Market Report.
📉 Second consecutive day of declines in Wall Street’s leading sector, the technology sector. What is driving them?
🤖 Sam Altman, the CEO of OpenAI, acknowledges that the current AI boom has led to “insane” valuations and a potential “bubble” in the market. He warns that some investors are likely to get “very burnt” as a result. However, Altman remains confident in the long-term societal benefits of AI, and is ready to continue spending aggressively to advance the technology. He says OpenAI is prepared to spend “trillions of dollars” on data center construction in the near future. Paradoxical, isn’t it? This is a bubble, don’t invest, but we will continue to invest in it.
📊 Although it may be true that the euphoria surrounding the phenomenon of AI is similar to the arrival of the internet and e-commerce, AI investment is different from the dotcom bubble, as companies today have strong earnings and cash flow to fund their infrastructure spending, rather than relying on debt.
💰 Perhaps what is depressing the stock market could be the usual issue: monetary policy and its money-making machine.
🗣️ Yesterday, Federal Reserve officials expressed concerns about the state of the labor market and inflation at their July meeting, though most agreed it was too soon to lower interest rates. There was a divergence of opinion among the central bankers, with two Fed governors, Christopher Waller and Michelle Bowman, voting against the decision to hold rates steady and instead preferring to start lowering the key rate. This was the first time in more than 30 years that multiple governors voted against a rate decision.
📈 Remember that the latest US PPI data above expectations would point to possible upcoming inflation spikes.
📝 The meeting came just before weaker-than-expected jobs data was released, further highlighting the diverging views on the state of the economy. The minutes were released ahead of Fed Chair Jerome Powell’s keynote address at the Jackson Hole symposium, where he is expected to provide insight into the central bank’s policy direction.
👔 According to the CNBC Fed Survey, President Trump is expected to tap his top economic advisor Kevin Hassett to be the next Federal Reserve chair. However, when survey respondents were asked who the president “should” pick, former Fed Governor Kevin Warsh ranked higher than Hassett, followed by Fed Governor Christopher Waller and former St. Louis Fed President James Bullard.
⚖️ There are concerns that if Hassett is appointed, it could threaten the Fed’s independence, as he is seen as being aligned with Trump’s strong push for lower interest rates for political reasons. The survey results suggest a divergence between who respondents think Trump will pick and who they believe would be the best choice for the role.
📉 Ahead of Fed Chair Powell’s Jackson Hole speech, respondents are split on whether he will strike a neutral or dovish tone, with some expecting him to avoid discussing the economic outlook and monetary policy.
🚫 The end of green policies and the bubble of electric cars, solar panels and wind turbines? President Trump stated that his administration will not approve any solar or wind power projects, claiming they are “farmer destroying” and “stupid.” Trump blamed renewables for rising electricity prices in the U.S. The president has launched a sweeping attack on renewable energy since taking office, including plans to terminate key tax credits that have driven the expansion of wind and solar in the U.S. The U.S. Department of Agriculture has also recently ended its support for solar projects on farmland.
💴 China is considering allowing the usage of yuan-backed stablecoins for the first time, in a major reversal of its previous stance towards digital assets. This is part of a plan to boost wider adoption of the Chinese yuan globally. The State Council (China’s cabinet) will review and possibly approve a roadmap later this month for greater usage of the yuan in global markets, including guidelines for stablecoins. China’s senior leadership is expected to meet to discuss yuan internationalization and stablecoins, which are gaining momentum worldwide.
📉 This would mark a significant shift from China’s 2021 ban on cryptocurrency trading and mining due to financial stability concerns. Stablecoins are seen as a promising tool for yuan internationalization amid the growing influence of U.S. dollar-linked cryptocurrencies in global finance.
🌍 Geopolitics:
⚔️ Russia has warned that it could hold veto power over any assistance to Ukraine after a peace deal is reached, potentially rendering planned Western security guarantees for Kyiv moot. This contradicts the Trump administration’s assertion that Russian President Vladimir Putin agreed to security guarantees at the Alaska summit. Russian Foreign Minister Sergei Lavrov also played down the likelihood of a summit between Russian and Ukrainian leaders, while the White House continues to engage with Russian and Ukrainian officials.
🤝 According to A NATO-style collective defence clause for Ukraine is being proposed by Giorgia Meloni, which would oblige allies to decide within 24 hours whether to provide military support in the event of another Russian invasion. As allies increase their efforts to protect NATO territory, the Netherlands is sending two Patriot air defence systems to Poland. US Vice President JD Vance added that security assurances and Russian territorial claims are the main topics of talks to settle the conflict.
🛑 WSJ reported Musk is pausing plans to launch his own “America Party” to avoid alienating Vice President JD Vance and other prominent Republicans. However, Musk has told associates he may use his financial resources to back Vance, particularly if Vance runs for president in 2028. Musk remains in contact with Vance and sees backing him as an alternative to the third-party route.
👬 Are Musk and JD Vance friends? Elon Musk and Peter Thiel (Palantir founder) are friends and both core members of the “PayPal Mafia” — the group of founders and early executives who built PayPal in the late 1990s. After law school, Vance joined “Mithril Capital,” one of Thiel’s VC funds, and built a close mentoring relationship with Thiel, who has since been a major political and financial backer of Vance’s career. Thiel (Palantir co-founder, PayPal Mafia member) personally funded Vance, introduced him to Silicon Valley circles, and is a strong supporter of Vance’s political career.
📉 Market View.
😟 The market appears somewhat disheartened following Trump’s speculation regarding the government acquiring stakes in the technology sector. Alternatively, it could be the comments from the CEO of OpenAI about a potential bubble in AI, or perhaps my concerns that the Fed will continue to refrain from cutting interest rates.
📈 In any case, S&P 500 futures are currently at 6415 points, bouncing back from the 6365 points at which they fell yesterday. The decline was more severe for Nasdaq futures, which dropped below 23050 points but have since rebounded to the current 23360 points.
💵 The dollar index remains above 98 points, demonstrating strength for the third consecutive day, surprising technical analysts. The EUR/USD pair continues to weaken, falling below 1.17 to 1.1630 at present.
📉 European markets are also lacking optimism; DAX 40 futures are trading at 24315 points, while Eurostoxx 50 futures show a more bullish structure, close to 5500 points at 5480 points.
📈 The crude oil market has risen in recent hours, with Brent crude sitting above $67.30 after stagnating around $66 for two weeks.
📊 As expected, in our charts, gold futures rebounded upwards during yesterday’s session over the significant support at 3350, currently trading at $3380.
🚀 Bitcoin is experiencing some bullish rebounds but still shows weakness, currently positioned at $113,755.
