for the Federal Reserve’s “data-dependent” approach. Finding suitable substitutes for the quantity and quality of gold-standard data proves difficult, and this combined with other economic factors like labor unrest and rising energy prices further complicates the decision-making process for the Fed during their upcoming meeting.

SLIGHT RISE

Jobless claims in the US rose slightly in the week ending Sept. 23, but the increase was smaller than economists had anticipated. The number of claims reached 204,000, just 2,000 more than the revised level of the previous week. Economists had predicted around 215,000 claims. The 4-week moving average decreased to 211,000, indicating a positive trend. Continuing claims went up by 12,000, reaching 1.67 million, which was slightly lower than expected. During a recent speech, Federal Reserve Chairman Jerome Powell acknowledged that although the job market remains tight, there are signs of improvement. The central bank is focused on creating more job opportunities to combat high inflation.

POTENTIAL HIGH INCREASE

According to researchers at Bank of America, whether the 10-year Treasury yield reaches 5% depends on investors’ confidence in the economy’s growth and the Federal Reserve’s decision to keep interest rates high for a longer period. It is worth noting that the current yield is approaching levels witnessed before the financial crisis, specifically between 2004 and 2006. However, achieving the 5% benchmark is contingent not only on improved economic fundamentals but also on a strengthened belief in the future outlook. If these conditions are met, there is a possibility of a steeper yield curve, which could bring the 10-year Treasury yields closer to 5%. Notably, the Federal Reserve Bank’s measure of long-term bond investor compensation recently turned positive for the first time since June, signaling higher expected rates. Although the current spread between short-term and long-term yields remains flat, a return to previous levels could potentially drive the 10-year yield close to 5%. While the baseline is a 10-year yield of approximately 4%, experts recommend implementing hedging strategies to prepare for potential yield increases.

INTERNATIONAL NEWS

Economic confidence in the Eurozone continues to decline for the fifth month in a row, casting a shadow on the region’s future prospects. The European Commission’s index, which measures sentiment in the economy, fell to 93.3 in September from the previous month’s revised figure of 93.6. This decline was mainly driven by a significant drop in consumer confidence, although there was a slight decrease in the services sector and some improvement in the industry. Moreover, recent indicators for the third quarter suggest that the private sector in the Eurozone, as well as its largest economies, may be experiencing a contraction. Nonetheless, despite these economic concerns, the European Central Bank chose not to raise interest rates, as inflation remains below the target rate of 2%, and it is clear that policymakers intend to maintain the current deposit rate of 4% for the foreseeable future.

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