longsPosition is at an extreme level, coupled with concerns about the continuous rise in yields (10-year nominal yield is about 4.45%, real yield>2.15%), the US stock market has retraced some of its recent gains (last Friday SPX -1.3%, Nasdaq -2.3%). In addition, Chairman Powell stated in last week's speech that considering the strong economic situation, the Fed is considering slowing down the pace of interest rate cuts, leading to a decrease in market pricing of a rate cut in December from nearly 2 points at the September high to only 61%.
"There is currently no signal for an urgent need to cut interest rates," Powell said in a speech in Dallas on Thursday. "The strong performance of the current economy allows us to make decisions more cautiously." - Jerome Powell
Before the stock market dumped heavily last Friday, the Volatility Index (VIX) had fallen from 23 to 14 after the election, with a nearly 40% big dump in two weeks. Although the market trend is accelerating as seen in the stock market and Crypto Assets (memecoin) Rebound, we believe that the 'easy part' of trading is over, and the future market will face more Fluctuation and challenges.
President Biden and Trump have explicitly pledged a smooth transfer of power. Now, the market focus has shifted from the election to policies, and the market is closely watching the cabinet formation. Several key positions have been clarified, especially those leaning towards hawks in trade and national security. One of the remaining key positions is the Secretary of the Treasury. The current frontrunners for this position are Scott Bessent (long-time investor and partner of Soros) and Howard Lutnick (CEO of Cantor Fitzgerald).
Bessent is considered a "safe card" with a lot of experience in the Capital Market, but Lutnick's company is one of the Tether custodians, so it is particularly followed by the cryptocurrency community, and no matter who joins the cabinet, both candidates are considered "pro-cryptocurrency", and the cryptocurrency industry has the opportunity to continue to receive political support and promote Bitcoin Long-term development as a reserve asset.
In terms of policies, although the market is excited about Trump's upcoming initiatives, not all policies will have the same impact, and even with the Republican-controlled Congress, implementing policies still needs to address many details.
We are currently in a relatively relaxed stage, and the market is rebounding purely due to hope and expectations. Investors are eagerly anticipating the positive impact of stimulus plans, while temporarily ignoring the negative impact of tariff and immigration policy tightening. Essentially, this is an ideal scenario where everyone benefits, so risk assets are pumping significantly.
Next, the easiest action for the incoming president to take would be to relax regulations, which can be implemented directly through executive orders, such as various energy projects and withdrawal from the Paris Climate Agreement. Basically, the relaxation of regulations for banks and Crypto Assets falls within this category, although the latter may take some time and require more regulatory clarity to support the current Bull Market.
Next comes the more controversial immigration and tariff issues. In terms of immigration policy, strengthening border control and large-scale deportations will face severe challenges from the media and the courts, but the Trump administration may promote them as core campaign policies. These measures may lead to a reduction in labor supply, especially in blue-collar positions, followed by further exacerbating inflation, making the work of the Federal Reserve in the second half of 2025 more difficult.
In terms of tariffs, the market expects a large number of heavyweight news to emerge as early as the first quarter, and Trump, based on his experience in his previous term, may target China as the primary objective. Broader tariff measures against Europe and other trading partners may require congressional support and may require Trump to propose a resolution as motivation, which could push the timeline back to the second quarter, while the negative impact of rising costs on inflation is expected to become evident in the second half of 2025.
Finally, given the soaring US debt balance and the newly established "DOGE" department's follow-up on government efficiency and cost reduction, large-scale plans for fiscal expenditure will be the most difficult measure for the Trump administration to implement. Any tax reduction and expenditure plans need to be negotiated with the Treasury Department and Congress, and it is expected that the market will ultimately be disappointed with this.
After Trump's election, Cryptocurrency has always been the hottest asset class, with BTC breaking $90,000 and its growth even surpassing the leveraged Nasdaq index. The rise of BTC is mainly driven by the U.S. trading session, with increasing mainstream participation in the U.S. There has been a significant influx of funds into Spot ETFs, with $1.7 billion flowing into BTC ETFs last week and $500 million flowing into ETH ETFs.
Another positive sign of mainstream participation is the continuous rise of Stable CoinMarket Cap, with a total Market Cap exceeding 160 billion US dollars, approaching the historical high point of 2022. Stable Coin is an important indicator of mainstream participation, and almost all on-chain activities start by converting Fiat Currency into Stable Coin. In addition, the supply of Stable Coin is roughly synchronized with the rise of M2. If the US government returns to a policy of net expansion of currency supply, it would be a good sign for the market in the long run.
Overall, we believe that the 'easy' part of the market Rebound has come to an end, and the next phase will be more challenging, with prices experiencing more Fluctuation and possible pullbacks. In addition, despite the renewed frenzy of memecoins and some signs of vitality in ETH, BTC's dominance continues to rise unilaterally, similar to the dominance of large-cap stocks in the SPX index, which is not particularly ideal for the current Crypto Assets ecosystem. In any case, as the market sentiment reaches a highly excited level, we will closely monitor the possible short-term surge and decline in the market. Please be sure to do Risk Management and be vigilant for more Fluctuation in the future!
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
SignalPlus Macro Analysis Special Edition: The Next Inning
longsPosition is at an extreme level, coupled with concerns about the continuous rise in yields (10-year nominal yield is about 4.45%, real yield>2.15%), the US stock market has retraced some of its recent gains (last Friday SPX -1.3%, Nasdaq -2.3%). In addition, Chairman Powell stated in last week's speech that considering the strong economic situation, the Fed is considering slowing down the pace of interest rate cuts, leading to a decrease in market pricing of a rate cut in December from nearly 2 points at the September high to only 61%. "There is currently no signal for an urgent need to cut interest rates," Powell said in a speech in Dallas on Thursday. "The strong performance of the current economy allows us to make decisions more cautiously." - Jerome Powell
Before the stock market dumped heavily last Friday, the Volatility Index (VIX) had fallen from 23 to 14 after the election, with a nearly 40% big dump in two weeks. Although the market trend is accelerating as seen in the stock market and Crypto Assets (memecoin) Rebound, we believe that the 'easy part' of trading is over, and the future market will face more Fluctuation and challenges.
President Biden and Trump have explicitly pledged a smooth transfer of power. Now, the market focus has shifted from the election to policies, and the market is closely watching the cabinet formation. Several key positions have been clarified, especially those leaning towards hawks in trade and national security. One of the remaining key positions is the Secretary of the Treasury. The current frontrunners for this position are Scott Bessent (long-time investor and partner of Soros) and Howard Lutnick (CEO of Cantor Fitzgerald). Bessent is considered a "safe card" with a lot of experience in the Capital Market, but Lutnick's company is one of the Tether custodians, so it is particularly followed by the cryptocurrency community, and no matter who joins the cabinet, both candidates are considered "pro-cryptocurrency", and the cryptocurrency industry has the opportunity to continue to receive political support and promote Bitcoin Long-term development as a reserve asset.
In terms of policies, although the market is excited about Trump's upcoming initiatives, not all policies will have the same impact, and even with the Republican-controlled Congress, implementing policies still needs to address many details.
We are currently in a relatively relaxed stage, and the market is rebounding purely due to hope and expectations. Investors are eagerly anticipating the positive impact of stimulus plans, while temporarily ignoring the negative impact of tariff and immigration policy tightening. Essentially, this is an ideal scenario where everyone benefits, so risk assets are pumping significantly.
Next, the easiest action for the incoming president to take would be to relax regulations, which can be implemented directly through executive orders, such as various energy projects and withdrawal from the Paris Climate Agreement. Basically, the relaxation of regulations for banks and Crypto Assets falls within this category, although the latter may take some time and require more regulatory clarity to support the current Bull Market.
Next comes the more controversial immigration and tariff issues. In terms of immigration policy, strengthening border control and large-scale deportations will face severe challenges from the media and the courts, but the Trump administration may promote them as core campaign policies. These measures may lead to a reduction in labor supply, especially in blue-collar positions, followed by further exacerbating inflation, making the work of the Federal Reserve in the second half of 2025 more difficult.
In terms of tariffs, the market expects a large number of heavyweight news to emerge as early as the first quarter, and Trump, based on his experience in his previous term, may target China as the primary objective. Broader tariff measures against Europe and other trading partners may require congressional support and may require Trump to propose a resolution as motivation, which could push the timeline back to the second quarter, while the negative impact of rising costs on inflation is expected to become evident in the second half of 2025.
Finally, given the soaring US debt balance and the newly established "DOGE" department's follow-up on government efficiency and cost reduction, large-scale plans for fiscal expenditure will be the most difficult measure for the Trump administration to implement. Any tax reduction and expenditure plans need to be negotiated with the Treasury Department and Congress, and it is expected that the market will ultimately be disappointed with this.
After Trump's election, Cryptocurrency has always been the hottest asset class, with BTC breaking $90,000 and its growth even surpassing the leveraged Nasdaq index. The rise of BTC is mainly driven by the U.S. trading session, with increasing mainstream participation in the U.S. There has been a significant influx of funds into Spot ETFs, with $1.7 billion flowing into BTC ETFs last week and $500 million flowing into ETH ETFs.
Another positive sign of mainstream participation is the continuous rise of Stable CoinMarket Cap, with a total Market Cap exceeding 160 billion US dollars, approaching the historical high point of 2022. Stable Coin is an important indicator of mainstream participation, and almost all on-chain activities start by converting Fiat Currency into Stable Coin. In addition, the supply of Stable Coin is roughly synchronized with the rise of M2. If the US government returns to a policy of net expansion of currency supply, it would be a good sign for the market in the long run.
Overall, we believe that the 'easy' part of the market Rebound has come to an end, and the next phase will be more challenging, with prices experiencing more Fluctuation and possible pullbacks. In addition, despite the renewed frenzy of memecoins and some signs of vitality in ETH, BTC's dominance continues to rise unilaterally, similar to the dominance of large-cap stocks in the SPX index, which is not particularly ideal for the current Crypto Assets ecosystem. In any case, as the market sentiment reaches a highly excited level, we will closely monitor the possible short-term surge and decline in the market. Please be sure to do Risk Management and be vigilant for more Fluctuation in the future!