Last week’s economic data triggered quite a bit of rethinking, with US data finally returning to where it was at the start of the first quarter (GDP revised down, consumption falling), while global inflation momentum started to unexpectedly pick up, with Eurozone HICP re-accelerating to 2.9% y/y (from 2.7% previously).
The slowdown in U.S. economic data is now too widespread to ignore, with the Atlanta Fed's GDP forecast now falling below 2% and real disposable income growth slowing to below 1%. In addition, rising credit card delinquency rates, rising rent costs and a weak job market all point to a weakening U.S. economy ahead of the election, while the Federal Reserve is still dealing with the thorny issue of high inflation and has few meetings left on its schedule before November.
Macro assets have rallied sharply over the past few sessions, fueled by a sequential deceleration in PCE last Friday, a 10% drop in oil futures, and hopes for an ideal economic slowdown. This week will see a string of important data releases, including today’s JOLTS, Wednesday’s ADP and ISM services indexes, and Friday’s nonfarm payrolls.
The non-farm payrolls data may be the most important event of the week, but there will also be the FOMC meeting and CPI data release on the same day next Wednesday. This will be the most anticipated day before the summer, so be sure to fasten your seat belts!
On the election front, former President Trump has benefited greatly from his recent guilty verdict, with his odds of winning the November election jumping to over 50% (compared to Biden's 35%), and it seems that a significant portion of voters see this as "politically damaging" to Trump and working in his favor. If the former president is re-elected, the main impact will be on fixed income, as the market generally expects him to exert new political influence on the Federal Reserve, pursue loose monetary policy, free-spending fiscal policy, and further tax cuts, which will certainly make the fourth quarter very interesting, at least for the market.
In terms of cryptocurrencies, market sentiment has been boosted since last Friday as the US stock market rebounded and overall risk sentiment recovered, with BTC challenging $70,000 again and ETH hovering around $3,800. However, trading activity remains sluggish, funding rates are low, realized volatility is not high, and prices remain within recent ranges. We expect this situation to continue at least until Friday's non-farm payrolls data, and the next major volatility will have to wait until next Wednesday's CPI and Fed meeting. At present, there seems to be less resistance to the upside, so I wish you all good luck!
