🤔 Tech Valuations: Cheaper, But Are They Worth It? 💸

Good Morning!

Thursday's trading session is marked by ongoing volatility, with significant fluctuations in Asian and European markets and a focus on U.S. economic indicators. The Nikkei index in Japan started with a 2.5% drop but managed to rebound by midday. Tech stocks continue to struggle, with Nasdaq futures initially down 1.3% before recovering slightly. Bond yields spiked after a poor 10-year Treasury auction, but early trading saw some recovery. Investors are wary of a U.S. economic downturn, yen carry trade unwinds, and an AI bubble. Richmond Fed's Thomas Barkin will also speak, potentially influencing market sentiment. Brace yourselves for another bumpy ride in the markets today!

In today’s email:

• Fed Watch: Not behind the curve in preventing a recession

• Bitcoin: Still taking a breather here around $57k

• Japan: Stock market trading like a penny stock or a shitcoin?

• XRP: Hit with a $125M fine putting an end to their SEC woes

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THE BIG IDEA

Tech stocks are back on the menu, folks!

After a rollercoaster ride that saw the Nasdaq 100 drop more than 13% from its July high, some brave souls are tiptoeing back into the market. Why? Because those juicy price-to-earnings ratios are looking a bit more palatable. But hold your horses—tech valuations are still above the 10-year average, so it’s not exactly a bargain bonanza.

Blame the sell-off on everything from economic jitters to the unwinding of yen-funded carry trades. But savvy investors smell opportunity. The S&P 500 tech sector is now trading at 26.1 times expected earnings, down from a sky-high 31.3 last month. It’s like tech stocks are on sale, but with a “no returns” policy.

Despite mixed earnings from heavyweights like Alphabet and Microsoft, and Warren Buffett’s Berkshire Hathaway trimming its Apple stake, the allure of tech is hard to resist. Hedge funds recently went on a buying spree, snapping up tech stocks like they were limited-edition sneakers. Robert Pavlik from Dakota Wealth is cautiously adding to his tech stash, convinced the fundamentals are still solid.

Let’s not forget the “Magnificent Seven” stocks, which have taken a beating

Nvidia is down nearly 27%! Yet, these megacap tech giants are still seen as safe havens, thanks to their rock-solid balance sheets. With economic uncertainty looming, investors might just flock to these stocks for a little security blanket action.

As we brace for upcoming U.S. jobless claims and inflation data, the big question is: will tech stocks rebound, or are we in for another market mood swing?

Keep your eyes peeled—this could be the perfect storm for savvy investors to make their move. So, are you ready to ride this wave, or are you sitting this one out?

MARKETS AT A GLANCE

TOP NEWS

The Fed is not yet behind the curve in preventing a U.S. recession

Despite being somewhat late in cutting interest rates. Markets haven't priced in a Fed policy stance that would stimulate the economy soon, reflecting doubts about a deep recession. Recent market volatility, spurred by a sharp rise in the U.S. jobless rate and tech stock shakeouts, has led to expectations of significant Fed rate cuts. Futures now anticipate 115 basis points of cuts by year-end, with JPMorgan projecting two half-point cuts in September and November. Despite these forecasts, the Fed's real policy rate remains high, suggesting markets are not fully pricing in a recession. The Fed's upcoming decisions, including a likely September rate cut, will be closely watched, especially as the labor market softens.

Japan's stock market is trading like a penny stock, with wild swings and uncertainty

The Japanese stock market is on a wild ride, swinging like a penny stock as it grapples with erratic trading and external pressures. The Nikkei Average recently plummeted 12% due to a soft U.S. jobs report and a Bank of Japan rate hike. Investors now face a dilemma: is this a market correction revealing deeper issues, or a chance to snag undervalued gems? With Japan's economy moving toward normalization after years of ultra-loose policies, it’s bound to be a bumpy—but potentially rewarding—journey for those brave enough to dive in!

Analysts are bullish on Asian currencies as Fed rate cut bets rise

Analysts have turned bullish on major Asian currencies like the ringgit, yuan, baht, and peso, thanks to expectations of Fed rate cuts and a yen carry trade unwind. Bullish bets on the Singapore dollar are at their highest since last year, while the Indian rupee faces bearish sentiment. Despite potential Fed easing, Goldman Sachs warns the dollar remains a "high carry currency," limiting its downside.

Japan made a historic move to stabilize its currency by spending a record 5.92 trillion yen

Japan made headlines with a record-breaking yen-buying intervention, splashing out 5.92 trillion yen ($41 billion) on April 29 to prop up its currency against the dollar. This was followed by another 3.87 trillion yen two days later, marking a quarterly record of 9.79 trillion yen spent. The yen's rapid decline had alarmed authorities, prompting these stealthy maneuvers to stabilize the market and keep traders on their toes.

CRYPTO

Bitcoin could be a steal as the Mayer Multiple hits its lowest since the FTX fiasco!

This valuation metric suggests Bitcoin might be undervalued, with the Multiple at 0.93, well below the buy signal of 2.4. While some analysts see this as a golden opportunity, others advise caution, expecting potential dips. Keep an eye on those support levels!

FTX and Alameda are shelling out $12.7 billion to creditors, with a trading ban slapped on top

A New York judge has ordered FTX and Alameda to cough up $12.7 billion to creditors, closing a 20-month CFTC lawsuit. While they dodge civil penalties, they're banned from trading digital assets. This follows the downfall of founder Sam Bankman-Fried, now serving 25 years for fraud. The crypto drama continues!

Bitcoin ETFs bounce back with $45 million in inflows, while ether ETFs face $23 million in outflows

After a rough patch, U.S. spot bitcoin ETFs are back in the green with $45 million in net inflows, led by BlackRock's IBIT. Meanwhile, ether ETFs aren't faring as well, seeing $23 million in outflows, mainly from Grayscale's ETHE fund. The crypto market's seesaw continues, with investors keeping a close watch on these trends!

Ripple ends its SEC saga with a $125 million fine, sending XRP soaring 18%

A New York judge has slapped Ripple with a $125 million fine, wrapping up a four-year SEC lawsuit over unregistered XRP sales. While the SEC originally sought $2 billion, the court's decision marks a significant win for Ripple. XRP's price surged 18% following the news, reflecting investor optimism as Ripple looks to move forward.

GOLD

Gold's been shining bright, and investors have questions!

Robin Tsui from State Street Global Advisors dives into the top queries: where gold prices are headed, how much to allocate, and the best investment methods. With prices potentially hitting $2,700, he suggests a 2-5% portfolio allocation. Remember, gold's not just a solo act—it's all about how it plays with other assets!

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