Market 05/10: Consumer sentiment unexpectedly drops - inflation concerns rise

FREE SEMINAR: How to protect your account from economic risks

By Steve Le - Monday, 5/13/2024 4PM New York Time

In the current volatile economic situation, protecting your account is extremely important but doing it effectively is not easy. In the free seminar on Monday, Steve Le, Founder of Viet Hustler, will delve into important topics related to Hedging and Diversification to help everyone protect their accounts from upcoming macroeconomic risks.

Topics covered:

• Basics of hedge and how to identify assets that need hedge

• Effective hedge strategies

• What is optimal diversification

• Types of assets and strategies to protect your account

How to participate:

1. Join Discord via link

2. Log in or create a Discord account if you don't have one

3. Click on the event link here to join at 4PM New York 05/13

Note: The session will not be recorded and uploaded to Youtube.

Statements from Fed officials

Fed Daly:

• Uncertain about inflation in the coming months, it may take time to bring it back to 2%.

• Labor market has not cooled yet.

• Supply is still good, no signs forcing the Fed to tighten policy.

US Treasury Secretary Yellen:

• Inflation has decreased significantly but not enough to cut interest rates.

Fed Bowman:

• No expectation of cuts in 2024.

• Tightening policy needs to be maintained longer.

• May need a few more meetings before deciding to cut.

Fed Logan:

• Still positive reasons for inflation to return to 2%.

• Too early to cut.

Fed Bostic:

• Economy is slowing down, though timing of cuts is uncertain.

FYI: Investment funds see weekly inflows due to rate cut expectations

• Contrary to Fed officials' statements, investment funds are net buying for the first time in 6 weeks, after weak payroll data boosted cut expectations.

• Small-cap funds increase 2.14 billion USD after three consecutive weeks of outflows.

• Large-cap funds increase 757 million USD.

• In contrast, Real Estate and Technology sectors are seeing heavy selling of 709 million USD and 458 million USD.

UMich Survey: Consumer sentiment unexpectedly drops - inflation concerns rise

• Consumer sentiment index unexpectedly drops to 67.4 - largest drop since August 2021 (< expected: 76.3, previous: 77.2).

• Current conditions index plunges to 68.8 (previous: 79.0).

• Consumer expectations sentiment drops to 66.5 (expected: 75.0, previous: 76.0).

• This is the largest drop in consumer sentiment since August 2021…

• … and also the biggest miss from expectations ever.

• Inflation expectations also worsened:

  • 1-year inflation expectations: rise to 3.5%=, highest since November 2023 (> estimate and previous 3.2%).

  • 5-10 year inflation expectations: rise to 3.1%=, highest since November (previous 3%).

• Additionally, consumer investment allocation in stocks this May rose to a record high according to this survey:

  

Small business optimism index falls to 11-year low

• Small business optimism index falls for 3 straight months to 88.5, lower than early 1990s recession and Dot-com 2000.

  • Small businesses account for ~44% GDP.

  • … and employ 1/2 of the workforce.

→ Inflation pressure reducing consumer demand + raising labor costs.

• However, CEO confidence index rises to 54 in Q2 (Conference Board)

  → CEOs cautiously optimistic after 2 years of dismal markets.

• Most CEOs expect Fed to cut 2 times or fewer this year.

China: Lifting housing restrictions - Warning of risks in the bond market

Two more major cities lift home purchase restrictions

• Real estate stocks surge 9.8% after two major cities Hangzhou and Xi’an lift home purchase restrictions.

• New home sales in Hong Kong also hit record in April, reaching 5.4 billion USD, 3 times higher than March and the highest since 2006.

Considering dividend tax exemption for stocks bought via Stock Connect

• China considering dividend tax exemption for individual investors on Hong Kong stocks bought via Stock Connect.

  • Hang Seng Index rises to 9-month high.

PBOC warns of risks in plunging government bond market

• PBOC continues to signal dissatisfaction with bond yields at lowest in over 2 decades, pressuring CNY.

• According to BofA survey, % of assets investors hold in China market still negative (though slightly up late 2023).

  

Crypto market: Grayscale's parent company reports positive revenue

• Digital Currency Group, Grayscale's parent, reports Q1 revenue up +11% YoY, reaching 229 million USD.

  • Grayscale revenue accounts for 156 million USD thanks to Bitcoin and Ether.

  • Bitcoin mining company Foundry revenue up +35% YoY.

  • Investment platform Luno revenue up +46% YoY.

Some other news:

1. US launches investigation into over 200,000 Ford vehicles at risk of fuel leaks that could lead to fires.

2. As of last week, 6.2% of listed homes have cut prices, a significant increase from 2021, 2022, and 2023.

3. Sam Altman takes nuclear energy company Oklo public, ticker OKLO to serve AI development.

   • Bill Gates and Jeff Bezos have also invested in nuclear plants in recent years.

4. Biden administration expected to impose tariffs on EVs + medical devices made in China next week.

5. World's largest semiconductor supplier - TSMC reports April revenue up +20.9% m/m and +59.6% y/y (to ~7.28 billion USD).

   • Highlighting continued increase in demand for advanced semiconductors used in AI hardware.