SVET Reports
SVET Markets Weekly Update (January 13–17, 2025)
On Week 3, markets received a new stimulus for growth as core producer inflation remained unchanged, falling below market expectations, while annual inflation still rose, driven by higher energy, food, and transportation costs. This was supported by a sharp jump in initial jobless claims. Gold prices surged fueled by growing expectations of Fed rate cuts. However, the dollar index increased to a 27-month high, and crude oil prices rose to a four-month high due to new sanctions. BTC fully recovered to new year-to-date highs, while ETH still lagged behind.
On Monday, equities ended slightly in the green, barely recovering after a sharp morning down-gap, with sectors like financials and healthcare gaining. Investors are now awaiting the CPI report and the start of earnings season. Oil is up again, as traders continue to price in new sanctions. The dollar is at a 27-month high, causing depreciation in other currencies. The euro is almost at parity with the dollar due to the EU’s weak economy. The Indian rupee has reached a new record low as decelerating GDP growth has caused investors to pivot to other markets, and the RBI hinted at easing its rate policies amid low inflation and slowing industries. China’s manufacturing exports rose sharply in anticipation of tariffs. BTC (89.1) and ETH (3.0) fell sharply again due to the spiking dollar but recovered a bit then, with both starting to test major technical support levels.
Crypto
Following Trump’s election win, institutional crypto OTC trading volumes saw a 106% increase in 2024, with BTC up 80%, ETH up 187%, and stablecoin OTC trading volumes up 191% YoY. (source)
World Markets
China’s exports surged by 10.7% YoY in December, exceeding expectations. This strong growth was driven by manufacturers front-loading orders ahead of potential new US tariffs. Exports to major markets like the US, South Korea, and the EU increased significantly. For the full year, exports rose by 5.9%, with notable growth in sectors like agriculture, plastics, and electronics.
Currencies
The dollar index surged to a 27-month high, exceeding 110, driven by a stronger-than-expected jobs report and concerns over potential inflationary policies. This led to reduced expectations for Fed rate cuts, with the market now anticipating fewer and later rate cuts. The dollar strengthened against major currencies, particularly the pound and the euro. 1Y trend: “Up, Appreciating”
The euro fell to a 27-month low against the dollar as investors lowered their expectations for ECB rate cuts. Concerns about persistent inflation, geopolitical risks, and the impact of US and UK policies are weighing on the euro. Rising energy prices have also contributed to the euro’s weakness. 1Y trend: “Down, Depreciating”
The Indian rupee hit a record low of over 86.6 per dollar in January due to increasing capital outflows, declining foreign exchange reserves, and expectations of looser monetary policy. Slower-than-expected economic growth and concerns about the RBI’s ability to support the currency amidst dwindling reserves further fueled the rupee’s depreciation. 1Y trend: “Up, Depreciating”
Commodities
WTI crude oil prices surged to a four-month high on Monday, driven by new sanctions. These sanctions target major exporters, insurers, and tankers, disrupting oil flows to key Ural’s buyers like India and China. This has caused market uncertainty, with Chinese and Indian refiners facing disruptions. Falling stockpiles, colder weather, and potential tightening of sanctions on Iran further supported the price rally. 1Y trend: “Up”
Comment: Violent Economics
Economics is a remnant of a deterministic world, akin to Newtonian physics. Rooted in the naïve beliefs of 19th-century intellectuals, it posits that humans are nothing more than puppets, driven by primitive desires. This perspective has been twisted into a dogma by national governments, whose megalomaniacal leaders have foisted Keynesian doctrines upon the populace. They wield money as a weapon, seeking to subjugate everyone to their whims.
In essence, true economy is merely a means by which people meet their needs in the most rational and least labor-intensive manner. However, under the reign of these power-hungry individuals, the concept of a job has morphed into a new form of slavery. People everywhere find themselves enslaved to the money these leaders print, tethered to a system that thrives on dependency.
The idea that an economy must operate under a centralized monetary system is increasingly outdated. Instead, it can function on a trust-ledger, where various forms of money — each serving distinct functions — can coexist. Some of these forms might be limited in number, serving as a store of value or a unit of account, while others could act purely as mediums of exchange. What underpins these systems is the trust that individuals place in one another and the issuers of this currency.
As technology advances, the rise of robo-AI is completely transforming hi-tech tools’ accessibility for the masses. Basic human needs can now be easily satisfied through low-cost, sometimes even individual-aimed, local production, enabling a majority of people to become money issuers and investors. With Universal Basic Income (UBI) and affordable food&shelter, a new paradigm of living is emerging. This shift allows individuals to engage in bot-investing and promote social accounts that facilitate donations for vital societal contributions — be it in writing, art, or science.
This transformation renders the violent economics perpetuated by governments increasingly obsolete. No longer do individuals need to be coerced into labor for food and shelter, nor do they require a centralized government monitoring every financial transaction. The focus can shift toward external defense, allowing societies to operate in a fundamentally different, more liberated manner.
On Tuesday, stocks closed mixed, with the S&P and the Dow gaining, while the Nasdaq declined. The PPI report showed slower-than-expected inflation, but investors are awaiting the CPI report for further insights into the Fed’s policy path. Small business optimism surged to a 6-year high on Trump’s hopes. The dollar remains strong. BTC (97K) and ETH (3.2K) edged up.
Details
Annual core producer inflation remained unchanged at 3.5% in December, below market expectations. This is the highest level since February 2023. 1Y trend: “Up” Annual producer price inflation accelerated to 3.3% in December 2024, the highest level since February 2023. 1Y trend: “Up” (BLS)
The NFIB Small Business Optimism Index surged to 105.1 in December, reaching its highest level in six years. This optimism is driven by improved economic expectations following the election. Small business owners anticipate better economic growth, lower inflation, and favorable business conditions under the new administration. 1Y trend: “Up” (NFIB)
Crypto
BTC’s adoption is exceeding the internet and mobile phones, says BlackRock report. The report also underscores BTC’s appeal as a decentralized asset in times of economic uncertainty. BlackRock advocates for its spot BTC ETF, IBIT. (source)
Currencies
The dollar index eased on Tuesday after the PPI report showed weaker-than-expected inflation. The report raised hopes for fewer Fed rate cuts. However, the dollar remains near multi-month highs, supported by expectations of a slower pace of rate cuts this year. The dollar weakened against the pound but strengthened against the yen. 1Y trend: “Up”
On Wednesday, stocks jumped after reports showed that core inflation dropped on lowering housing prices while annual inflation rose due to energy costs, which, nonetheless, reinvigorated traders’ fading optimism. Strong earnings from major banks also boosted investor sentiment. Still, manufacturing returned to a contraction zone, and the weekly growth rate of mortgage applications jumped to the highest level in five years as the Fed slowed its rate’s decrease. Meanwhile, EU industrial production was confirmed to be down as German GDP contracted for the second year in a row. BTC reached $99K, and ETH — $2.4K, continuing to rise as crypto traders followed the main markets surge.
Details
Annual inflation rose to 2.9% in December, driven by higher energy, food, and transportation costs. Shelter inflation slowed, and used car prices continued to decline. 1Y trend: “Side”. CPI increased 0.4% MoM in December, exceeding expectations. Energy prices, particularly gasoline, rose significantly. Food prices and shelter also increased. 1Y trend: “Side”. Annual core consumer price inflation eased to 3.2% in December, down slightly from the previous month. The shelter index rose 4.6% YoY, the smallest increase since January 2022. On a monthly basis, core consumer prices rose by 0.2% in December. 1Y trend: “Side”.(BLS)
The NY Empire State Manufacturing Index tumbled to -12.6 in January, signaling a sharp return to contraction. New orders and shipments declined, while inventories remained positive. Labor market indicators were mixed. Input and selling price inflation increased slightly. 1Y trend: “Up”. (NFed)
Mortgage applications surged by 33.3% in the week ending January 10th, the sharpest increase since 2020. This surge occurred despite rising mortgage rates, as homebuyers rushed to lock in borrowing costs before potential further interest rate hikes. (MBA)
World Markets
Industrial production in the Euro Area decreased by 1.90% YoY in November. Industrial Production in the Euro Area averaged 0.87% since 1991, reaching a high of 41.60% in April 2021 and a low of -28.40% in April 2020. 1Y trend: “Up” (EU)
Germany’s GDP contracted by 0.2% in 2024, following a contraction in 2023. Manufacturing and construction sectors experienced significant declines, while service sector growth was limited. Household consumption increased slightly, but foreign trade remained weak. 4Y trend: “Down” (DE)
The People’s Bank of China (PBoC) injected a second-to-record amount of liquidity (CNY 958.4B) into the market through seven-day reverse repurchase agreements. This move aimed to offset the impact of maturing MLF loans, increased cash demand ahead of the Lunar New Year, and peak tax season pressures. The PBoC has recently shifted its policy approach, increasing reliance on seven-day reverse repo operations to manage market liquidity. (PBC)
Commodities
WTI crude oil prices surged to a 5-month high, driven by lower-than-expected inflation, leading to expectations of lower interest rates. A larger-than-expected draw in crude inventories further supported the price increase. While the IEA noted uncertainty surrounding the impact of US sanctions on Russian oil, OPEC maintained its forecast for global oil demand growth. 1Y trend: “Side”
On Thursday, stocks were mixed at the opening but ended mostly in the red, despite weaker-than-expected retail sales and higher jobless claims data. Gold is at a 2-month high due to the Fed’s perceived change of mind based on the latest data pointing to a slowing economy that requires lower rates. Meanwhile, the ECB hinted at further rate easing this month. BTC (100K) and ETH (3.3K) are fluctuating near the week’s highs as traders look for drivers to set the market direction.
Details
Initial jobless claims rose sharply to 217K in the week ending January 11th, exceeding expectations. Despite the increase, claims remain below recent averages, indicating a strong labor market. Outstanding claims fell, and the four-week moving average also declined. 1Y trend: “Up” (DOL)
The Philadelphia Fed Manufacturing Index surged to 44.3 in January, its highest level in over two years. This significant increase was driven by sharp rises in new orders and shipments, which might be attributed to expected Trump’s tariffs. Employment indicators also improved. Price indexes increased, and overall future activity expectations improved. 1Y trend: “Up” (PFed)
Retail sales increased 0.4% MoM in December, slower than the previous month. Sales increased in various sectors, including miscellaneous stores, sporting goods, and furniture. However, sales declined in building materials, food services, and health & personal care stores. 1Y trend: “Side” (Census)
The NAHB/Wells Fargo Housing Market Index increased to 47 in January, reaching a nine-month high. Current sales conditions and buyer traffic improved. However, sales expectations for the next six months declined, likely due to elevated interest rates. 1Y trend: “Side” (Nahab)
Crypto
Argentine companies, including Bitfarms (crypto mining firm, the largest holder, 870 BTC), Mercado Libre (a e-commerce leader in Latin America, 412 BTC), and Globant (an IT and software engineering firm, 15 BTC), collectively hold 1,397 BTC. Argentina is emerging as a key player in the crypto space, with analysts predicting increased crypto adoption following El Salvador’s model. (source)
World Markets
The ECB minutes revealed a cautious approach to interest rate cuts, signaling that further easing is likely. Policymakers emphasized the need to gradually reduce restrictive policies as inflation trends align with projections. With weak economic growth, the focus has shifted to supporting economic activity. The ECB is expected to cut rates further, potentially reaching a neutral level by the end of 2025. 1Y trend: “Down”
Commodities
Gold prices surged to a 2-month high, reaching $2,715 per ounce, driven by growing expectations of Fed rate cuts. Weaker-than-expected retail sales and rising unemployment claims reinforced the view that the Fed may need to ease monetary policy to prevent a slowdown. The ceasefire agreement between Israel and Hamas also contributed to the decline in safe-haven demand. 1Y trend: “Up”
On Friday, stocks advanced, housing starts surged, while manufacturing stalled. EU inflation accelerated due to rising energy prices, while China’s GDP growth exceeded expectations thanks to CCP stimulus. However, foreign investments in China dropped to a record low, and the population has been decreasing for the third straight year. BTC (106K) attempted to reach to ATH, while ETH (3.5K), followed with much less vigor.
Details
Housing starts surged by 15.8% (the most since March 2021) to a 8-month high in December, driven by a significant increase in multi-family housing starts. Single-family housing starts also edged higher. Starts increased in most regions, with the Northeast and Midwest seeing the largest gains. 1Y trend: “Side” (Census)
World Markets
The IMF projects global growth of 3.3% for 2025 (3.2% — previous) and 2026 (unchanged). The America’s (2.7% v.s. 2.2%) and China’s (4.6% vs 4.5%) outlooks were upgraded , while the Euro Area forecast was downgraded (1% vs. 1.2%). India’s GDP growth maintained at 6.5%. Global inflation is expected to ease gradually to 4.2% (vs. 4.3%) in 2025 and 3.5% in 2026.
Euro Area annual inflation accelerated to 2.4% in December, driven by base effects and rising energy prices. Core inflation remained steady at 2.7%. While inflation increased in some countries, it slowed in others. The ECB expects inflation to return to the 2% target by year-end. 1Y trend: “Down” (EU)
China’s Q4 GDP grew by 5.4% (4.6% in Q3) — strongest in 18 months, exceeding expectations. Industrial production (+6.2%) and retail sales (+3.7%) also grew faster than expected. New home prices continued to decline but at a slower pace. Unemployment rose slightly (5.1%). These figures suggest that recent stimulus measures have been effective in supporting economic recovery. At the same time, foreign direct investment into China plummeted by 27.1% in 2024, reaching a record low. This decline was driven by weak consumption growth, falling housing prices, and rising economic risks. Increased government control and regulatory uncertainty also discouraged foreign investors. 1Y trend: “Down” (CN) China’s population declined for the third consecutive year in 2024 (to 1.408B). This marks a significant demographic shift for China, following decades of restrictive family planning policies. (SCH)
On Week 4, focus shifts to inauguration and an earnings season (Netflix, P&G, and J&J). Key releases: S&P Global PMIs, home sales. Internationally, the Bank of Japan might raise rates (25 basis points), also rate decisions are expected in Norway, Turkey, and Malaysia. Other data includes: PMIs in several countries, Germany’s ZEW, UK jobs and wages, South Korea’s and Taiwan’s GDPs.
Comment: Voluntary Lumpenization Under Authoritarian Democracies
The dream of escaping the rat race and achieving financial independence has long captivated the minds of the middle class, particularly those under 35. However, in today’s world, this aspiration is increasingly out of reach. Centralized bureaucracies have transformed into self-protecting machines, coining themselves as “authoritarian democracies,” where stringent controls are placed on the populace to prevent any perceived “extremes.” This shift has rendered vertical social mobility virtually impossible.
In times of instability — when bureaucratic structures falter — opportunities arise for new, unregulated markets to emerge, leading to the rapid growth of a new class of millionaires. Yet, contemporary bureaucracies feel threatened by the vigor and innovation offered by new entrepreneurs. Rather than embracing these disruptors, they brand them as “extremists” and impose regulatory frameworks under the guise of “consumer protection.” These regulations primarily serve to shield government and corporate interests from competition, stifling the burgeoning markets that could offer genuine pathways to wealth for the ambitious.
As the complexity and volume of regulations soar to astronomical levels, the middle class finds itself cornered, with little hope for upward mobility. The cost of maintaining middle-class status has skyrocketed, juxtaposed against the meager returns that such a status offers. With the barriers to entry into a higher economic class growing insurmountable, many may find themselves contemplating a radical strategy: voluntary lumpenization.
Voluntary lumpenization — a conscious decision to embrace a lower class status — may, at first glance, seem counterintuitive. Yet, for many in the middle class, it could represent a rational response to their current plight. By opting out of the relentless pursuit of a status that provides diminishing returns, individuals can potentially free themselves from the economic pressures and bureaucratic entanglements that stifle their aspirations.