"Deuces!"

Hi There! Upon my move to the great U.S. of A, I encountered a buffet of cultural shocks, but the most startling was discovering that Americans don’t celebrate Boxing Day. Picture my first December on the job: I'm all set for an added day off, replete with relaxation and leftover feasts. Then, bam! I’m told I need to use PTO (Paid Time Off) for the day after Christmas. My expression – utter disbelief!

Back home in Grenada, Boxing Day, on December 26th, is an occasion of significant merriment. It is a sentiment that is shared in the UK, Australia, New Zealand, South Africa, Canada, and several European nations. Boxing Day is traditionally a day for lounging in pajamas, pondering over the remaining slices of turkey and ham, or hitting the beach. Contrary to its name, Boxing Day has absolutely nothing to do with the sport. It originated in Victorian England as a day when the well-to-do would box up presents for those less fortunate. Nowadays, Boxing Day has pivoted from packaging gifts to unwrapping the pleasures of family time, engaging in sports, beach limes (beach parties), and in some countries shopping.

This cultural mix-up, initially a source of surprise, has now become a cherished memory I revisit every December 26th with a smile.

 Alright, let’s dig in!

Last week marked a significant milestone in the U.S. stock market, with the S&P 500 and the DOW experiencing their eighth consecutive week of gains. This is the longest green streak since 2017 for the S&P 500 and 2019 for the DOW. In terms of numbers, the S&P 500 saw an advance of 0.8%, the Dow modestly added 0.2%, and the Nasdaq made an impressive jump of 1.2%.

A key factor in this bullish trend was Friday’s Personal Consumption Expenditures (PCE) data, which influences the Federal Reserve's assessment of inflation. The PCE data came in lower than expected, suggesting a continuing downward trajectory in inflation. This, coupled with various positive economic indicators such as jobs, consumer sentiment, housing, and more, has bolstered investor confidence. Many believe that the U.S. economy is on track for a "soft landing," with the Federal Reserve's shift towards a more dovish stance further propelling the markets. This shift has injected a wave of optimism about a potentially lower interest rate environment in the coming year.

However, not all was rosy. A critical yet often overlooked indicator, the Leading Economic Indicators (LEI) index, fell 0.5% in November. This marked its 20th consecutive month of decline. This trend is reminiscent of the pattern seen during the Global Financial Crisis in 2008-2009, raising concerns among economists about potential economic challenges ahead. See the Special Tools & Strategies Section for more on LEI.

In the crypto market, Bitcoin (BTC) continued to follow the 20-day exponential moving average, as previously discussed (in Issue #59). Meanwhile, Solana (SOL) and Avalanche (AVAX) emerged as the top performers last week. This underscores an important lesson: it's wise to pay attention to projects that are subject to heavy criticism, as they may present unexpected opportunities.

Here are other key highlights from last week:

• Angola is leaving OPEC after 16-year dispute

• Analysts say that Bitcoin (BTC) could hit $160K in 2024

• NFTs are predicted to make a comeback in 2024

• Tens of Millions to enter Web3 through gaming in 2024

• Step-by-step guide on how to use the Polygon Bridge

This is a short week in the markets!

There are no speeches from Federal Reserve members or earnings reports this week. This marks the first time since 1997 that not a single company has reported earnings, according to Earnings Whispers.

Key US Economic News this week to watch:

• Thursday

  • Pending Home Sales (Nov)

• Friday

  • Chicago Purchasing Managers Index (PMI) for December

This Week’s High-Impact Global Economic Data Highlights:

• China Composite and Manufacturing PMIs

This week's anticipated bias (not financial or investment advice):

• Monday (12/25/23) - U.S. Market is Closed

• Tuesday (12/26/23) - Historically Bullish

• Wednesday (12/27/23) - Secure your profits

• Thursday (12/28/23) - Expect big market moves

• Friday (12/29/23) - Bearish

Trading Tip: Breaking a strong resistance often signals a bullish trend!

Week 12/17/23 - 12/23/23 Recap

Special Tools and Strategies

The Leading Economic Indicators (LEI) index is a very important tool used by economists to forecast economic trends, particularly recessions and recoveries. Recently, this index has drawn significant attention due to its notable decline of 0.5% in November 2023. This marked the 20th consecutive month of decreases. Such a persistent drop was last observed during the Global Financial Crisis of 2008-2009, which led to a recession in the U.S.

Published by the Conference Board, the LEI encompasses ten components, each reflecting different aspects of the economy:

1. Average Weekly Hours Worked by Manufacturing: This measures consumer income and business demand for labor.

2. Average Number of Initial Applications for Unemployment Insurance: Indicates changes in unemployment, affecting business activity and consumer income.

3. Volume of Manufacturers’ New Orders for Consumer Goods and Materials: Shows short-term business spending.

4. Institute for Supply Management (ISM) New Orders Index: Tracks the increase or decrease in orders for manufactured goods.

5. Volume Manufacturers' New Orders, Nondefense Capital Goods Excluding Aircraft: Indicates long-term business plans for production.

6. Building Permits, New Private Housing Units: Forecasts future construction spending.

7. The S&P 500: Reflects the total value of the business sector and stockholder wealth.

8. Inflation-Adjusted Monetary Supply (M2): Measures the purchasing power of liquid assets for business and consumer use.

9. Interest Rate Spread, 10-year Treasury Bonds less Federal Funds: Signals bond market expectations about the economy.

10. Consumer Expectations for Business Conditions: Predicts consumer outlook for the near future.

Almost all indicators within the LEI, except for stock prices, are currently signaling potential economic challenges, suggesting a possible downturn despite the economy's apparent resilience. Historically, the LEI has accurately predicted U.S. recessions. In the past 60 years, nearly every recession was preceded by a sustained decline in this index, with only two exceptions – one being a typical recession and the other the unpredictable Covid-19 crisis.

Given this trend, economists are considering the likelihood of a recession in 2024. This possibility strengthens the argument for the Federal Reserve to start reducing interest rates soon, which might boost the market rally unless the downturn is more severe than current data indicates.

Disclaimer: This newsletter is strictly educational. The information this report provides does not constitute investment, financial, trading, or any other advice. You should not treat any of the report’s content as such. Please be careful and do your research.