11/4/2024

Good Morning.

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We hope you had a pleasant and spooky Halloween. Americans spent an estimated $11.6 billion on Halloween this year according to the National Retail Federation. This represents a -5% YoY change in spending on the holiday.

• Last week's economic indicators

  • GDP for Q3 grew at an estimated annualized rate of 2.8% below the Q2 annualized rate of 3% . This still represents strong growth, especially in the wake of recession fears and high borrowing costs.

  • Core PCE YoY: 2.7%, representing a small increase in inflation

  • Jobs report: Unemployment remains at 4.1% and non-farm payrolls only increased by 12,000. This is further evidence of a cooling job market.

• The Fed will meet this Thursday. Markets are pricing in a 25 basis point cut. This would bring the Fed's rate cuts to a total of 75 basis points this year.

• The election is this Tuesday and the race to 270 remains extremely competitive. However, political markets have favored Trump.

In today’s newsletter we will cover: 

• Market update

• Election: political markets

• What to look out for this week

Markets 

Market Update

The U.S equity market experienced a large selloff on Thursday, sparked by the labor data. The S&P fell -1.77% and is responsible for the week’s decline. 

Nvidia remains the second most valuable company in terms of market capitalization ($3.321 trillion). This number is larger than the GDP of France, which is ranked 7th in terms of GDP. The following are two key pieces of information about the company.

• Nvidia will be replacing Intel on the Dow Jones Industrial Average. Intel’s share price has simply been hammered ytd (down -51.46%). The former tech giant is not adapting to the rapidly changing semiconductor industry, while Nvidia is leading the charge. The rebalance of the index will take place prior to market open on November 8th and is meant to give a better representation of the semiconductor industry. 

Link to article

• Earnings date: November 20th. Nvidia is set to release earnings in 2½ weeks. The stock has seen immense volume over the past few months and is a market driver due to growth potential and high weight in the U.S. stock market.  

Bitcoin over the course of last week broke through the $70k level and reached a 6 month high (which is also very close to the all time high). 

• BTC has gained more legitimacy as institutional money has flowed in through the expansion of ETF products. The election will undoubtedly be a strong factor as Trump has expressed his support for the adoption of the crypto currency.  

1 Month Bitcoin Chart

5 Yr Bitcoin Chart

The 10 year treasury rose to its highest level since July as traders digested economic data and fiscal uncertainty. Friday's non-farm payroll number for October came in far below estimates and supports the narrative of a cooling labor market. This number may have been influenced by recent hurricanes and the Boeing strike.    

• “While the Fed will likely attribute some of the weakness in today’s data to one-off factors, the softness in today’s data argues for the Fed to continue its easing cycle at next week’s meeting. Stormy numbers but sky clearing for November 25 bp cut.” (Lindsay Rosner, head of multi sector fixed income investing at Goldman Sachs Asset Management)

Political Markets

The introduction of betting in this election has brought an inflow of billions into wagers on which candidate will win. There’s been consequent outcry that betting endangers democracy as well as controversy over the legitimacy of the odds due to potential manipulation. Polymarket is one of the most famous of these marketplaces, and on this exchange alone over $3 billion in bets have been placed.

(Bloomberg Premarket Data)

How it works

Payouts are dependent on market odds when the bet is placed. For example, using current odds of a 55.3% chance that Trump wins means the contract costs $0.547 and if it hits it will pay out $1. This is a return of 83%! These bets operate like future contracts and can be sold in marketplaces.

Manipulation

The lack of disclosure has led to concerns that the odds are not accurate. Large volumes of trades have been found coming from specific sources by using block chain. This means there could be players in the market who have outsized influence. In addition wash trading has been discovered, which means contracts are sold and bought again rapidly to falsely portray increased volume.

What To Look Out For This Week!

Tuesday: U.S. presidential election; winner could take days to announce

Thursday: Fed interest rate decision; 25 basis point cut expected

Key earnings:

• Monday: Palantir

• Tuesday: Apollo Global Management 

• Wednesday: CVS

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We are two college students on a mission to immerse ourselves in the financial industry. We are eager to learn more and make new connections. Our goal is to share exciting and informative content that provides a broad picture of current events and offers valuable insights.

Authors: Ben Banchik, Zachary Singer

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