The United States economy is defying expectations and showing remarkable resilience. Despite rising yields on Treasury bonds and surging mortgage rates, the economy added an impressive 336,000 jobs in September. This data sends a clear message that the world’s largest economy continues to move forward, even in the face of tightening monetary policy. While this news may cause concern for stock investors, it’s important to consider the bigger picture.
Although stocks may seem less appealing when compared to a 6% return on a savings account, the bond market may be reaching a turning point. The bond market has experienced a historic sell-off, but there are indications that this trend may soon come to an end. If a recovery occurs, it could signal the start of a new bull market for risk assets.
In the world of cryptocurrency, the short-term price of Bitcoin remains influenced by regulatory decisions, particularly those related to a Bitcoin spot ETF. Despite positive news surrounding spot ETFs, Bitcoin has remained stagnant. However, if regulators give the green light to a Bitcoin spot ETF, it could lead to significant inflows into Bitcoin and a much-needed resurgence. It’s also worth noting the ongoing FTX saga, which is currently playing out in the courts and damaging the reputation of cryptocurrencies.
Interestingly, what may be bad news for financial markets could actually benefit the broader economy. The Federal Reserve plays a crucial role in shaping the path of risk assets, and with just two more meetings before the end of the year, their decisions could have a significant impact. If the Fed decides to pause rate hikes, it could trigger anticipation of an impending rate cut, leading to a massive risk-on rally across various asset classes, including cryptocurrencies.
As we enter the last three months of the year, there is often a festive rally in the market. This rally could soften the blow of the challenging year we’ve had and set the stage for a more positive 2024. However, regulatory decisions regarding spot ETFs and the Fed’s messaging on rate hikes will be closely watched. While September’s jobs data may drive immediate market moves, it doesn’t necessarily dictate the long-term thinking of the Fed.
Looking ahead to 2024, there are both positive and negative factors to consider. The BTC “halvening” in April historically has a positive impact on the crypto market. However, macroeconomic conditions have shown signs of instability, and Bitcoin’s correlation with stock markets adds complexity to the equation. The outcome will depend on the messaging from the Fed and decisions made by the SEC regarding spot ETFs. If the macroeconomic backdrop remains uncertain, the Fed may pivot towards rate cuts, potentially altering the trajectory of traditional and digital asset markets.
With the possibility of a bond market recovery and regulatory clarity in the crypto space, there is hope for brighter days ahead. As we approach the festive season, the potential for a Santa rally ignites optimism and momentum in the crypto market. While challenges may arise, history has shown that things often get worse before they get better.