SVET Markets Weekly Update (November 6–11, 2023)
On Week 45, the Nasdaq, despite a sudden surge on Friday, lingered in the 13.5K-13.8K zone due to a technical correction and bulls’ hesitations about the direction of the Fed’s policy after Powell’s commentaries switched back to a hawkish mood. Meanwhile, BTC entered into an accumulation mode below $38K after closing the previous week above 36K.
On Monday, Nasdaq remained stagnant following a strong week and within its key resistance zone of 13K-13.5K. Bulls believe the Fed’s rate hikes are over and await corporate results. Tech and healthcare led the gains, while real estate lagged. Apple, Microsoft, Amazon, and Nvidia rose, while Tesla and Berkshire Hathaway fell. Fed officials’ speeches this week will be closely watched for clues about future rate moves. BTC holds near 35K, while some coins, including MATIC, AVAX, and DOGE, showed notable increases as some traders’ attention switched to large cap alts.
Venezuelan stocks (IBC Index) nearly 6x in value (to 61K from 15K) this year due to soaring inflation and a falling bolivar.
One unappreciated consequence of inflation is the rapid rise of local stock markets. This happens because investors view investing in equities as a safe haven or a way to protect their wealth against the eroding effects of inflation. This is because, historically, stocks have demonstrated the potential to outpace inflation and provide returns that can help investors maintain or increase their purchasing power.
Argentina (inflation to date: 119%; stocks index rise to date: 321%) and Venezuela (303%; 579%) have experienced significant inflation in recent years but their stock markets valuation grew even faster. However, not everyone in these countries has easy access to the stock market. Stock market participation is restricted to a small minority of investors who have the financial means and access to brokerage services.
As a result, the majority of the population have limited options for protecting their wealth against inflation. As a result, many resort to investing in foreign currencies like the US dollar or, increasingly, in cryptocurrencies as alternatives.
Investor Charlie Munger voiced his apprehension over Bitcoin’s surge in value, citing Adam Smith’s economic principles that stress “the importance of individuals taking better care of their own property than that of others. Also, Munger cautioned against disrupting the established financial system with novel currencies like Bitcoin, comparing it to ‘throwing a “stinky marble” at a long-standing recipe that works well for many people’.
The growing gap between generational understanding of finance and economy and their role in improving our civilization is becoming increasingly apparent.
BabyBoomers, in their 60s and 70s, still adhere to the belief in the transformative power of individual ‘self-improvement,’ which, after numerous Darwinian iterations, would ultimately lead to the emergence of a group of ‘super-homo’ who would collectively assume the role of Earth’s stewards, guiding humanity towards a brighter future defined by their ‘ethical’ intuitions.
On the other hand, millennials and the affiliated Gen-Z have, through their interactions with boomers, concluded that these notions are utter nonsense, rooted in medieval theories that would regress us to the most catastrophic periods in human history when such ‘inspired’ shepherds manipulated the destinies of millions like pawns on a chessboard. In response, they propose technology-based solutions driven by algorithmic and mathematical consensus, ensuring timely and effective decision-making for large populations.
Presently, most boomers and their Gen-X allies in power recognize the threat that technology and mathematics-based governance mechanisms pose to their (and their numerous siblings’) personal power. Consequently, we are entering an era of ‘glove-off’ battles where the most intelligent and technologically adept individuals are labeled threats to ‘law and order’ and dealt with accordingly.
This situation is exacerbated by a deep divide within the Boomer generation, splitting them into two opposing camps. One camp advocates for perpetual economic and social globalization based on the principles of ‘universal humanitarian law,’ leading to the gradual erosion of national, ethnic, and social distinctions, the dissolution of country borders, and the establishment of a World Government led by the most ‘advanced’ nations.
This faction is countered by the elites of the least economically developed nations among the Boomers, who vehemently oppose relinquishing any of their authority over their local, suppressed populations to some form of ‘human rights’ enthusiasts from other continents. They enjoy widespread support from the local, impoverished, and disillusioned segment of the population.
These two factions within the Boomer generation are now entering the concluding phase of their lives and are determined to make a ‘last stand’ against their opposing and deeply despised counterparts, regardless of the cost to the rest of us, who are expected to ‘shut up, serve, and obey’.
In this unprecedented new environment, we — boxed between those two monstrous enraged dinosaurs — must all carefully consider our personal destinies, particularly our current inability to oppose the boomers’ indiscriminate and unsubstantiated application of brutal force to intimidate us into submission.
This is a different Earth, and this is a different Game.
On Tuesday, Nasdaq rose for the seventh consecutive day, its longest winning streak in two years. Amazon, Apple, Meta, and Tesla all rose. Microsoft reached its all-time high. Energy stocks were the biggest underperformers, falling on lower oil prices. Meanwhile, BTC traders attempted to overcome the 36K barrier, which resulted in a 1K price increase on the hourly graph. Technical formations remained bullish, but major resistance zones ahead and low volumes undermined rising momentum.
The logistics industry is exhibiting signs of resurgence, as evidenced by the Logistics Managers Index (LMI) climbing to 56.5, up from 45 in July. This upward trajectory, according to analysts, suggests a gradual yet consistent expansion of the economy over the past three months. The logistics sector is reportedly capitalizing on an ongoing supply boom, which has resulted in lower supply costs and stimulated job creation. However, this LMI surge is primarily attributed to increased inventories, which could be a consequence of seasonal fluctuations and should not be construed as an unequivocal indicator of a broader shift towards robust economic growth.
The Helsinki Stock Market Index (HEX) is a major stock market index that tracks the performance of the Finnish stock market. The index is a market value-weighted index, and it consists of all the stocks listed on the Helsinki Stock Exchange. The index began with a base of 100 on December 31, 1985. The major components of the index include companies from various sectors such as oil and gas refining and marketing, industrial machinery, electric utilities, diversified banks, and communications equipment.
The drop in the Finnish market index (HEX, Helsinki) by more than 11% in 2023 can be attributed to a combination of factors, both domestic and international. This analysis provides insights into the key drivers behind this decline:
Energy Crisis: One of the significant factors contributing to the market index drop is the global energy crisis. Energy prices, especially fossil fuels, have surged in 2023, affecting various industries that rely heavily on energy, such as manufacturing and transportation. This has led to increased operational costs, reduced profit margins, and general economic uncertainty.
Sudden Break of Relations with Russia: The abrupt deterioration of relations with Russia has had adverse effects on the Finnish economy. Russia has historically been a significant trading partner for Finland, and any disruptions in this relationship can impact various sectors of the Finnish economy. Trade restrictions, economic sanctions, or geopolitical tensions can hinder business operations and trade, leading to decreased market performance.
Aggressive Policy of the Finnish Central Bank: The aggressive policy of the Finnish Central Bank, characterized by a substantial increase in interest rates to more than 9%, can have a severe impact on the financial markets. Higher interest rates can lead to reduced borrowing, increased borrowing costs for businesses, and decreased consumer spending, ultimately affecting economic growth and corporate profitability.
Air Transportation (Finnair Oyj): The aviation industry is highly sensitive to energy prices, and it has also been affected by reduced demand due to global uncertainties and travel restrictions.
Pharma (Oriola Oyj): The pharmaceutical sector may have been impacted by increased production costs and supply chain disruptions, which can affect revenue and profitability.
Real Estate (Yit Oyj): Yit Oyj, with significant activity in Russia, may have faced challenges due to geopolitical tensions, affecting its business operations and profitability.
Tech/Media (Sanoma Oyj): Tech and media companies may have been influenced by changes in advertising budgets, consumer behavior, and economic uncertainties.
Best Performers (Uponor Oyj): Companies providing energy efficiency solutions, like Uponor Oyj, have likely benefited from the energy crisis as organizations and consumers seek ways to reduce energy consumption and costs.
Expectations for the Future: we expect a reversal in the index’s performance in the near future for several reasons:
As the global energy situation improves and energy prices stabilize, it could alleviate some of the pressure on industries heavily reliant on energy.
Lower inflation can lead to a reduction in Central Bank interest rates, potentially stimulating economic growth and investment.
Businesses are likely to adapt to the new geopolitical landscape and seek new markets to offset losses due to the strained relationship with Russia.
In conclusion, the Finnish market index’s decline in 2023 can be attributed to a combination of domestic and international factors, including the energy crisis, geopolitical tensions with Russia, and aggressive monetary policy. The performance of specific industries and companies within the index was also affected. The expectation for the future is that the index may start to reverse as these factors evolve, offering potential opportunities for recovery and growth in the coming months. However, economic and geopolitical uncertainties may continue to influence the market’s performance.
Orange juice prices have increased by 89.44% since the beginning of 2023, and there are several reasons for this surge.
Regionally, two of the most important producers of orange juice are Brazil and the United States, which constitute some 85% of the market. In the U.S., the states of California, Florida, and Texas produce the bulk of the country’s oranges. The current crisis in Florida’s orange growing areas has been a key factor in the recent orange juice rally.
Brazilian growers have also been facing some weather-related headwinds. As a result, the 2023/2024 growing season may not be as bountiful as the 2022/2023 growing season, which is likely why orange juice prices continue to rally.
The US orange crop has been ravaged by infestations and extreme weather intensified by global heating, which has led to a decrease in production and a rise in prices. Last year, Florida, which produces more than 90% of the US’s orange juice supply, was hit by Hurricane Ian, Hurricane Nicole, and freezing conditions in quick succession, devastating orange producers in the Sunshine State. Producers also battled an incurable citrus greening infestation that is spread by an invasive insect, rendering fruit unusable.
With supplies hurt by storm and insects, the United States is increasingly importing from international markets like Brazil. The US will increasingly have to depend on imports from Brazil, which accounts for around one-third of global output, as well as neighboring Mexico. Indeed, with the US importing more orange juice than it has been producing domestically in recent years, many believe South America’s biggest economy could hold the key to the direction of orange-juice prices in 2023
On Wednesday, Nasdaq flattened out, recording its longest winning streak in two years, as the Dow closed in the red. Real estate and tech outperformed, while utilities and energy lagged behind. eBay’s earnings outlook missed estimates, and Lucid Group changed its production forecast. Meanwhile, BTC and ETH remain stalled below 36K and 1.9K, respectively. Also, SOL, MATIC, ADA, XRP, DOGE are rising as traders continue to accumulate select altcoins.
Wholesale inventories increased by 0.2% in September 2023, reversing a six-month trend of declines. Durable goods inventories rose by 0.2%, while nondurable goods inventories increased by 0.1%. This means that businesses are stocking up on goods in anticipation of future demand. However, the impact of this on the future of the economy is uncertain, as it depends on various still fluctuating factors such as inflation, job growth, and business activity.
On Thursday, Nasdaq and the Dow fell as Treasury yields rose and Fed Chair Powell signaled more tightening. Disney soared on strong earnings, while Tesla sank on valuation concerns and a sell rating. Meanwhile, BTC closed a trading day above $36K — the first time since May 2022 — and ETH shot above $2K on rumors about BlackRock’s Ethereum ETF application.
New unemployment claims fell slightly (to 217K) on the week ending November 9th, but continuing claims rose to the highest level since April, suggesting that the unemployed are having greater difficulties finding positions within companies. This points out to that the job market is softening, but it remains tight.
On Friday, the Consumer Sentiment Index dropped but Nasdaq gained significantly, along with other major indexes, following hawkish comments from Powell and stabilizing Treasury yields. Major tech stocks saw increases, with Microsoft hitting an all-time high again. Meanwhile, BTC and ETH began to form a double top on the hourly chart just above their key resistance levels.
According to Michigan University the Consumer Sentiment Index fell to 60.40 points in November 2023, down from 63.80 points in October. Historically, from 1952 to 2023, the average has been 85.49 points. The highest recorded level was 111.40 points in January 2000, while the lowest was 50 points in June 2022.
On Week 46 the focus will be on inflation rate data, retail sales, and speeches by Fed officials. Other important data includes producer prices, industrial production, export and import prices, building permits, and housing starts. Playing volatility remains the main theme for traders.
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