Market Update - October 31st 2024

As strong economic data continues, crypto markets seem unfazed, with positive news fueling the ongoing rally.

At the same time, challenges like significant earnings misses in sectors like home building underscore the complexities of the economic landscape.

This week is a significant one for macroeconomic data releases. Bitcoin hit $72k for the first time since April, bolstered by multiple factors, including U.S. election dynamics, Trump’s growing election prospects, and the recent BRICS discussions, which hinted at potentially using Bitcoin as a global trade payment system. Surprisingly, stronger-than-expected U.S. consumer confidence hasn’t dampened Bitcoin’s rally.

In the broader economic context, U.S. forecasts have been overly bearish in recent months, reflected by the economic surprise index rising above zero for the first time since April. From an investment perspective, the strategy of buying at low points and selling at peaks has continued to deliver solid returns. The jobs component, however, remains a key focus, with the Fed honing in on employment figures now that inflation appears more stable. The JOLTS report, released on Monday, showed a notable miss, indicating potential weaknesses in the job market.

The job market in turmoil ? 

The Beige Book (the report published by the United States Federal Reserve Board) offered insights into Fed perspectives on the economy:

• Consumer spending is mixed, with some regions showing a shift toward budget-friendly purchases.

• Manufacturing has declined in several districts, likely due to cooling consumer demand mentioned above, with the energy and agricultural sectors showing limited growth.

• The labor market has seen slight improvements, with reduced worker turnover and a greater availability of candidates. However, finding workers with specific skill sets remained a challenge, especially in specialized industries. 

• Overall, while the economy remains stable, concerns around mortgage rates and housing affordability linger. However, there is cautious optimism about the long-term economic outlook.

Key data points to watch this week include:

• Consumer confidence – Beat.

• JOLTS job openings – Missed significantly.

• ADP employment – a noisy figure with little connection to payrolls data, but came in well above expectations

• 3Q GDP – Marginally missed at 2.8% vs expectations of 2.9%. Core PCE came in above expectations at 2.2%, but not enough to warrant alarm that inflation is a problem again.

• Non-farm payrolls – Predicted 100K increase, influenced by recent weather events (hurricanes) and strikes. Weak hiring likely meant the unemployment rate rose to 4.2%, from 4.1% - this month and the next are likely to be skewed by election hiring too.

• ISM Manufacturing PMIs & Prices Paid - likely to remain in recessionary territory at 47.

The DXY remains strong, which has traditionally impacted Bitcoin inversely, though this relationship appears less consistent currently.