Macroeconomic Research and Trends

In the last 24 hours, over 170,000 people in the cryptocurrency market have been liquidated. How much inflation risk has this round of correction digested?

The cryptocurrency industry may gradually shift from the hype of native altcoins to real asset tokenization, on-chain machine economy, and a more mature industrialization phase.

The prices in this window are determined by emotions, amplified by leverage, driven by war narratives—rather than by crude oil supply and demand.

Although Bank of America’s “sell signal” has ended, this is by no means a signal to buy the dip. The Federal Reserve's restoration of credibility and the alleviation of concerns over AI financing, the two prerequisites for returning to risk assets, have not been fulfilled. Currently, the cracks in AI financing are widening, and tech stocks are extremely crowded. Strategists warn that whether we can return to tech stocks in November hinges entirely on the “semiconductor prices” as the decisive factor. The short-term recommendation is to temporarily avoid technology, maintain a defensive stance, and focus on small-cap stocks and REITs.

In a survey consulting primary dealers, the Ministry of Finance asked about the repurchase plan for long-term government bonds, how to improve repurchase efficiency, the timing of short-term bond issuance, and the economic and financing outlook, but did not directly address the issue of reducing the supply of long-term bonds. Some investors originally expected that the Ministry of Finance would use this questionnaire to more clearly hint at considering a reduction in the scale of long-term bond auctions, or even stopping the issuance of 20-year government bonds. The refinancing announcement released by the Ministry of Finance on November 4 became the next point of observation. Citigroup expects that at that time, the auction scale for 20-year and 30-year U.S. Treasury bonds will each be reduced by $3 billion, believing that this survey indicates the Ministry of Finance is considering reducing the issuance of long-term bonds.

Core CPI has been higher than expected for two consecutive months, with inflation in housing and non-housing services strengthening simultaneously, which reinforces the rationale for the Federal Reserve to raise interest rates again in October, but ultimately requires confirmation from subsequent data.

In September, the PPI in the United States exceeded expectations, rising 6.3% year-on-year, reaching a new high since December 2022, with a month-on-month increase of 1.3%. The surge in energy prices was the main driver, with a single-month increase of over 10%. Following the CPI exceeding expectations, inflationary pressures on the production side further spread, coupled with strong manufacturing sentiment, raising expectations for the Federal Reserve to continue increasing interest rates in the coming months, putting pressure on the market.

Bowman acknowledged that inflation remains above the Federal Reserve's target, but emphasized the need to comprehensively assess economic data, observe how financial markets and economic conditions evolve, and then consider the next steps. She called for reforms to some regulatory rules introduced after the 2008 financial crisis, stating that cutting-edge AI models pose cybersecurity risks to critical infrastructure, and pointed out the need to pay attention to the capital demands arising from data center construction.

Morgan Stanley believes that U.S. Treasury yields have risen by a cumulative 120 basis points since February, and the strengthening dollar along with high oil prices are further tightening financial conditions, with the bond market replacing the Federal Reserve in playing a tightening role. To determine whether U.S. stocks can rebound, two key signals need to be observed: whether the MOVE index declines, and whether the earnings reports from JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo can release positive signals. Wilson believes that the market's concerns about recession risks may be excessive, and there is still room for improvement in U.S. stocks.

Recently, Trump has intensively stated that Iran "either signs the agreement or ceases to exist," while three U.S. aircraft carrier strike groups are simultaneously gathering in the Middle East. Reports indicate that Saudi Arabia is preparing for a large-scale counteroffensive against the Houthis, and the Mandeb Strait is in a state of emergency. Bank of America pointed out that the pricing of Brent at around $103 falls precisely between "sporadic conflicts" and "intense battles." This week, Trump's decisions, Iran's responses via Qatar, and the developments in Yemen will determine the direction of oil prices, and the boundaries between war and negotiations between the U.S. and Iran may become clearer.