BTC: Positive Momentum Building, Despite Fake ETF News
BTC Still above 28K = Pent-up interest
BTC’s ability to remain above the 28K level signifies pent-up interest in the cryptocurrency. BlackRock CEO Larry Fink acknowledged this pent-up interest, stating that clients around the world are expressing the need for crypto. While he couldn’t provide specific details or comment on the application’s status, Fink’s remarks highlight the growing demand for cryptocurrencies.
Very Bullish: Investors Long Positioning Ahead for ETF Approval
Investors recognize that BTC ETF approval has not yet been fully priced in, despite the recent bounce from 27K to 30.7K. This is why BTC is holding above 28K, as investors are keen on not missing out on further upside potential once the approval is actually granted. Market dynamics often exhibit a short-term memory, and it is likely that the current episode will be forgotten in the coming weeks, leading BTC to maintain higher levels.
No, Fake ETF News Won’t Affect SEC Approval
The fake ETF news circulating on platforms like Twitter is unlikely to have an impact on SEC approval. The Securities and Exchange Commission (SEC) is primarily concerned with regulatory aspects and does not base its decisions on BTC price action or social media speculation. Therefore, while such news may create temporary noise in the market, it is unlikely to influence the SEC’s approval process.
US Equities
US Equity — Positive Sentiment with Supportive Factors
Looking at the current equity market positioning themes, S&P 500 futures saw balanced flows with profit taking on shorts in the first half of the week, followed by new short positions on Thursday. Net positioning remains around $27 billion net short, comparable to the previous week. Despite the large swing, current positioning is not overly extended and is in the bottom decile of positions seen in the past three years. ETF inflows have been picking up recently. Similarly, Nasdaq flows were mixed but the swing to net bearish positions appears to have halted and even pulled back slightly.
The sentiment towards US equities is turning positive, supported by various factors. Strong macro data, including strong payrolls, in-line CPI, and the FOMC signaling a continued pause in rate hikes, are contributing to the positive sentiment. Additionally, expectations for third-quarter earnings support the view of above-consensus EPS growth through 2024. The US is considered a “safe haven” during geopolitical risks, further boosting the outlook for US equities. Institutional funds are showing positive flows into the Tech and Growth sectors, suggesting that these areas may lead any rally towards the year-end, with a rotation more likely in 2024. Despite the challenges posed by significant event risks, maintaining focus on the good macro conditions remains important.
US Equity — Equities Higher Amid Volatile Yields
US equities had a positive week, experiencing higher prices, while yields in the rates market exhibited volatility. The S&P 500 (SPX) rose by 0.5%, with notable performance from sectors such as Energy (+4.5%), Utilities (+3.6%), and Real Estate (+2.3%). The rates market presented a surprise as real and nominal yields decreased, while breakevens increased. Stress metrics are indicating some concerns, shining a brighter light on potential risks. However, despite the mixed market dynamics, the US economy remains strong, showing no signs of an upcoming recession. Q3 GDP growth is tracking close to 4%, the economy added 336k jobs in September, and the manufacturing sector appears to be recovering from contraction. The Federal Reserve has communicated that there will be no further rate hikes for now, considering the rise in longer-term Treasury yields. While the possibility of a preemptive rate cut by the Fed could reduce the likelihood of a recession, inflation remaining above the 2% target may limit the opportunity for rate reductions until activity data shows clear signs of deterioration. Notably, there have been encouraging signs of core prices accelerating and unexpected acceleration in shelter prices, potentially reflecting a rebound from previous softer readings.
APAC Region
Investor Preference for “Value” and “Low Risk” Stocks
Investors in the Asia-Pacific (APAC) region are gravitating towards “Value” and “Low Risk” stocks for various reasons. The region has witnessed a significant outflow of funds from emerging market (EM) funds, especially China funds, as investors express pessimism. This pessimism stems from concerns about consumption recovery and the anticipation of potential policy changes from China’s Third Plenum. Consequently, investors are actively seeking out value stocks that possess long-term potential, despite short-term market sentiment.
Factors Driving the Preference for “Value” and “Low Risk” Stocks
Overall, the preference for “Value” and “Low Risk” stocks in the APAC region reflects investors’ cautious approach in light of concerns about consumption recovery, policy changes, and market sentiment. They are actively seeking opportunities in stocks that offer long-term potential and stability amidst uncertain market conditions.
