The non-farm payrolls data was slightly weaker than expected, continuing the recent trend of weakening momentum in the US economy. The unemployment rate rose from a cycle low of 3.43% to 4.05%. Of the approximately 200,000 new jobs added in the past month, approximately 150,000 were in the government and healthcare sectors, and the employment data for the past two months was also revised down by 111,000. Wage growth slowed to 3.9% year-on-year and 3.5% month-on-month, respectively, providing more positive signals to the Fed that inflation is slowly falling back to its long-term target. In addition, given the recent performance of cryptocurrencies, will we see a small surge in job seekers and lead to lower wage pressures in the coming months?
With only a few meetings left before the November election, and given the Fed’s strong desire not to surprise the market, we expect this month’s FOMC meeting to take a more forceful stance, positioning the market for a 25bp rate cut in September.
TradFi assets welcomed the continued slowdown in economic data. U.S. Treasury yields fell 5-10 basis points in a steep bull trend. At the same time, driven by technology and growth stocks that are highly sensitive to low interest rates, U.S. stocks once again set a new record high. How many times has this set a new record high this year?
Since June, the U.S. stock market has been rising continuously, which is a huge difference from the performance of European stocks and even cryptocurrencies. In the short term, there is a lack of convincing catalysts. Even France's far-right deadlock or Trump's victory seems unable to shake this market. Especially when the Federal Reserve still has ample room for easing policy, it is best not to fight against market trends.
As the second quarter ends, the focus will turn to corporate earnings, with Citi analyst models showing the potential for more positive surprises based on management guidance and the company's strong pricing power. Well, say goodbye to another shorting catalyst.
We mentioned the strong seasonality of July before, and it’s going pretty well so far. The first two weeks of July are historically the strongest for the U.S. stock market, and July as a whole was a phenomenal month in its own right. Can you share some of the heat with crypto?
As expected, short interest on both the SPX and Nasdaq continues to hit new lows, at just 7% of float. Any chance of getting below 5% before summer is over?
Even more extreme, the current "winner concentration" in the SPX has exceeded the highs of the 1930s. Don’t forget that markets can correct in “price” and “timing,” and even if the eventual sell-off feels like an instant disaster, the process of top formation often takes months or even quarters, and we have yet to see any Significant signs of a mood shift... not yet.
Speaking of shifting sentiment, the fortunes of many crypto tokens have changed, with major coins and top altcoins seeing a -20% correction in the past month and a 10% drop in the past week alone.
The German government’s public intention to sell and the supply unlocking at Mt. Gox pushed BTC from $65,000 to $54,000 in a week, with the lack of positive catalysts coupled with long-term long positions unable to offset the massive selling pressure, leading to painful and dramatic position stops across the market.
A large number of BTC futures long liquidations occurred on various exchanges, and even spot ETFs saw large outflows due to profit and loss protection.
Additionally, it was reported that most of the price losses occurred in the Asian time zone, and while European and US investors may have done some bargain hunting, Asian investors bore the brunt of the capital losses.
Meanwhile, BTC and ETH implied volatility barely budged, with traders seemingly focused on closing positions rather than buying downside protection or going short outright. This move seems to have been entirely spot-led, with traders caught off guard and focused on minimizing risk rather than initiating new positions.
After a very disappointing altcoin season and post-halving price action, the losses across the crypto space are quite severe, and there is little incentive for the native ecosystem alone to chase price rallies. Even though the inflows after the approval of the ETH ETF may provide a short-term bottom for the market, the distribution of positions takes time, and crypto prices may be "stagnant" for most of the summer. If the July 31 FOMC meeting tilts sharply dovishly, it may provide some overall support, but a stock market sell-off (if it actually happens) remains an external but real bearish risk to overall sentiment.
We continue to believe that this cryptocurrency cycle (and the ones that follow) will be very different from what native users are used to, with TradFi coming in, the players have changed, the wallets are different, and the rules of the game have changed.
Stay safe my friends, it could be a long summer.
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