January 2024 Macroeconomic Report: US Stocks Hit New Highs, Crypto Market Under Short-Term Pressure

At the beginning of 2024, the US economy is showing a strong momentum. Although rising inflation data may delay the interest rate cut, the impressive economic data has injected ample confidence into the market, especially among consumers. In January, US stocks continued to rise to new highs, with technology stocks becoming the focus of the market again; however, Tesla faced its first decline in gross profit in many years. The Asia-Pacific stock market performed well, while the European stock market remained stable and fluctuating. The Bitcoin ETF was approved as expected, but the market was briefly pressured due to selling pressure. As the selling pressure gradually weakens, the market is stabilizing and showing a certain degree of rebound.

On January 5, the United States released its first important economic indicator for 2024: non-farm payrolls increased by 216,000 in December, far exceeding the expected 175,000. Among them, private sector non-farm employment increased by 164,000, also significantly surpassing the expected 130,000. This strong start undoubtedly brings positive signals to investors.

However, strong employment data has also raised concerns in the market about inflation. Data released by the U.S. Department of Labor on the 11th showed that the U.S. CPI rose 3.4% year-on-year in December last year, higher than the previous month's 3.1% and the expected 3.2%, far exceeding the Federal Reserve's 2% inflation target. Nevertheless, the market generally believes that the likelihood of interest rate hikes is low, but the timing of rate cuts may be later than previously expected.

The US 10-year Treasury bond showed a steady upward trend throughout January, reflecting the market's expectation of rising CPI.

In addition to employment data, other economic indicators also show that the US economy remains strong. The Markit Manufacturing Index released on January 24 significantly exceeded market expectations: the January Markit Composite PMI preliminary reading is 52.3, higher than the expected 51. Among them, the Manufacturing PMI preliminary reading is 50.3, reaching a new high since October 2022, and well above the expected 47.6. This indicates that both manufacturing and service orders are on the rise, and the business environment is favorable.

GDP data also exceeded expectations, with the annualized quarterly growth rate of the US GDP in the fourth quarter at 3.3%, compared to an expectation of 2%. The annual GDP growth rate reached 2.5%. The consumer confidence index has also improved, with the Michigan University confidence index hitting a new high in a year and a half.

In the stock market, following last month's record high for the Dow, the S&P 500 has also surpassed its historical peak this month, exceeding the previous high of January 4, 2022. Currently, only the Nasdaq among the three major indices has yet to reach a new high, but it is only about 5% away from doing so. The Nasdaq 100 index has already achieved a new high.

The market focus has shifted back to tech stocks, with Nvidia and Microsoft hitting new all-time highs once again. The wave of artificial intelligence is widely regarded as a revolutionary trend that will last for years, if not decades. Looking back at 2023, large tech stocks in the US performed impressively, becoming the main source of market returns.

However, Tesla's stock price has experienced consecutive declines, with a drop of over 12% on January 25. The main reason is that Tesla's global dominance in the electric vehicle market is being challenged by BYD. Data shows that BYD's pure electric vehicle deliveries exceeded those of Tesla in the fourth quarter. Tesla's 2023 financial report indicates that its total gross profit has declined for the first time in many years, decreasing by 15% compared to 2022, and cash flow has also dropped by 42%.

Other countries' markets have also performed well, especially Japan and India. The Bombay Sensex 30 index has reached a new all-time high this month, and the Nikkei 225 index is close to its historical high from 1990. The German DAX and French CAC 40 indices are currently in a high-level consolidation phase.

In the crypto market, on January 11th, 11 companies' Bitcoin spot ETFs were approved as scheduled. This means that ordinary investors can directly purchase Bitcoin assets just like buying and selling stocks, bringing potential incremental funds to the market.

However, the crypto market subsequently experienced a decline, primarily due to the selling pressure from early Grayscale GBTC investors. Grayscale, as an important institution in the crypto world, has long provided compliant cryptocurrency investment channels for investors through trust funds. With the successful conversion of GBTC to an ETF, early investors began to reduce their holdings on a large scale, putting pressure on the market.

However, this selling pressure is believed to mainly come from early investors and does not represent the view of the entire crypto market. Other Bitcoin ETFs, aside from Grayscale, are increasing their holdings. JPMorgan's latest research report believes that the profit-taking phase of GBTC is basically complete, and the downward pressure on Bitcoin should have essentially ended. As a result, the price of Bitcoin has begun to stabilize around $40,000 to $41,000, showing a certain degree of recovery.

Although short-term prices are affected by various factors, ETFs provide a more convenient way for retail and institutional investors to invest in Bitcoin, and are still expected to drive the development of a bull market in the long term.

Overall, the stock market started strong in 2024, while the crypto market has experienced some ups and downs. Currently, there is no obvious risk to overall market liquidity, and the US economy remains in good shape. In this environment, the crypto market is expected to gradually digest the selling pressure and return to an upward channel. The logic of incremental capital entering the market still holds, so after weathering this cold January, the market is expected to welcome a warmer spring.