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Wall Street is being swallowed up by the multitrillion-dollar boom in risky assets that has been going on all year, and now international policymakers are fueling their support.
Following the Federal Reserve's dovish shift, previously unpopular market segments are seeing fresh rallies, propelled by the most recent "Goldilocks" economic data.
Meanwhile, countries worldwide, from Europe to China, are starting to embrace policy easing.
Emerging market stocks, businesses highly responsive to economic cycles, and speculative technology bets that do well in declining interest rate regimes are among the most recent assets to experience a price surge last week.
Do You Remember?
The top crypto token is bucking a seasonal jinx, and Bitcoin is poised for one of its biggest increases ever in September.
According to Bloomberg data, the cryptocurrency has risen around 9% this month, although historically, September has seen an average loss of 5.9%.
Global monetary policy easing has energized riskier parts of the crypto market, as seen by an index of smaller currencies that has surged over 20%.
Speculators have fueled outsized gains in smaller tokens.
Bitcoin climbed beyond $65,000 for the first time in the four weeks before Friday's expiration of options contracts, which BRN predicts can now cause further volatility in the cryptocurrency market.
A steep fall would ensue if prices dropped back below that mark, while a sustained rise may follow a successful break.
Bitcoin has often encountered resistance around the $65,000 mark.
According to Deribit data, the most popular Bitcoin option prices across all expirations are $100,000, $90,000, $70,000, and $65,000.
Dealers offering options contracts engage in "gamma hedging" when investors flood the market with trades to offset their exposures to rapid market movements.
The Fed, the European Central Bank, and the People's Bank of China all cut borrowing rates in September to bolster economic development.
In anticipation of future stimulus, investors reacted to looser monetary policy by increasing the prices of many assets, including equities and gold.
While the broad monetary policy shift is helping the top crypto token, Bitcoin's correlation with the Fed's monetary policy is still at its highest.
Even though the Fed is only now beginning to give its monetary medication, the latest avalanche of benign data shows that Corporate America is doing well and consumers are still in good health.
Thus, bears are being crushed on a daily basis.
Looking at the daily movement of markets is one approach to evaluating the risk-on-bonanza on Wall Street.
The cross-asset momentum index tracked by Societe Generale has reached its highest point in over a year.
The gauge tracking 11 momentum indicators peaked at its highest in over a year.
In addition, the indicator has only reached these bullish levels around 5% of the time, going back to 2011.
This despite its eleven components—including copper vs. gold, cyclical stocks versus defensive, cryptocurrencies, high-yield bonds, and more—flashing hot.
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A massive Fed reduction and stimulus from China drove market optimism soaring after investors had been hearing rumblings about recession risk, political unpredictability, and bad seasonals.
As hope rose that the world's largest economy is still expanding — despite its industrial sector's stagnation — animal spirits ignited in practically every asset class, from gold to crypto.
SG Cross Asset Momentum Indicator: Bullish Spirits Hit Maximum
The Fed's favoured inflation index rose slightly, but GDP data was robust, and the number of people filing for unemployment benefits fell.
The S&P 500 managed to scrape out a new gain last week, putting it on track for its greatest first three quarters since 1997, thanks to its 20% rise in 2024.
The latest indicator of trouble for equities bears is a 17% year-to-date increase in the price of a basket of the most-shorted stocks maintained by Goldman Sachs Group.
In spite of the so-called "everything rally," hedges of all kinds are failing to deliver.
In order to hedge against a catastrophic market collapse, the Cambria Tail Risk ETF is on track to lose money for the fourth year in a row.
Wake Me Up When September Ends
There is some more bad news. Despite a strong macro picture, momentum indications show that the excitement will be difficult to maintain going ahead.
Following a recent uptick in the Treasury market, the more precarious edges of the debt investment landscape are also on the rise.
With gains of almost 8% year-to-date, a Bloomberg index of US high-yield credit is set for its best start in five years.
The global community is bolstering positive sentiment.
Chinese stocks had their greatest week since 2008 thanks to the Politburo's stimulus commitments, the biggest since the pandemic.
Meanwhile, Saudi Arabia appears prepared to forsake its unofficial oil price objective, which might mean lower prices for a time.
Many other central banks worldwide have also signalled their intention to follow the Fed in decreasing interest rates to stimulate economic development. September saw the biggest month of easing since April 2020.
Elsewhere
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We spoke to Kash Razzaghi, New York-based Chief Business Officer at Circle, who discussed business and market trends in Asia and beyond, including cross-border payments and decentralized finance, and the stablecoin issuer's including its recent tie-up with Sony's blockchain unit.
Speaking to Gemini's APAC Lead, Saad Ahmed, we learned how the collapsed crypto exchange pulled a full 180 by returning $2.18 billion to its users following the Genesis bankruptcy. Ahmed shared how Gemini plans to restore its credibility, regrow, and more importantly, which Winklevoss twin would win in a crypto boxing match.
Finally, we caught up with Chiliz CEO, Alex Dreyfus, who shed light on the relevancy of fan tokens and how entwined they are with the official football clubs. He discussed how Chiliz is overcoming Web2 scepticism and why they were parading Fabio Cannavaro around Token2049 this year.
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