The Stock Market
Global Market: S&P 500 & NASDAQ
The S&P500 and NASDAQ have shown steady upward trends from the start of the year as markets are in a steady ascend. Both indexes are up 15.51% and 29.81% from that period, and the NASDAQ could be en route to its highest green streak since 2019. The question marring investors’ optimism is whether this is a genuine bull run or a fake out. Big tech players have been given significant boots as a new wave of support for artificial intelligence has once again swept the market. Promises of productivity boosts, generative AI and many other use cases could fuel a new dot.com bubble-like era. Hence it is essential to keep a sense of the hype.
Key financial experts like David Rosenberg, Morgan Stanley’s CIO Mike Wilson and Jeremy Siegel all believe there is no fundamental backing behind the stocks’ rallies. Talks of a recession have been around for many months, and these greens should not be seen as a sign that the storm is over. Inflation pressures and unemployment claims in the US remain high, suggesting that tech stocks profits could begin to decline. Alternate view holders like Goldman Sachs believe that the excitement around AI might fuel an economic expansion instead as the positive effects spill over into other sectors, thus lowering their estimates for a recession from 35% to 25%.
Global Market: FTSE100
Over in the UK markets, things remain volatile, as has been the trend for 2023. At its latest closing, it has been on a slight boost from the start of June, closing at 7672.72 on 16th June. The domestic housing crisis has muted any rises in the utilities, healthcare and consumer staples as the UK’s largest building materials supplier, Travis Perkins, dropped by 6.7% over the past week. Inflation remains the nation’s greatest challenge as the ECB and BoE continue to develop cooling measures following unexpected inflation just two months ago.
Clean Power News: Decarbonisation Targets
With a government as unstable as its inflation, a by-product of the UK’s economic situation is its struggle to abide by its inflation targets. Labour and Conservative parties have set targets for 2030 and 2035, respectively, but Sir Dieter Helm, professor of economic policy at the University of Oxford, is doubtful that either goal is feasible. He remarks that such ambitious policies can only be borne out by further taxpayer funding, but that will not be a priority in this market. Green marketing has become a part of political parties’ polling strategies in recent years so it will be a great challenge for them.
To give credit where it is due, the UK has been one of the fastest rates of decarbonisation in recent years. They have made explicit promises, such as the publicly owned clean energy company GB Energy, to be created to hit these targets. Nevertheless, the country needs to recognise the technological and logistical challenges of rapid development, such as slow grid connections and skill shortages, to name a few that will only be further bumps on their road to carbon neutrality.
The Crypto Market
Cryptocurrency Market: Bitcoin & Ethereum
Cryptocurrencies’ recovery at the end of March this year came to a jarring halt after decreased faith in the product following the SEC’s Wells notices issued to first Coinbase and, recently, Binance. Temporarily, customer funds access has been limited to Binance.US employees, but repercussions have already been seen in the market. This is reflected in stagnant, slightly downward trending slopes in both Bitcoin and Ethereum prices. Prices are roughly similar to those a month ago, closing at 26612.50 and 1745.36, respectively. However, we should remember that prices came in after a slight optimism rebound by investors following Investment Bank BlackRock’s filing for a Spot Bitcoin ETF.
To casual investors, market signals indicate that cryptocurrencies are easy to avoid for now and maybe in the near future, but institutions have a different take. The digital assets team of Nomura, Laser Digital, recently surveyed institutional investors and discovered that 82% of them remain optimistic about Bitcoin and Ethereum, and 91% see digital assets as the all-purpose tool for covering risks associated with fiat currencies.
Regulation News: Securities Exchange Commission (SEC)
Let’s first understand the SEC’s actions to understand what these trends mean. SEC director Gurbir Grewal has expressed his disdain for the Cryptocurrency industry, stating that it is built entirely around non-compliance. In March, the SEC first issued a Wells notice to Coinbase, informing that enforcement action may be taken against them, which eventually escalated into a lawsuit over several tokens on their exchange being “unregistered securities”. Earlier in June, Binance was also sued by the SEC, claiming that their platform is misleading investors and that it is an unregistered exchange. Much like any bank run, this will surely spook cryptonatives leading to downfalls seen in the past three months. Binance has also been under the watchful eye of the Commodity Futures Trading Commission, which sued them earlier in March for poor compliance.
It is understandable why regulators, whose mission is to audit companies for unsafe investing practices, would crack down on decentralised products as their value proposition is to be self-regulated. Backing from BlackRock came to these exchanges’ rescue in the nick of time. Their proposed iShared Bitcoin Trust will bring about the checks and balances the SEC wants to see from these products as NASDAQ will be brought in under a surveillance-sharing agreement with an operator of the spot trading platform. This is an auditing tool where a third party, NASDAQ, can make market activity, customer identification and chances of market manipulation. Looking ahead, it is clear that a roadmap needs to be in place to make clear what needs to be addressed by governing bodies concerning digital assets.
Innovation News: Asian Markets
The politicisation of digital assets only bogs progress toward unlocking the financial potential of cryptocurrencies. The Laser Digital Survey has clarified that experts can see the use case for digital assets, but that can never be realised as long as the legislative framework is unclear. In the US, democrats and republicans already have differing views on digital assets, and to make matters more confusing, there are too many commissions that only make standardisation harder compared to Asia markets.
Tokenisation and the integration of blockchain into financial services continue to underpin institutional investors’ interest as web3.0 believers need to ensure this continued interest remains to tide through these uncertain times. Investors should look out for signs of whether this will chain off losing interest from the Asian markets as their sustained interest will be the US pressured to continue investing time and effort into cryptocurrency. However, if global competitors also become pessimistic, there could be a lack of incentive to build these legislative frameworks.
For now, signs in both Hong Kong and Singapore look positive. Recently, the Hong Kong Monetary Authority has encouraged HSBC and the Bank of China to take on crypto clients amidst these complications. Lawmaker Johnny Ng even invited crypto exchanges to consider the Hong Kong market. Over in Singapore, the Monetary Authority of Singapore has given Syngum, a fiat-digital asset brokerage, in-principle approval from regulators to obtain their significant payments institution license. It will be difficult for the US to continue dragging their feet in fear of losing out.
In Other News…
Short Updates:
UK Biobank – UK Biobank is set to receive £127.6 million to fund a facilities upgrade to Manchester Science Park. This marks a small victory for UK R&D following the governments decision to rescind £1.6 billion for funding related to science and research.
European Innovation Council – The latest batch of 51 startups in the EIC Accelerator Program is touted to receive a total of 261 million Euros in the form of grants and equity investments. Additionally, 29% of the startups have women amongst their C-Suite, marking a positive step forward for representation in the EU’s Deep Tech plans.
