Goldman Shines with Surprise Earnings as Bitcoin's 'Sell the News' Phase Wanes

1. Digital Asset Market: The recent drop in Bitcoin's price, following the launch of spot exchange-traded funds (ETFs) in the U.S., has been influenced by traders on Binance, OKX, and Upbit. The cumulative volume delta (CVD) indicator shows that Binance traders led the sell-off, with other major exchanges also showing net capital outflows. However, exchanges like Coinbase and Bitstamp have seen net inflows, supporting the case for further price drops. Some analysts expect the sell-off to continue until Bitcoin's price reaches $40,000 or lower.

2. Macro Economics: An improvement in consumer and economic sentiment has economists feeling optimistic about 2024, with most saying America will not enter a recession. A recent survey showed that businesses are also feeling better. This week's incoming economic data is expected to support this cheery outlook. Meanwhile, a short-term budget plan has been announced and more will be learned in the coming week at the World Economic Forum's 54th meeting in Davos, where Chinese Premier Li Qiang has spoken confidently about his country's economic prospects.

3. Equities: The Dow Jones Industrial Average saw a 250-point decline as Apple's decision to offer discounts on newer iPhones in China drove down its stock. On the other hand, Goldman Sachs stock saw a rally after reporting fourth-quarter earnings that exceeded expectations. The 10-year yield also rose to 4.01%, while oil prices remained stable. At the same time, banks such as Morgan Stanley and PNC released their own Q4 earnings, with mixed results. As the week progresses, investors are keenly anticipating the release of U.S. retail sales data and the Philadelphia Fed manufacturing survey. Despite these developments, the Dow and S&P 500 fell while the Nasdaq continued its winning streak. In the midst of it all, Goldman Sachs reported higher-than-expected earnings and revenue for the fourth quarter of 2023, driven by a surge in equity sales and trading. However, the bank also saw its lowest annual profits in four years due to losses incurred from its exit from retail banking. Full-year net income dropped 24%, although Q4 net income rose 51% from the previous year. While full-year revenue decreased by 2%, Q4 revenue increased by 7%. Goldman Sachs reported Q4 EPS at $5.48, beating estimates of $3.51

4. The Fed and US Treasury: Federal Reserve governor Christopher Waller stated that interest rate cuts are likely this year, but the Fed should proceed cautiously and slowly to avoid potential risks of over-tightening. He noted the current strong state of the US economy, with low unemployment, strong GDP growth, and slightly above-target inflation, as being almost as good as it gets. Despite these positive indicators, Waller emphasized the need for prudence in monetary policy to avoid over-tightening. Economist forecasts for 2024 also show a lower chance of recession and continued economic growth, supported by recent data on inflation and producer prices and improving confidence among businesses and consumers. In addition, positive developments such as ongoing budget negotiations to avoid a government shutdown and encouraging remarks from Chinese Premier Li Qiang about China's economic performance at the World Economic Forum in Davos, are further fueling optimism about the US economic outlook.

5. Geopolitical: At the World Economic Forum in Davos, leaders from Ukraine have asked for more aid and support from the West, particularly in terms of financing and weapons, in their ongoing conflict with Russia. President Zelensky emphasized the need for air superiority and warned against attempts to "freeze" the war. The US has promised ongoing support, while NATO has suggested that Ukraine could eventually join the alliance. At the same time, Zelensky met with CEOs and top executives, including JPMorgan's Jamie Dimon, to discuss potential ways to finance their rebuilding efforts. White House representatives were also present, signaling continued support for Ukraine's economic recovery.

   In other significant news, former President Donald Trump won the Iowa caucus by a record-breaking margin, with Florida Gov. Ron DeSantis coming in second and former South Carolina Gov. Nikki Haley in third. Entrepreneur Vivek Ramaswamy ended his campaign and endorsed Trump after coming in fourth. Turnout was lower due to extreme weather conditions. Next up is the New Hampshire primary. Trump won 51% of the vote and 98 out of 99 counties. His hold on the Republican base appears strong, indicating we’re (sadly) headed to a 2020 rematch in the General Election.

View from our desk

The cryptocurrency market has demonstrated resilience following the initial sell-off triggered by the ETF news. Opportunistic buyers have capitalized on price dips, particularly at the $42K support level. This suggests that the market downturn might be short-lived, with signs pointing towards a rapid stabilization. With the upcoming Bitcoin halving and the dwindling supply, the entrance of new investors, including retirement funds, is anticipated to drive significant growth. By the end of the year, prices are expected to surpass current levels, with the potential for substantial upside outweighing the limited downside risks.

Meanwhile, The World Economic Forum's 54th meeting in Davos, traditionally a focal point for global economic discussions, is notably receiving diminished attention this year. This trend raises questions about the evolving relevance of such gatherings in shaping global economic policy and thought leadership. In previous years, Davos has been a platform for high-level dialogue and decision-making, influencing economic and political agendas worldwide. However, the current subdued interest may indicate a shift in the global economic community's priorities or a skepticism about the forum's impact in the face of rapidly changing global dynamics. This waning spotlight on Davos could also reflect a broader trend of decentralization in economic discourse, where localized issues and forums gain more significance. As the world navigates complex economic challenges, the role and influence of traditional platforms like the Davos meeting are being reevaluated, signaling a possible shift in how global economic strategies and policies are formulated and discussed.

Investors should prepare for a period of relative stability in the markets, punctuated by small oscillations. The expected quantitative tightening by the Fed, coupled with measures to ensure liquidity, suggests a cautious approach to managing the economy. For Bitcoin and other cryptocurrencies, the potential ETF approval represents a significant milestone that could redefine market dynamics. However, the broader economic factors, including Federal Reserve policies and Treasury yields, will continue to play a crucial role in shaping the investment landscape. As always, a balanced and informed approach to investment decisions is recommended in these evolving market conditions.

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The 1Konto Team

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