"Hakuna Matata!"

Hi There! This Memorial Day 2024, I embarked on a deeply personal and physically challenging journey to honour those who sacrificed their lives for our freedom. I completed my first individual half Murph, a CrossFit Hero workout dedicated to the memory of U.S. Navy SEAL Lt. Michael Murphy, who bravely gave his life in Afghanistan. The full Murph workout involves a 1-mile run, 100 pull-ups, 200 push-ups, 300 air squats, and concludes with another 1-mile run. Participants often wear body armor or a weight vest to intensify the challenge, symbolizing the weight carried by those who serve.

For beginners like myself, modifications ensure accessibility while maintaining the spirit of the challenge. My version included an 800-meter run, 50 pull-ups, 100 push-ups , and 150 air squats, followed by another 800-meter run. Completing this grueling workout was not just about physical endurance but also a profound act of remembrance and respect. It was an honour to connect with the legacy of Lt. Murphy and all the valiant souls remembered on this day, reflecting on the true cost of freedom and the strength of the human spirit. This experience was a powerful reminder of the sacrifices made by military personnel and their families, leaving me with a deep sense of gratitude.

Alright, let’s dig in!

Last week has been a whirlwind of market activity, marked by significant fluctuations across various sectors. Despite strong performances in specific areas like Nvidia's earnings, overarching economic concerns continued to dominate investor sentiment, as evidenced by the mixed reactions across global markets and commodities.

Stock Markets:

• S&P 500 closed at 5,300, while the Nasdaq rose by 1% to 16,921.

• Dow tumbled over 800 points to 39,100, halting its five-week streak of gains.

• Despite an outstanding earnings report from Nvidia (NVDA) that surpassed elevated expectations, broader market concerns triggered a sell-off. Nvidia's shares surged, benefiting its shareholders, yet the broader Dow 30 experienced significant declines, especially after Nvidia's earnings announcement.

Commodities:

• There was a notable weakness across the commodities sector, especially in energy and metals:

  • Oil prices oscillated around the 200-day moving average, influenced by expectations of extended production cuts from OPEC+.

  • Natural Gas prices retreated in the U.S. but continued an upward trend in Europe.

  • Metals like gold, silver, and copper fell significantly, with copper shedding over 5% amidst discussions of a potential super-cycle.

Bonds and Interest Rates:

• Hawkish remarks from the Federal Reserve escalated the 10-year yield to 4.50%, causing further inversion of the yield curve between 2-year and 10-year treasuries.

• The U.S. Dollar Index followed yields upward, testing resistance near previous highs.

Economic Indicators:

• Fed minutes revealed a cautious stance on rate adjustments, emphasizing the need for more conclusive data to confirm inflation is heading towards the 2% target.

• Inflation expectations have been adjusted downward, showing consumers are less pessimistic than initially thought.

• Unemployment claims remained stable with initial claims at 215,000 and a slight increase in continuing claims.

Global Markets:

• Asian markets suffered due to a strengthening U.S. dollar and renewed rate concerns:

  • China and Hong Kong stocks declined amidst geopolitical tensions and doubts about the adequacy of new property market measures.

  • European stocks dipped slightly with the FTSE 100 down nearly 1%, and Japanese markets remained relatively flat.

• Emerging markets showed mixed results; India outperformed while Brazil lagged.

Cryptocurrency:

• The SEC’s approval of eight spot Ethereum ETF applications (from BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton) marks a significant milestone, indicating growing acceptance of cryptocurrencies within traditional finance. This follows the earlier approval of Bitcoin spot ETFs, suggesting a positive shift in regulatory attitudes towards cryptocurrencies.

 Here are other key highlights from last week:

• Developers foresee ‘Programmability’ as catalyst for Bitcoin’s next rally.

• Phantom wallet beat PayPal to secure No. 2 app in Google Play store.

• Blockchain gaming investments reached nearly $1B in April.

• KlimaDAO Japan to launch carbon credit marketplace with Progmat.

• QuickSwap launched new decentralized perpetual exchange.

This week is short and packed with high-impact news:

This week, following the Memorial Day holiday, the financial markets anticipate a busy period as investors evaluate the ongoing AI-driven rally on Wall Street and speculate on the Federal Reserve's next steps regarding interest rates.

U.S. Economic Data Highlights:

• CB Consumer Confidence: On Tuesday, the Conference Board reported a rise in U.S. consumer confidence to 102.0 in May, exceeding expectations and marking an increase from April's 97.5. Despite this uptick, concerns about a potential recession linger among consumers, contrasting with more optimistic CEO assessments regarding economic downturn risks.

• Housing Market: The S&P Case-Shiller Home Price Index for March indicated continued growth, with record highs in all 20 surveyed cities, underscoring persistent strength in the housing market.

• Economic Reports: The remainder of the week will see significant reports including:

  • Fed's Beige Book Release on Wednesday

  • Q1 GDP figures, Weekly Jobless Claims, and Pending Home Sales on Thursday

  • Core PCE inflation data alongside the Chicago Business barometer PMI on Friday.

Fed Speakers and Statements:

• FOMC Member Bowman: Stated that the FOMC would have benefited from earlier decision to taper and end QE in 2021, to allow for earlier rate hikes.

• FOMC Member Daly and Cook: Discussed the impact of AI on the economy, noting the technology's potential to reallocate labour, which could create transitional challenges for workers.

• FOMC Member Mester: Advocated for increased transparency in Fed communications but did not comment directly on economic outlook or interest rates.

• FOMC Member Kashkari: Expressed caution against rushing to cut rates, indicating a preference to see more sustained positive inflation data and acknowledged potential significant losses in commercial real estate.

• FOMC Member Williams and Bostic: Both are scheduled to speak about community service and the economic outlook, respectively, with Williams also set to address the Economic Club of New York.

Earnings Releases:

Notable earnings releases this week are outlined in the chart below.

Key Global Economic Events this week:

• Monday:

  • Germany: Ifo Business Climate Index.

  • Australia: Retail Sales figures.

  • Switzerland: Speech by SNB Chairman Jordan.

• Tuesday:

  • Australia: April CPI, detailing inflation trends.

• Wednesday:

  • Germany: Preliminary CPI data.

  • Switzerland: Second speech by SNB Chairman Jordan.

• Thursday:

  • Switzerland: GDP report.

  • Japan: Tokyo CPI.

  • China: Manufacturing and Non-Manufacturing PMI.

• Friday:

  • Euro Area: CPI Flash Estimate.

• Weekend:

  • OPEC+ Meeting: Key discussions on oil production levels scheduled for Sunday, 2 June 2024, via videoconference.

Trading Tip:

Jump on new crypto trends before everyone and their mama starts talking about them on social media!

Week 5/19/24 - 5/25/24 Recap

Special Tools and Strategies

Let’s Talk Volatility and Why it isn’t a Bad Thing!

What is Market Volatility?

Market volatility refers to the rate at which the price of a stock, or the market as a whole, increases or decreases for a given set of returns. High volatility means that a stock’s price can change dramatically over a short period in either direction. A lower volatility means that a stock's price does not fluctuate dramatically, but changes in value at a steady pace over a period of time.

Calculating Volatility:

Volatility is typically measured by the standard deviation of the annualized returns over a given period and represents how drastically a stock's price can change within that time frame. A stock that has high volatility often has higher risk, but also potential for higher rewards.

Factors Affecting Volatility:

1. Political and Economic Developments: Decisions by governments and economic data releases, such as GDP reports or policy changes, can create market fluctuations.

2. Industry-Specific Events: Events like regulatory changes, technological advancements, or market disruptions specific to an industry can affect stock prices within that sector.

3. Company Performance: News about a company’s performance, including earnings releases and major corporate actions, can cause price changes of that company’s stock.

Opportunities in Volatility:

While often viewed negatively, volatility can present opportunities for investors:

• Buying Low: During periods of low prices, investors can purchase stocks at a discount—potentially leading to high returns if the market rebounds.

• Selling High: Conversely, when stocks are temporarily overvalued, selling them can secure profits that can be reinvested elsewhere.

Long-term Strategy and Volatility:

Adopting a long-term perspective in investing can mitigate some of the risks of volatility:

• Avoid Market Timing: Attempting to time the market is extremely difficult; staying invested over the long term is generally more profitable.

• Leverage Market Corrections: Market downturns can be viewed as opportunities to purchase valuable assets at reduced prices.

• Focus on Quality: Investing in companies with solid fundamentals can safeguard investments from the worst of downturns and benefit from eventual recoveries.

Don’t Let Volatility Scare You:

Understanding and embracing market volatility can be a beneficial strategy for investors. By recognizing the factors that cause market changes and maintaining a long-term investment strategy, investors can use volatility to their advantage, potentially enhancing their investment returns over time.

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.