🦅 Powell's Hawkish Speech: Rates Are Staying Higher For Longer!

Good Morning!

In classic Fed-watching fashion, Powell just poured cold water on rate cut expectations. He emphasized there's no rush to lower rates given the robust economy and sticky inflation hovering above the 2% target. Market reaction? Rate cut odds for December slipped to below 60%, down from 80% pre-announcement. Bitcoin dipped given Fed's hawkish tone, dancing around $88,000. The Trump effect is real – markets are betting his return could usher in a crypto-friendly regulatory environment. But it's not all sunshine: U.S.-China tensions are simmering as Trump's cabinet picks signal a potentially tougher stance on Beijing.

In today’s email:

• FedWatch: Powell’s statement "no rush to cut rates" says it all

• Bitcoin: Dipped to $88,000 after Powell's speech

• Berkshire: Buying Pizza 🍕 

• Gold: Back to $2550 given the prospect of “higher for longer” rates again

👇Join: Our exciting community subreddit to join the conversation:

THE BIG IDEA

Fed's steady stance amid strong U.S. economy creates global market ripples, with Powell's cautious approach contrasting sharply with international economic weakness

The Fed's not hitting the gas on rate cuts anytime soon – and that's sending ripples through global markets. Powell's latest Dallas speech painted a picture of American economic exceptionalism, calling U.S. growth "by far the best of any major economy." This optimistic outlook comes despite October's modest job growth of just 12,000, which Powell attributes to Southeast storms and labor strikes rather than underlying weakness.

Here's where it gets interesting: While the U.S. economy flexes its muscles with potential upticks in retail sales (analysts eyeing a 0.3% rise), Europe and China are struggling to keep pace. This divergence is creating a peculiar market dynamic – the dollar's strengthening, but global stocks might be in for a reality check.

Treasury yields have been climbing steadily since September, while rate cut expectations for 2025 have been slashed in half

The plot thickens with upcoming data releases from China (retail and industrial numbers) and U.K.'s Q3 GDP. Any disappointment could further highlight the growing economic divide. Wall Street's been surprisingly resilient so far, but with global rates rising in response to Fed policy and inflation stubbornly above 2%, this balancing act might not last forever.

Powell's message is clear: there's no rush to cut rates while the U.S. job market stays solid and inflation needs taming. Current inflation readings show 2.3% (or 2.8% excluding food and energy) – still above the Fed's 2% target. It's a delicate dance between supporting labor markets and controlling prices – and he's choosing to take it slow. This cautious approach means we're likely in for an interesting ride as markets adjust to this new reality, particularly as the disparity between U.S. and global economic performance continues to widen.

MARKETS AT A GLANCE

TOP NEWS

October's PPI data shows persistent inflation pressures, particularly in services, while jobless claims remain surprisingly resilient

U.S. producer prices ticked up 0.2% in October, with portfolio management fees jumping 3.6% and airline fares soaring 3.2%. Combined with sticky consumer inflation and jobless claims hitting six-month lows at 217,000, the Fed's path to rate cuts looks increasingly complex. Markets have adjusted accordingly, now pricing in just a 62.4% chance of a December cut.

Carbon market gets a potential boost as oversight body approves new standards for nature-based offsets amid quality concerns

Key carbon regulators just greenlit new standards for nature credits, potentially reviving a market that's been struggling with credibility issues. The move opens doors for 400 million nature-based offsets under REDD+ methodologies, though prices have plunged from $12.50 to $3.60 per credit since 2022. Verra's getting a second chance, but with stricter oversight.

Berkshire makes strategic moves, reducing Apple stake while adding new positions in Domino's and Pool Corp

Buffett's empire is shuffling the deck – slashing its Apple stake by 25% (now $70B from $175B) while scooping up $550M in Domino's Pizza and $152M in Pool Corp. Despite the Apple trim, it's still Berkshire's crown jewel at 25% of their portfolio. Cash keeps piling up, hitting a whopping $320.3B with most parked in T-bills.

CRYPTO

Powell's hawkish tone causes slight crypto pullback, though markets remain bullish post-Trump victory

Bitcoin dipped to $88,000 after Powell's "no rush to cut rates" speech, with rate cut odds for December dropping to 58.9% from 83%. Yet crypto's still riding high – BTC's up 15% week-over-week, with altcoins like XRP and ADA surging 20-40%. The mood shift appears more speed bump than roadblock, especially with Trump's win fueling regulatory optimism.

Crypto industry anticipates major regulatory shift as Trump's victory signals potential end to SEC battles

ConsenSys CEO Joe Lubin predicts Trump's win will lead to dismissal or settlement of SEC crypto cases, potentially saving the industry "hundreds of millions." With Trump's promise to fire Gensler and appoint crypto-friendly officials, the regulatory landscape could dramatically shift. Markets are already pricing in this optimism.

Tether's Hadron platform enables institutions to tokenize assets across blockchain networks, expanding its traditional finance reach

Tether has launched "Hadron," a new tokenization platform designed for institutions, corporations, fund managers, and governments to tokenize various assets like stocks, bonds, and loyalty points. Unlike fiat-backed stablecoins, Hadron emphasizes asset management with regulatory tools like KYC and AML, and is compatible with multiple blockchain networks, including Bitcoin layer-2 solutions. This platform marks Tether’s continued expansion into traditional finance, aiming for accessible, transparent digital asset solutions.

VanEck predicts Bitcoin could reach $180K by mid-2025 amid bullish momentum

Bitcoin’s post-election rally mirrors its performance after the 2020 election, says VanEck Head of Digital Assets Matthew Sigel. With BTC already up 30% since early November, Sigel expects "repeated all-time highs" over the next two quarters, predicting Bitcoin will reach $180,000. CEO Jan Van Eck recently suggested BTC could hit $300,000 longer-term.

GOLD

Gold trading contrasts other assets due to unique supply dynamics, investor psychology, and cyclical price perception

Gold's enduring nature—added yearly without loss like other metals—causes unique trading patterns. Investors tend to sell as prices peak, seeing it as "expensive," and hold when they view it as undervalued. Currently, Chinese buyers show decreased interest post-rally, while Western markets may trigger a recovery as sentiment hits a pessimistic low. Analysts anticipate a possible upswing, though caution remains central.

DAILY ECONOMIC CALENDAR (ET)

MEME OF THE DAY