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SEPTEMBER 4, 2023

MARKET CLOSED

Due to today being a federal holiday, Labor Day holiday, the U.S. stock market will be closed.

POTENTIAL APPROVAL

According to a report by JPMorgan, it is more likely that the Securities and Exchange Commission (SEC) would be compelled to approve spot bitcoin exchange-traded fund (ETF) applications from several asset managers. This comes after a federal court ruled that the SEC must review its rejection of Grayscale’s attempt to convert the Grayscale Bitcoin Trust (GBTC) into an ETF. The court found that the SEC’s denial was arbitrary and capricious, and it failed to justify its differential treatment of similar products, specifically futures-based bitcoin ETFs. The court argued that both spot and futures markets carry similar risks of fraud and manipulation. The ruling implies that for the SEC to defend its rejection of Grayscale’s proposal, it would have to retroactively withdraw its previous approval of futures-based bitcoin ETFs, which is deemed unlikely and would be disruptive for the SEC.

STRATEGY FLIPPED

Based on a recent note from Goldman Sachs, hedge funds have changed their approach in the U.S. financial market, as instead of betting against regional banks, they have turned more optimistic and bullish on the broader financial sector. This shift comes as regional bank stocks have rebounded by approximately 20% from their low point in May. Moreover, short positions on larger U.S. banks have also decreased since mid-July, with hedge funds increasingly favoring long positions. Overall, hedge funds now hold net long positions in the U.S. financial services sector, including larger banks, savings and loans, asset management companies, credit services, and investment brokerage firms.

MARKET RALLY VS BOND YIELDS

According to the latest Markets Live Pulse survey, the majority of 331 respondents believe that this year’s US stock market rally is strong enough to withstand higher bond yields. They expect that if 10-year Treasury yields were to climb and hit 4.5%, the losses for the S&P 500 Index would be contained to less than 10%. Additionally, the survey participants anticipate a potential shift from the current positive correlation between stocks and bonds to a negative correlation by the end of the year. The survey also highlights that 59% of investors still view a portfolio consisting of 60% stocks and 40% bonds as a viable investment strategy.

KEY EVENTS HAPPENING THIS WEEK

Monday: Labor Day holiday.

Tuesday: Factory orders report for July.

Wednesday: Mortgage Bankers Association (MBA) reports, U.S. trade deficit report for July, Fed Beige Book, and S&P final U.S. services PMI and ISM services reports for August.

Thursday: Initial jobless claims report for week ending on September 2, and speeches from Philadelphia, Chicago, New York, Atlanta and Dallas Fed Presidents.

Friday: Wholesale inventories and Consumer credit reports for July, and speech from San Francisco Fed President.

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