This Is Not the Time to Turn into a Bear

Watch Out This Week!

This week will be the most important week of 2024 so far for Wall Street.

Results are expected from most of the "Magnificent Seven" companies that left their mark in 2023. These companies face high expectations to justify their valuations after their recent rallies. This week, Alphabet, Apple, Amazon, Meta Platforms and Microsoft will present their balance sheet reports.

Mega-cap tech balance sheets will be particularly important for investors who have been looking for signs of a widening rally in 2024 but have been disappointed so far. Tech giants like Nvidia are up 23% this year, while the small-cap Russell 2000 is down more than 2%.

"These balance sheets are particularly important because although we expected a rotation, we continue to see strong performance from technology and communications services stocks at the beginning of the year," said Shannon Saccocia, chief investment officer at NB Private Wealth. said.

Also in focus will be the Federal Reserve's latest monetary policy decision and the January employment report. Investors do not expect much from the FED meeting this week. Markets are almost certainly pricing in the possibility that the central bank will keep interest rates steady at its January meeting, according to the CME FedWatch tool. The meeting will not yield a new economic projection summary providing information on the number and timing of interest rate cuts this year. However, Powell's post-decision statements will still be the focus of the market waiting for a rate cut.

What Did the Data Announced Last Week Say?

The personal consumption expenditures price index published by the US Department of Commerce for December showed that inflation rates decreased towards the end of the year. The index, which increased by 0.2% on a monthly basis, increased by 2.9% on an annual basis, excluding food and energy. Monthly headline inflation rose to 0.2%, up from 0.1% in November; however, the annual rate decreased from 3.2% to 2.9%. While consumer spending was above expectations with a 0.7% increase, personal income growth was in line with forecasts at 0.3%.

Inflation, although still high but trending downward, could give the green light for the Fed to start lowering interest rates this year. Approaching the healthy 2% annual inflation rate targeted by the FED increases the possibility of policy changes and lowering interest rates to a range between 2.5% and 3%.

Additionally, preliminary growth data released last week showed that the US economy expanded strongly (3.3%) in the last three months of last year. For the full year, real GDP increased by 3.1% (from Q4 2022 to Q4 2023). This is a very solid growth rate supported by a strong labor market, consumer spending, business investment, net exports and subdued inflation. The announced preliminary data helped calm recession concerns to some extent.

“This is Not the Time to Turn into a Bear”

After a week-long sell-off, some bulls appear to have returned to the crypto market.


Crypto-related stocks ended the week in the green, rising on Friday after the price of bitcoin rose more than 3% in the last 24 hours. Bitcoin mining companies, which are generally more exposed to price fluctuations; Particularly harsh at the beginning of the week after Cipher Mining (CIFR), Mawson (MIGI), Core Scientific (CORZ), Sphere 3D (ANY), TeraWulf (WULF), Bitfarms (BITF), Marathon Digital (MARA) and others became the target of a short seller They were the biggest gainers, with many stocks rising between 5% and 15%, including the hard-hit Hut 8 (HUT).

Other crypto-related stocks, such as crypto exchange Coinbase (COIN) and enterprise software company MicroStrategy (MSTR), which has bitcoin on its balance sheet, also rose between 3% and 5% on Friday. MicroStrategy, long considered important to the price of bitcoin, holds approximately 189,000 bitcoins on its balance sheet after the last purchase in December.

Coinbase, which acts as custodian for many of the spot bitcoin exchange-traded funds (ETFs), has also seen up-and-down action from Wall Street analysts this week and had its share of price swings.

Crypto stocks came under additional pressure earlier this week after JPMorgan downgraded Coinbase to an underweight rating, citing the disappointing bitcoin ETF catalyst. The stock was then upgraded to outperform on Thursday by Oppenheimer, who cited strong company fundamentals and tight management team.

The main catalyst for the sell-off we saw this week was traders treating the bitcoin ETF approval as a “sell the news” event and withdrawing money from the Grayscale Bitcoin Trust (GBTC). The slow inflow of funds into newly approved ETFs may also have increased the pressure, as it may have dampened the excitement towards ETF approval. On the other hand, FTX's discharge of 22 million GBTC shares from the bankruptcy estate further increased sales.

According to Markus Thielen, research director at 10x Research, the decline after ETF approval may be a short-term phenomenon. “While Bitcoin ETF inflows may disappoint, this is not the time to be bearish as macroeconomic headwinds will continue to blow from behind in 2024 and the U.S. election cycle will see a constructive fiscal response that will lift asset prices,” Thielen wrote in a note. he wrote.