👀 Jackson Hole Jitters? Awaiting Fed's Message

Good Morning!

The financial world's eyes are on Jerome Powell this week. Ahead of his Jackson Hole address, markets are riding high on hopes for a dovish tone. Asian shares just hit a one-month peak, and even the Nikkei's shaking off yen woes. Fed speakers have been dropping hints about a September rate cut, making it unlikely Powell will rock the boat. The real intrigue? Whether he'll suggest an even bigger cut or drop any bombshells about the U.S. economy's future. Meanwhile, Sweden's central bank might join the rate-cutting party today, and Canada's inflation report could seal the deal for more cuts up north.

In today’s email:

• Fed Watch: Awaiting Powell’s Jackson Hole speech this week

• Bitcoin: Right around $61k again

• Gold: Could reach $3000/oz next!

• Stocks: Hitting highs in anticipation of dovish comments

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THE BIG IDEA

Unsettling parallels between current economic conditions and those leading to the 1929 stock market crash emerge, highlighting potential warning signs

As we navigate today's economic landscape, eerie similarities to the period preceding the Great Crash of 1929 are emerging. Just as the Roaring Twenties saw the U.S. dominate global finance, we're witnessing unprecedented market highs and economic optimism. However, beneath the surface, troubling signs are appearing.

The Federal Reserve's role is pivotal in both eras. In the 1920s, the newly created Fed's policies inadvertently fueled speculation. Today, the Fed's extensive market interventions and prolonged interest rates tinkering echo this historical pattern, potentially inflating asset bubbles.

Market innovations are another parallel

Margin trading amplified speculation in the 1920s; today, complex financial instruments and easy access to trading apps may be playing a similar role. The belief in perpetual growth, driven by technological advancements and modern business practices, mirrors the optimism of the 1920s.

Income inequality, a significant issue before the 1929 crash, is again at historic highs. This disparity could exacerbate economic instability, as it did in the lead-up to the Great Depression.

Moreover, just as the Fed struggled to control speculation in 1929, today's regulators face challenges in managing an increasingly complex financial system. The recent interventions to prevent market panics are reminiscent of efforts to stave off crashes in the late 1920s.

These parallels suggest we may be on a similar path to a significant market correction or economic downturn. While history doesn't always repeat, it often rhymes, and the similarities between now and 1929 are too striking to ignore.

MARKETS AT A GLANCE

TOP NEWS

Treasury yields hold steady as investors await Fed minutes and Powell's Jackson Hole speech, with markets pricing in a September rate cut

The Treasury market's playing it cool. Yields are barely budging as we gear up for a Fed-packed week. All eyes are on Wednesday's Fed minutes and Friday's Jackson Hole showdown. Markets are still betting on a September rate cut, but they're dialing back expectations for a big 50 basis point slash. Powell's speech at Jackson Hole is the main event – will he drop any rate cut breadcrumbs? Don't hold your breath for specifics, though. The smart money's on a modest 25 basis point cut, barring any major job market drama. It's a high-stakes game of monetary policy poker, and Powell's holding his cards close.

China maintains benchmark lending rates, signaling economic challenges despite recent policy moves

China's keeping its loan prime rates steady this month, surprising exactly no one. With banks' profit margins squeezed tighter than a subway at rush hour, further rate cuts were off the menu. July's surprise rate slashing spree hasn't quite delivered the economic punch Beijing hoped for. Bank lending's hit a 15-year low, and the economy's still feeling sluggish. Goldman Sachs' crystal ball sees more easing on the horizon – think reserve requirement cuts and another rate trim before the year's out. Beijing's determined to hit that 5% growth target, come hell or high water.

Asian stocks hit a one-month high as investors anticipate dovish signals from the Fed, with all eyes on Powell's upcoming speech

The Asian markets are buzzing like a beehive today. Stocks have climbed to a one-month peak, riding the wave of Wall Street optimism. Why? Everyone's betting on the Fed dropping hints about rate cuts. The Nikkei's on fire, shrugging off yen strength like it's yesterday's news. Meanwhile, the dollar's slumping to seven-month lows against major currencies. Gold's flirting with record highs, and oil's taking a breather. All eyes are now on Powell's Jackson Hole speech – will he open the door to a 50bp cut? The market's holding its breath.

CRYPTO

Bitcoin struggles below $60K due to institutional outflows, miner profitability concerns, and macroeconomic factors

Looks like Bitcoin's hitting some turbulence, folks. The king of crypto's stuck under the $60K mark, and it's not just one thing holding it back. We've got a triple threat: institutional investors are pulling out of spot ETFs, miners are sweating over their profit margins, and the global economy's sending mixed signals. Japan's carry trade drama seems to be settling, but now we're watching the Fed's next move like hawks. Goldman Sachs is feeling optimistic about dodging a recession, but that might not be enough to push BTC over the $63K hump. Until these headwinds calm down, Bitcoin might be stuck in this holding pattern.

Kaiko predicts tokenized Treasuries will remain attractive despite potential Fed rate cuts, with the market growing to nearly $2 billion

The tokenized Treasury train isn't slowing down anytime soon. Despite whispers of Fed rate cuts, Kaiko's sees continued investor interest in these digital darlings. Why? It's all about that sweet, sweet liquidity and security. BlackRock's BUIDL fund is leading the charge, raking in a cool $520 million since March. Even if the Fed trims rates, real rates might hold steady or climb, keeping these tokens tempting. The market's already hit a whopping $1.93 billion, with Ethereum hosting the lion's share. It's a digital gold rush in the Treasury world, and investors are still scrambling for their piece of the pie.

Report suggests SEC Chair Gary Gensler may be considered for Treasury Secretary if Kamala Harris wins the presidency, sparking skepticism and debate

Rumor has it that crypto's arch-nemesis, Gary Gensler, might be eyeing the Treasury Secretary gig if Kamala Harris wins the White House. The source? A right-leaning Washington Reporter with "unnamed sources." Gensler's been the boogeyman for the crypto crowd, slapping enforcement actions left and right. But not everyone's buying this story. Some skeptics think it might be a ploy to rile up crypto voters. Whether it's fact or fiction, one thing's for sure – the mere thought of Gensler with more power is sending shockwaves through the crypto world!

GOLD

Gold hits new highs as analysts predict prices could reach $3,000 per ounce by next year, driven by geopolitical uncertainties and potential Fed rate cuts

The yellow metal's hitting record highs, and analysts are betting it's got more room to run. We're talking $3,000 an ounce by next year! What's fueling this golden rush? A cocktail of global jitters – from election uncertainties to Middle East tensions – and whispers of Fed rate cuts. The smart money's watching for Powell's Jackson Hole speech this week for more clues. With interest rates potentially heading south, gold's looking more attractive than ever. It's a glittering outlook for the safe-haven favorite, as investors seek shelter from the storm.

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