In October, the Federal Reserve released the Beige Book, which revealed the current stable state of the US economy, dispelling traders' concerns about the macroeconomic situation. The US election became the main logic driving market trading; the US earnings season is approaching, and technology stocks suffered a sharp decline at the end of the month; the cryptocurrency market has become a haven for the uncertainty of the election, with Bitcoin approaching a new historical high, and a new cryptocurrency bull market may have arrived.
For the US economy, November is a month of mixed feelings: US non-farm payrolls increased by 254,000 in September, higher than the expected 150,000, and the combined revisions for August and July were 72,000. The September unemployment rate was 4.1%, lower than the expected 4.2%, and 4.2% in August. September average hourly wages grew 4% year-on-year and 0.4% month-on-month, both higher than expected; the Markit manufacturing PMI preliminary value was 47.8 (expected 47.5), a 2-month high, and the Markit services PMI preliminary value was 55.3 (expected 55), a 2-month high. The stable economic data performance is accompanied by high inflation: US September CPI rose 2.4% year-on-year, slowing from the previous 2.5% but exceeding the expected 2.3%; core CPI rose 3.3% year-on-year, slightly higher than the expected and previous 3.2%. This inflation data has directly overwhelmed the debate on "whether the Fed will cut rates by 25 or 50 basis points in November": currently, almost everyone is betting on a 25-basis-point rate cut in November, and there are only a few people betting on no rate cut, the voice of a 50-basis-point cut has completely disappeared.
Source: fedwatch tool
The current state of the US economy and the moderate decline in inflation have basically shown that the US economy is in a soft landing, and the macroeconomic risks are gradually fading from the traders' view. The latest Beige Book released by the Federal Reserve in October mentioned that since early September, economic activity in most regions of the US has changed little, and inflationary pressures have continued to ease. Overall, the Beige Book paints a mild economic picture of "stable economic operation, easing inflation, and some economic indicators needing improvement", basically characterizing the US economy as heading towards a soft landing. But is it just like that? The Beige Book also mentioned the uncertainty of the US election in November several times, believing that the election is one of the factors causing consumers and businesses to postpone investment, hiring, and procurement decisions. Currently, the support rates of US Vice President and Democratic presidential candidate Harris and Republican presidential candidate Trump are very close, which may lead to the two parties using unexpected means to fight for power.
Overall, the US economy has been characterized by the Federal Reserve as a soft landing, and the current economic situation has a basically positive impact on the market, meaning that political issues have become the main reason for determining the short-term market trend, so attention should be paid to the temporary trading risks brought by political issues. However, unexpectedly, Halloween also prepared a "joke".
Source: S&P 500 Index heatmap.
After the Dow Jones Index hit a new high last month, everyone was expecting the Nasdaq Index to catch up, especially hoping that the "king of stocks" Nvidia (NVDA) would continue to break through historical highs amid the many voices shorting the "AI bubble", and start a new market trend.
But unexpectedly, the US stock market suffered a severe setback on the last trading day of October, with the three major indices collectively closing lower, and technology stocks generally declining. Among them, the Dow Jones Index fell 0.90%, the Nasdaq fell 2.76%, and the S&P 500 Index also fell 1.86%, with Apple falling 1.82%, Nvidia falling 4.72%, Microsoft falling 6.05%, Google C falling 1.96%, Amazon falling 3.28%, and Meta falling 4.09%, Tesla falling 2.99%. The S&P and Nasdaq both recorded their largest single-day declines since September 4, wiping out the gains made in October. As Steve Sosnick of Interactive Brokers said, "Halloween brought tricks, not treats, to many investors. The market sentiment seems to be shifting from being excited about anything related to AI to investors hoping companies can get a return on their massive spending."
However, setting aside market sentiment, looking at the latest earnings reports of the "Seven Sisters" of US stocks, Tesla (TSLA)'s performance was quite impressive, surging 21.92% on October 24. The earnings report showed that Tesla's revenue grew nearly 8% year-on-year in the third quarter, still lower than expected, but the profit surprised, with gross margin rising 195 basis points year-on-year to 19.8%, and the automotive business gross margin exceeding expectations to rise to 17.1%; "carbon credit" revenue grew more than 30% to a single-quarter high. Meanwhile, the third quarter saw a growth of over 75% in the computing power used for AI training. During the quarter, Tesla pre-deployed a cluster of 29,000 Nvidia H100 chips at its Gigafactory in Texas, and conducted training, and is expected to have a capacity of 50,000 H100 chips by the end of October. AI has also become one of the core drivers of Tesla's stock price.
This month, in addition to the AI narrative, there has been an interesting new change in the US stock market, with political issues surpassing macroeconomic issues as the core trading logic. Interestingly, Trump Media & Technology (DJT) surged nearly 250% this month, which seems to indicate that at least in the US stock market, traders generally bet on Trump's victory, which is also the market's vote with real money, and the "Trump trade" has become the current theme of the US stock market. Trump's current policy tendencies are relatively clear, such as increasing tariffs on imported products from other countries, thereby achieving the purpose of protecting domestic manufacturing. Therefore, traders are generally more optimistic about US domestic companies, which is also one of the logics behind the continued surge of domestic tech giants.
This October, the US stock market is on the eve of the election, and it is also the earnings season, the superimposition of these two factors has further aggravated the volatility of the market. Meanwhile, the stock markets of Japan, France, and Germany are in a "lying flat" state, quietly waiting for the turning point events brought about by the US election.
After a seven-month sideways consolidation, Bitcoin finally saw a decent main uptrend, approaching its previous high. Especially the US Bitcoin ETF, which saw a period of intensive inflows in October "Uptober".
'MEME' must be translated into 'MEME'.
'Solana' must be translated into 'Solana'.
'Amp' must be translated into 'Amp'.
'SOL' must be translated into 'SOL'.
'HT' must be translated into 'HT'.
'AR' must be translated into 'AR'.
'AMP' must be translated into 'AMP'.
'meme' must be translated into 'meme'.
Trump has been playing the "crypto card" since the beginning of the election, firmly courting the votes of crypto investors. In July 2024, he revised the official Republican platform to include the "right to mine Bitcoin" and the "right to self-custody digital assets," boldly advocating for "unregulated transactions." The Democratic Party has also gradually relaxed its hostility towards cryptocurrencies, passing Bitcoin and Ethereum spot ETFs during Biden's term. Although Harris is not as outspoken on cryptocurrency issues as Trump, her campaign team has tried to attract the support of the crypto community in the late stage, expressing a willingness to explore a regulatory framework that will not stifle innovation. It can be said that regardless of the outcome of the US election, cryptocurrencies will usher in a new round of development. Therefore, cryptocurrencies have become the "promised land" for capital hedging before the election, which is almost an open secret. Looking at history, the market often experiences a period of increased volatility before the election, and investors' risk aversion and policy uncertainty will lead to frequent fluctuations in the crypto market prices. For example, during the 2020 US presidential election, the price of Bitcoin experienced significant fluctuations within a few weeks.
But overall, in the absence of on-chain narratives, the political aspect has become the main driving force. The integration of Bitcoin with the traditional world has spread from the financial field to the political field, officially becoming an important member of the world order.
It is worth mentioning that compared to Bitcoin, the performance of Ethereum has been quite poor. For the past two months, Ethereum has been in a sideways trend. From the ETF data, its inflows and outflows have remained relatively stable.
One of the important reasons for Ethereum's current weakness is the siphoning effect of other public chains such as Solana. Currently, the "MEME" craze is hot in the crypto community, but Ethereum is not the main battlefield for MEME. The US election has also led to the emergence of countless MEME coins with Trump's image on the Solana chain, which has also drained a lot of funds from Ethereum. This temporary community factor cannot determine Ethereum's long-term trend. After the US election, when the MEME hype subsides, Ethereum may be able to emerge from the shadow and regain the funds that have been oversold.
As the concerns about the economic situation subside, the market has returned to the AI theme. Although many investors are waiting for the outcome of the US election, the crypto market has unexpectedly become the best investment choice at the moment. This may be a predestined outcome, that Bitcoin is indeed a higher-quality investment asset, and more and more people will notice its hedging properties. With the arrival and conclusion of the US election, and the gradual clarification of the global macroeconomic situation, the market may re-enter the AI theme narrative, and the crypto market is expected to remain active, and may once again usher in the prosperous "stock-coin double flight" seen in the first half of the year.
