Stocks Spooked For 3rd Straight Month As WW3 Fears Spark Surge In USD, Gold, & Crypto (Not Oil)

Spooktober ends ugly...

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Wage inflation

Consumer and Fed expectations are rising faster than expected

Confidence drops


Expectations of inflation soaring


It's not the best way to end a month.

As Financial Conditions tightened,

For the third consecutive month, October, they

The economy was spooked by the failure to deliver


Source: Bloomberg

As the US began to realize that it was not in immediate danger of recession, and was actually experiencing one of the strongest quarters of growth in the last 20 years, came

Another leg up in rates

As Goldman's Chris Hussey points out, investor confidence in sustained US growth is rising.

The expectation that the Fed soon will need to CUT interest rates falls

If the Fed does not cut rates as much in 2024, as many people had predicted previously, then

Rates may need to be raised further toward

The ultra-short-term yield of the Fed Funds Rate -- currently between 5.25% and 5.50%.

Source: Bloomberg

Rates on the long term are higher, which is a deterrent to values

While the US economy's growth has been stronger than expected, the outlook for future growth is less robust.

Source: Bloomberg

Small caps fell over 7% during October. This is the third consecutive month of declines and the worst loss monthly since September 2022.

Nasdaq lost over 2% in the last month. This is also its third straight monthly loss.

Notice the initial bids on stocks for the Israel-Hamas War...

Source: Bloomberg

Utilities was the only sector that ended October in the black, with Energy and Consumer Discretionary being the largest losers...

Source: Bloomberg

The Long Bond yield increased by over 30bps in the last month, marking the 7th consecutive month that the Long Bond has seen its yield increase. However, the Short-end (2Y), remained essentially unchanged.

Source: Bloomberg

The yield curve (2s30s), for the fourth month in a line, steepened to its highest level since July 2022. (Dis-inverting multiple times within a single month )...

Source: Bloomberg

There was a massive increase in the volume of 10Y TSY Futures at today's close. TSY Prices fell and 10Y Yields rose 4-5bps in what appears to be a month-end pension rebalancing.

Source: Bloomberg

The real yield (10Y) has risen for the sixth month in a row to its highest level'since Lehman.' (Oct 2008. )...

Source: Bloomberg

The dollar has rallied for a 3rd consecutive month, reaching its highest monthly closing since November 2022.

Source: Bloomberg

The price movement in FX today is shocking.

USDJPY soared more than three figures from its overnight lows, (weaker JPY vs USD), after the BoJ sent mixed signals with its YCC adjustments...

Source: Bloomberg

JPY has been at its lowest since Oct 2022...

Source: Bloomberg

Although on a closing-basis, this is the weakest dollar relative to the yen since June 1990...

Source: Bloomberg

EURUSD rallied initially (despite low GDP and lower inflation), but when humans saw the reports, the euro dropped against the dollar.

Source: Bloomberg

Solana was the best performing crypto in October, outperforming ....

Source: Bloomberg

Bitcoin had its best month since Jan 2023. It soared above $35,000, the highest level since May 2022.

Source: Bloomberg

Ethereum has underperformed bitcoin (its largest monthly underperformance since Feb 2021 )...

Source: Bloomberg

Spot Gold has had its best month ever since March.

Futures have seen their largest month since July 2020

Starting the ramp when Hamas attacks Israel from $1820 up to $2020

NatGas, on the other hand, soared by over 23% in a month. This is its largest monthly gain since July 20,22.

Source: Bloomberg

WTI erased the post-Israeli attack gains...

Last but not least, some big picture nonsense. The US equity markets continue to struggle to maintain their extreme richness in relation to GDP, (Buffett’s favorite indicator), and have bounced off of the DotCom highs. Now they are back to that level - still massively undervalued...

Source: Bloomberg

Biden breaks the AI bubble

Source: Bloomberg

What next?

Happy Halloween!