Macro Economic Review of January 2024: US Stocks Hit New Highs, Crypto Market Under Short-term Pressure

At the beginning of 2024, the performance of the US economy is impressive. Although a slight rebound in inflation indicators may delay the timing of interest rate cuts, overall economic data remains strong, injecting confidence into the market and consumers. In January, US stocks continued to climb to new highs, with technology stocks, particularly those related to artificial intelligence, becoming the focus of the market again. However, a certain electric vehicle manufacturer has encountered a decline in gross profit for the first time in years. The Asia-Pacific stock market performed well, while European stock markets remained stable.

The Bitcoin ETF was approved as scheduled, but the market experienced temporary pressure due to selling pressure from a certain institution. However, as the selling has weakened, the market is gradually stabilizing and showing a certain degree of rebound.

US economic data exceeds expectations

The non-farm payroll employment data released at the beginning of the year showed that 216,000 jobs were added in December, far exceeding the expected 175,000. The private sector added 164,000 jobs, also significantly surpassing estimates. This strong start has brought positive signals to investors.

However, strong employment data has also raised concerns about inflation. In December, the Consumer Price Index ( CPI ) rose by 3.4% year-on-year, higher than the expected 3.2%, and far exceeding the Federal Reserve's 2% inflation target. Although inflation has rebounded, the market generally believes that the likelihood of interest rate hikes is low, and the timing of interest rate cuts may be later than previously anticipated.

Currently, the market expects the probability of the Federal Reserve cutting interest rates in March has decreased from 75.6% to 42.4%, with most viewpoints suggesting that rate cuts may only begin in the middle of the year. The yield on the U.S. ten-year Treasury bond has shown an overall upward trend in January, reflecting the market's expectations of rising CPI.

Other economic indicators also performed well. The January Markit Composite PMI preliminary value is 52.3, higher than the expected 51. Among them, the Manufacturing PMI reached 50.3, setting a new 15-month high. The annualized quarterly GDP growth rate for the fourth quarter is 3.3%, far exceeding the expected 2%, resulting in an annual GDP growth rate of 2.5%.

The consumer confidence index has also shown a significant increase, with the University of Michigan consumer confidence index reaching a new high in a year and a half. These data collectively reflect that the U.S. economy has maintained a relatively strong growth momentum.

Stock Market Performance

The S&P 500 index has broken its historical high this month, surpassing the previous peak set on January 4, 2022. The Dow Jones index had previously reached a new high, and now only the Nasdaq Composite index has yet to break its historical peak, but it is only about a 5% gap away. The Nasdaq 100 index has already set a new high.

Market focus is shifting back to technology stocks, particularly those related to artificial intelligence. A certain chip giant and a certain software giant have both set historical highs. The artificial intelligence revolution is widely believed to last for many years, if not decades, becoming a market consensus.

However, a well-known electric vehicle manufacturer has experienced a decline in gross profit for the first time in years. The company delivered 484,500 vehicles in the fourth quarter, exceeding expectations, but falling short of a certain Chinese competitor's 526,400 pure electric vehicle deliveries during the same period. The company's total gross profit for 2023 decreased by 15% compared to 2022, and cash flow also saw a 42% drop.

Other international markets have also performed well. The Sensex 30 index in Mumbai, India, has reached a historic high, and the Nikkei 225 index in Japan is close to its peak from 1990. The German DAX index and the French CAC 40 index are currently consolidating at high levels, with no significant risks apparent from a technical perspective.

Crypto Market

On January 11, 11 companies' Bitcoin spot ETFs were approved. This allows ordinary investors to invest in Bitcoin as conveniently as buying stocks, and is expected to bring a significant amount of incremental funds to the crypto market.

However, the market did not rise as expected, but instead experienced a decline. The main reason is that early investors in a large encryption currency fund began to sell off on a large scale. This fund had previously existed at a premium for a long time, attracting many arbitrageurs to participate. However, due to the fund's suspension of the redemption mechanism, investors were unable to exit. Now that the fund has successfully transformed into an ETF, these early investors can finally sell through the ETF, causing tremendous selling pressure.

From the holding data, it can be seen that the fund has significantly reduced its holdings since the 11th. Notably, apart from this fund, other newly approved Bitcoin ETFs are actively buying. A large investment bank estimates that the net outflow of this fund has reached $4.3 billion, believing that the profit-taking phase is basically complete and that the downward pressure on Bitcoin should have largely ended.

As a result, the price of Bitcoin began to stabilize around $40,000 to $41,000 and showed a certain degree of recovery. Although short-term prices are affected by various factors, ETFs provide retail and institutional investors with a more convenient investment channel, and the logic of incremental capital inflow still holds true in the long term.

Outlook

At the beginning of the New Year, stock market investors are feeling a positive market atmosphere, while cryptocurrency investors have experienced a less than smooth start. Currently, there is no significant risk in overall market liquidity, and the U.S. economy is maintaining a good momentum. In this environment, the crypto market is expected to gradually digest the selling pressure and reopen the upward trend. The fundamental logic of incremental funds remains unchanged, so after getting through the cold January, the market is expected to welcome a warmer spring.