🏦 Fed's Next Move: Will It Sink or Save Markets?

Good Morning!

Rising Asian markets and a softer dollar are painting an interesting picture this week. Tech stocks are having a moment, but all eyes are on Nvidia's upcoming earnings that could set the tone for the sector. Meanwhile, the Fed's rate cut prospects have cooled to 58.4% (down from 65% last week) as markets process Trump's potential fiscal policies and their inflationary implications. The plot thickens in the international arena – Washington's green light for Ukraine to use U.S. weapons inside Russia has sent gold surging and oil prices climbing.

In today’s email:

• FedWatch: Will be get another December rate cut?

• Bitcoin: Well above $91k for now

• MSTR: Best performing leveraged bet on BTC

• Gold: Hits a one-week high on geo-political tensions

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THE BIG IDEA

Recent economic data paints a complex picture of US consumer resilience against manufacturing headwinds, leaving December's Fed rate cut hanging in the balance

The US economy is serving up a feast of mixed signals that's got even the savviest market watchers scratching their heads. October's retail sales jumped 0.4% – because apparently, Americans can't resist a good shopping spree. The real showstopper? Auto sales zoomed up 1.6%, while restaurants and bars kept the cash registers singing with a 0.7% boost.

But here's where it gets interesting: the "control" group (think of it as the economy's steady pulse) actually dipped 0.1%, missing the expected 0.3% gain. Furniture stores and health retailers took the biggest hit, suggesting some consumers might be tightening their designer belts.

The wealth gap is playing a fascinating role in this economic theater

The top 20% of households are living their best financial lives – they're basically swimming in high-interest returns while paying peanuts on their mortgages (if they even have any). Meanwhile, the other 60% are wrestling with inflation and drowning in car loans and credit card debt that's starting to look scarier than a horror movie.

Manufacturing isn't exactly having a party either. October's production slipped 0.3%, with the Boeing strike and Mother Nature tag-teaming to throw a wrench in the works. But wait for the plot twist – the NY Fed's Empire manufacturing survey exploded from -11.9 to +31.2, possibly riding the wave of post-election optimism.

All eyes are now on December's Fed meeting, with markets pricing in just 15 basis points of a potential 25-point cut. The upcoming jobs report on December 6 could be the make-or-break moment that decides whether we're getting an early holiday gift from the Fed.

MARKETS AT A GLANCE

TOP NEWS

Japan and China's record Treasury selloff ahead of Trump's victory signals growing concerns over potential inflationary policies and geopolitical tensions

The world's top Treasury holders are playing defense. Japan offloaded a record $61.9 billion in US government debt last quarter, while China dumped $51.3 billion – their second-largest selloff ever. The moves came as yields peaked mid-September, just before Trump's surprise win rattled markets with promises of tax cuts and higher tariffs.

Super Micro's stock surges 37% after hiring BDO as its new auditor, marking a potential turning point in its recent compliance struggles

Server maker Super Micro is staging a comeback play, bringing BDO on board as its new auditor after a rocky few months of compliance issues. While the company's value has dropped from its peak of $70B to $12.6B, there's a silver lining – they're rolling out products featuring Nvidia's next-gen Blackwell AI chip, keeping their tech edge sharp.

Morgan Stanley's long-time bear Mike Wilson flips bullish, predicting an 11% upside for the S&P 500 through 2025 amid changing economic landscape

Wall Street's notorious skeptic Mike Wilson is singing a different tune, setting a 6,500 target for the S&P 500 by 2025. His optimism stems from anticipated Fed rate cuts, potential Trump-era deregulation, and broadening earnings recovery. Wilson's betting on high-quality cyclical stocks, particularly in financials, while suggesting caution on consumer sectors.

CRYPTO

Debate intensifies over Trump's promise to create a U.S. Bitcoin reserve, with experts divided on whether executive action alone can establish this unprecedented monetary move

The U.S. government's sitting on a $19B Bitcoin stash from seizures, but turning that into an official reserve isn't as simple as keeping the keys. While Trump's promising to hodl, experts are split on whether he'll need Congress's blessing or can flex executive muscle to make it happen. Meanwhile, Senator Lummis is dreaming bigger – proposing a gold-for-Bitcoin swap.

Coinbase CEO Brian Armstrong shifts from political neutrality to active engagement, scheduling a meeting with Trump to discuss potential administration appointments

Coinbase's Armstrong is playing political chess, pivoting from his 2020 "no politics" stance to meet with Trump about staffing decisions. After spending $46M through Fairshake PAC to back crypto-friendly candidates, Armstrong's eyeing potential influence in Trump's promised "Bitcoin and crypto presidential advisory council."

Traditional Wall Street giants are piling into MicroStrategy stock as it outperforms Bitcoin with a staggering 450% YTD gain versus Bitcoin's 110%

Wall Street's old guard is suddenly crypto-curious, with Vanguard and Capital International each scooping up 16 million MicroStrategy shares – a 1,000% increase in their holdings. The company's latest $4.6B Bitcoin buy brings its stash to 331,200 BTC, worth nearly $30B, as institutional holders surge to 738.

Binance launches BFUSD, a stablecoin offering 19.55% APY, targeting futures traders

BFUSD provides daily rewards without staking, backed by a 105.54% collateralization ratio. Users in MiCA-regulated regions and restricted futures markets are excluded. As Binance re-enters the competitive stablecoin space, facing rivals like Tether and BlackRock, questions remain about its resilience to potential regulatory challenges amidst a bullish market.

GOLD

Gold hits one-week high at $2,623 on softer dollar; markets await Fed signals

Gold gained 0.4% as a weaker U.S. dollar supported demand, while traders eye a 58.8% chance of a December rate cut. Silver also hit a one-week peak at $31.32, while palladium surged 5% on Monday, reflecting geopolitical tensions and rate-cut speculation. Lower rates and geopolitical risks continue to bolster non-yielding assets.

DAILY ECONOMIC CALENDAR (ET)

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