More mainstream investors expected to pile in…

Thoughts of the Day

Ether (ETH) surged nearly 20% yesterday as Bloomberg analysts increased the likelihood of US authorities approving ETH Exchange Traded Funds (ETFs) this week. Approval is expected eventually, following Bitcoin ETF approvals. Even if ETH doesn’t meet approval standards, other cryptocurrencies likely will, driving mainstream adoption. The cumulative investment in Bitcoin ETFs since January hit a new high of $12.85 billion yesterday and is expected to keep growing as more investors recognize the ease of investing in BTC through ETFs. As more savings are diverted into cryptocurrencies, BTC is expected to continue rising, despite potential uncertainties along the way.

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Tradertainment

Just slightly more than a decade ago, in 2013, this was the audience that a talk about Bitcoin could garner. What a stark contrast to the multitudes of attendees at crypto events in recent years and yet, this is how it is still if you’re looking at the number of traditional financial investors that are truly invested in BTC.

Day Ahead

  1. Canadian Inflation Rate (headline: +2.8% YoY expected and +2.9% prev, +0.5% MoM expected and +0.6% prev)
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What Happened Yesterday

Market Movements as of New York Close 20 May 24
  • [Fedspeak]
    Jefferson (current voter, slight hawk): “Too early to tell if the recent slowdown in the disinflationary process will be long-lasting. Policy rate is in restrictive territory.”
    Barr (current voter, known dove): “Fed will need to allow tight policy further time to continue to do its work.”
    Bostic (current voter, known hawk): “My outlook is inflation will continue to fall this year and into 2025.”
    (Jefferson remains cautious about committing to a view. Barr is on a wait and see, and did not mention if he was confident that inflation will fall further which he said in Feb. Bostic remains optimistic that inflation will continue to fall.)
  • The RBA meeting minutes highlighted that the board members considered whether to raise rates and that the board agreed it was difficult to either rule in or rule out future changes in the cash rate. The board expressed limited tolerance for inflation returning to target later than 2026 and may raise rates if their inflation forecasts were too optimistic. Reaction to the minutes release was muted.
  • The US stock market opened almost unchanged from Friday. It popped higher at market open following news that Morgan Stanley upgraded Micron from underweight to equal weight, sending semiconductor stocks higher. It then gradually grinded lower through the rest of the New York session. The S&P 500 finished +0.09% higher on the day (high: +0.42%, low: -0.02%), the Dow Jones fell -0.49% (high: +0.18%, low: -0.54%) while the Nasdaq rose +0.69% (high: +0.85%, low: +0.02%).
  • [Earnings]
    Zoom Video Communications (NASDAQ: ZM, -1.15% in aftermarket trading) fell despite beating on both earnings ($1.35 vs $1.20 expected) and revenue ($1.14 billion vs $1.13 billion expected). The company now expects 2025 revenue of about $4.61 billion to $4.62 billion, up from its earlier forecast of about $4.6 billion. Analysts expect revenue of $4.61 billion.
  • The crypto market rallied as the deadline of the Ether ETFs filing looms. Bloomberg increased the odds of approval (see article 3 below), sending the crypto market rallying. Bitcoin rose +5.97% while Ether rose +19.24%.
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Headlines & Market Impact

Japan closely monitoring weak yen and bond market, finmin says

Notable Snippet: Japanese Finance Minister Shunichi Suzuki said on Tuesday he was concerned about the negative implications of the current weakness in the yen and its effect on incentives to increase wages.

“One of our major goals is to achieve wage increases that exceed the rise in prices,” Suzuki said. “On the other hand, if prices continue to remain high, it will be difficult to reach this target even if wages rise.”

While a weak yen is a boon to exporters, it has become a headache for Japanese policymakers as it hurts consumption by pushing up the cost of raw material imports.

The yen’s slump past 160-per-dollar late last month triggered a suspected round of interventions by Tokyo.

The Japanese currency has bounced since then and was last fetching around 156.45.

In a regular post-cabinet meeting press conference, Suzuki reiterated that the foreign exchange rates should be set by markets reflecting fundamentals and that it was desirable for the currency to move in a stable manner.

The government will monitor the currency market closely and take appropriate action as necessary, he said.

Responding to questions about benchmark Japan government bond yields hitting the highest in more than a decade on Monday, Suzuki said it is important for the government to closely monitor the market and communicate with traders.

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Deutsche Bank lifts S&P 500 year-end target to Street-high of 5,500

Notable Snippet: Deutsche Bank has raised its 2024 year-end S&P 500 (.SPX) target to 5,500, the highest among major brokerages, banking on strong corporate earnings to support equity valuations.

The brokerage previously expected the index to finish 2024 at 5,100 points. The new target, at the top end of its range of 5,100-5,500, is around 4% higher than the index’s last close of 5,303.27.

Oppenheimer Asset Management had also predicted the index would end at 5,500.

“We see the earnings cycle having plenty of legs,” Deutsche Bank strategists led by Binky Chadha said in a note on Friday.

“While all the growth may not materialise this year, we see market confidence in a continued recovery rising by year-end, supporting equity multiples.”

Meanwhile, Morgan Stanley’s Michael Wilson on Monday forecast the index would hit 5,400 by June 2025, compared with an earlier prediction of 4,500 through December this year.

Wilson also expects better earnings growth in the next two years, reflecting “healthy, mid-single-digit top-line growth in addition to margin expansion in both years as positive operating leverage resumes (particularly in 2025)”.

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Ether Jumps 10% to $3.4K After Bloomberg Ups Odds of Spot ETF Approval

Notable Snippet: Already modestly higher during U.S. trading hours Monday, the price of ether (ETH) jumped more than 10% after two well-followed Bloomberg ETF analysts greatly upped their odds of the U.S. Securities and Exchange Commission approving spot ETH ETFs.

“James Seyffart and I are increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing chatter this afternoon that SEC could be doing a 180 on this (increasingly political issue), so now everyone scrambling (like us everyone else assumed they’d be denied),” tweeted Bloomberg Senior ETF Analyst Eric Balchunas.

The SEC this week faces a number of final deadlines on the spot ETF approvals/denials after having delayed decisions on the funds a number of times.

Exchanges are being asked to update 19b-4 filings on an accelerated basis by the U.S. Securities and Exchange Commission, three people familiar with the situation told CoinDesk, suggesting they may be moving to approve these applications ahead of a key deadline this Thursday.

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Phan Vee Leung
CIO & Founder, TrackRecord