💸 Debt And Wars: Inflation Fears Dim!

Good Morning!

The great American divergence keeps getting wider. We're seeing Wall Street and the dollar flex their muscles like never before – the greenback just notched its eighth consecutive weekly gain, touching a two-year peak. Meanwhile, US assets are absolutely dominating global flows: American funds have vacuumed up over 70% of developed market bond investments and nearly 90% of equity inflows in the past quarter. This stellar US performance is casting a long shadow over emerging markets, particularly in Asia.

In today’s email:

• FedWatch: Debt and wars displacing inflation as top threats

• Bitcoin: $100k? Not just yet!

• Solana: ETF soon?

• Gold: Biggest weekly gain in 20 months

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THE BIG IDEA

The Fed's latest survey reveals a dramatic shift in financial sector concerns, with US debt sustainability and trade wars displacing inflation as top threats

Remember when inflation was keeping everyone up at night? The Fed's latest survey shows the financial sector's nightmare fuel has changed dramatically. While President-elect Trump campaigned hard against rising prices, the pros have moved on to bigger fish: mounting US debt, recession fears, and potential trade wars are now stealing the spotlight.

Here's where it gets spicy: Treasury yields are climbing despite the Fed's recent rate cuts (we're talking 75 basis points worth), and the term premium – fancy speak for what investors demand to hold longer-term Treasuries – is flirting with decade-highs. Market jitters? You bet. The volatility meters are running hot, thanks to a cocktail of economic uncertainty and heightened sensitivity to every headline about growth, inflation, and Treasury supply.

Trade war worries are making a comeback tour, with market watchers fretting about a potential domino effect

Tariffs leading to retaliatory measures, crimping global trade, and possibly reigniting our old friend inflation. Talk about a plot twist – "persistent inflation" has tumbled from the top spot to sixth place in the Fed's worry list.

Looking ahead, Trump's economic blueprint – mixing tax cuts with import tariffs – has economists raising eyebrows. The concern? This combo might just pour gasoline on both the inflation fire and our already hefty federal deficits, especially with bond markets keeping Treasury yields elevated.

The silver lining? Banks are holding steady, households aren't borrowing excessively (though some delinquencies are ticking up), and the financial system generally looks solid. Just keep an eye on those "stablecoins" in crypto land – they're growing fast and, according to the Fed, might not be as stable as advertised.

MARKETS AT A GLANCE

TOP NEWS

Treasury yields show signs of stabilizing around 4.5% as investors find value in bonds, despite recent market turbulence following Trump's victory

The bond market rollercoaster might finally be catching its breath. After a wild two-month ride that pushed 10-year Treasury yields above 4.5%, investors are starting to bite. Trump's Treasury pick Scott Bessent, known as a fiscal hawk, seems to have calmed some nerves – though with inflation still sticky and Trump's economic plans uncertain, we're not entirely out of the woods yet.

Base metals and iron ore rally as Trump's Treasury pick Bessent triggers dollar decline, offering relief to the commodity sector

The metals market is finally catching a break. Base metals across the LME are climbing as the dollar takes a hit following Trump's Treasury pick, Scott Bessent. After weeks of pressure from Trump's election and China concerns, Bessent's nomination has calmed market nerves – investors are betting he'll prioritize stability over radical shifts.

EUR swap curve steepening has paused amid rising geopolitical tensions and Trump's impact on US rates policy

The EUR swap curve's steepening trend has hit the brakes this month, hovering in a tight 5-10bp range. While markets are pricing in more European rate cuts, the US curve is actually flattening post-Trump victory. Add in fragile Eurozone risk sentiment, and we're seeing a temporary pause in what's expected to be a longer steepening trend into 2025.

CRYPTO

Bitcoin teases $100K milestone as traders spot suspicious 'spoofing' activity while long-term holders lock in record profits

The race to $100K Bitcoin is getting spicy. We're seeing some crafty market manipulation through "spoofing" – phantom sell walls popping up around $99.5K during low-liquidity hours. Meanwhile, longtime hodlers aren't shy about taking profits, cashing out a record $443 million on November 22 as BTC touched $99,800.

Dogecoin surges 5% as Musk's cryptic X profile screenshot sparks fresh payment integration speculation

The OG memecoin is doing what it does best – riding the Elon Musk tweet wave. A subtle dollar icon on Joe Rogan's X profile caught crypto sleuths' attention, with Musk's "true" reply sending DOGE soaring. With X Payments securing licenses across most US states and Tesla already accepting DOGE, speculators are betting big on wider adoption.

Trump's Commerce Secretary pick deepens ties between Tether and Wall Street as Cantor Fitzgerald plans $2B Bitcoin lending program

Talk about a power move. Cantor Fitzgerald, Tether's banking bestie, is cooking up a $2B Bitcoin-backed lending program while quietly snagging a 5% stake in the stablecoin giant. With CEO Howard Lutnick headed for Trump's cabinet as Commerce Secretary, Tether might finally get the political backing it's been craving – though those pesky regulatory questions aren't going anywhere.

Spot Solana ETF approval looks increasingly likely by end of 2025 as regulatory winds shift with Trump's victory and Gensler's departure

With four heavyweight firms filing Solana ETF applications and the SEC actually engaging in discussions, the crypto-ETF floodgates might be opening wider. The success of Bitcoin ETFs ($30B+ in inflows), a crypto-friendly Trump administration, and Gensler's exit have analysts betting big on a SOL ETF approval next year.

GOLD

Gold Sees Biggest Weekly Gain in 20 Months Amid Geopolitical Tensions

Gold surged 5.5% this week, its largest gain since March 2023, reaching $2,710 an ounce. Rising haven demand followed Russia’s use of new ballistic missiles in Ukraine and dovish Fed comments suggesting further rate cuts. Supported by central bank buying and geopolitical risks, gold is up 30% this year, with analysts forecasting fresh records in 2025. Silver and platinum also rose.

DAILY ECONOMIC CALENDAR (ET)

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