🏦 The Central Bankers' Quest For Neutral

Good Morning!

Beijing's throwing a $142 billion lifeline to its top banks, and markets are loving it. This cash injection, hot on the heels of earlier stimulus measures, has got investors thinking China's finally waking up to its economic woes. The result? A rally across Asian markets, with China's blue-chip index and Hong Kong's Hang Seng Index leading the charge. It's not just a China party though – European futures are joining in, setting the stage for a buoyant day ahead.

In today’s email:

• Central Banks: Whats the new ‘neutral’ rate?

• Bitcoin: Struggles to break $64k decisively

• Binance: Launches Pre-market spot trading

• Gold: Keeps getting stronger 💪🏼

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THE BIG IDEA

Global central banks embark on a rate-cutting journey, exploring the new 'neutral' in a transformed financial landscape

The financial world is witnessing a fascinating experiment. Central banks worldwide are joining the rate-cutting party, but this isn't your grandma's easing cycle. We're in uncharted territory, trying to figure out just how much the global financial landscape has shifted since the pandemic.

Here's the billion-dollar question: Where's the new 'neutral'? That sweet spot where inflation behaves, economies hum along, and central bankers can catch their breath. The consensus? It's likely higher than the ultra-low rates we got cozy with pre-pandemic.

Fed Chair Powell put it bluntly: "We're not going back to that." The days of near-zero rates in the U.S. and negative rates in Europe seem like a distant memory. But pinpointing this elusive 'neutral' rate? It's more art than science, with policymakers relying on gut feelings as much as complex models.

The Fed's crystal ball suggests rates might bottom out around 2.9% by 2026, but opinions are all over the map

Some officials, like Governor Bowman, argue we're closer to 'neutral' than we think.

What does this mean for you and me? Well, don't expect mortgage rates to plummet as fast as they skyrocketed. A recent Fed study hints that 30-year home loans might not dip below 5%. Gone are the days of 3% mortgages.

It's not just a U.S. story. The ECB and Bank of England are singing from the same hymn sheet. BoE Governor Bailey echoed Powell's sentiment: "We're unlikely to return to the world we left in 2009."

The bottom line? We're navigating a new normal in global finance. Factors like shifting labor markets, evolving supply chains, and bold fiscal policies have reshaped the landscape. As we watch this real-time experiment unfold, one thing's clear: the era of rock-bottom rates is behind us.

MARKETS AT A GLANCE

TOP NEWS

Swiss National Bank cuts rates for the third time this year, leading Western central banks in easing

The Swiss are at it again, trimming rates for the third time in 2024. The Swiss National Bank just slashed its key rate to 1.0%, riding the wave of low inflation and a surging franc. They're not alone in this easing frenzy – the ECB and Fed are joining the party. But Switzerland's been the trendsetter, cutting rates back in March while others were still mulling it over.

S&P 500 trapped in a range due to hedge positions, awaiting a breakout catalyst

The S&P 500's stuck in a rut, thanks to JPMorgan's collar strategy. Market makers are playing a high-stakes game of hedge tetris, buying and shorting futures to balance their positions. The magic number? 5,750. We're in a holding pattern until September 30, when the game resets. But here's the kicker: one solid day of heavy trading could shatter this stalemate.

US consumer confidence drops sharply, signaling a cooling job market and potential unemployment rise

The latest consumer confidence report is raising eyebrows. The headline index plummeted to 98.7 in September, shocking even the most pessimistic forecasters. The labor differential, a key job market indicator, suggests unemployment could breach 5% by year-end. This cooling trend aligns with falling quit rates, hinting at worker unease. All eyes are now on next week's jobs report, which could push the Fed towards swifter rate cuts if it confirms these worrying signals.

CRYPTO

Industry insider claims US regulators forced Silvergate Bank's closure to stifle crypto sector

Nic Carter drops a bombshell: Silvergate Bank was strong-armed into liquidation by US regulators. The smoking gun? A forced 15% cap on crypto deposits, or face shutdown. Carter sees this as part of a broader "Operation Choke Point 2.0" to kneecap the crypto industry. He argues Silvergate could've weathered the storm if left alone, pointing to the crypto market's rebound. This move, he claims, was a calculated strike against crypto's financial infrastructure.

Binance launches innovative pre-market spot trading service with actual tokens

Binance's upping the ante in the crypto exchange game. They've just rolled out a pre-market spot trading service, but here's the kicker – you're trading real tokens, not derivatives. It's a joint venture between Binance Spot and Launchpool, giving users a shot at early positions before official listings. While rivals like Bybit and Coinbase offer similar services, Binance claims they're the first to deal in actual tokens. Sorry, folks in the U.S., Canada, and a few other spots – this party's not for you.

BlackRock's head of digital assets, Robbie Mitchnick, argues that while Bitcoin is a risky asset, labeling it as "risk-on" is misleading

He explains that Bitcoin behaves differently from equities and other risk-on assets due to its unique characteristics—such as being decentralized, non-sovereign, and free from country-specific or counterparty risks. Mitchnick highlights that Bitcoin acts as an emerging global monetary alternative and shares similarities with gold in terms of low long-term correlation with U.S. equities.

Veteran trader Peter Brandt predicts the Bitcoin-to-gold (BTC/GLD) ratio could surge by 400% in 2025, hitting 123:1

This bullish forecast stems from a technical analysis showing an inverse head-and-shoulders pattern, often signaling a strong rally. Currently, the ratio sits at 24:1, and if Bitcoin outperforms gold as predicted, it could see prices above $262,000. The increasing global M2 money supply and expanding liquidity could further boost Bitcoin’s performance, positioning it as a key asset in the evolving economic landscape.

GOLD

Gold prices hold steady at $2,660 amid growing speculation of a 50-basis-point rate cut by the U.S. Federal Reserve in November

Weak U.S. economic data and geopolitical tensions, particularly in the Middle East, have increased demand for gold as a safe-haven asset. Additionally, concerns over China's economic recovery bolster gold's appeal. Technically, gold is trading within a narrow range, supported by the 50-day EMA, with a potential breakout ahead if prices remain above $2,659. Investors are awaiting Fed Chair Powell's speech for further clarity.

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