WealthBee Macro Monthly Report: The US Economy Exceeds Expectations, the Crypto Market Enters a Consolidation Period

Author: R3PO

The economic data released in July in the United States exceeded expectations, indicating that the U.S. economy is very strong, which surprised the market; with Tesla and Netflix's performance falling short of expectations, tech stocks collectively pulled back, and the Nasdaq index recorded its largest decline in over four months this month; the cryptocurrency market was stuck in a sideways consolidation in July, with BTC prices dropping below $30,000 and ETH prices falling below $1,900, but with the U.S. passing a crypto bill, crypto assets may enter a new phase.

On July 6 local time, the U.S. reported that the ADP employment numbers for June surged by 497,000, doubling the expected 228,000, marking the largest monthly increase since February of last year and far exceeding the previous value of 278,000. The data indicates that the U.S. labor market showed no signs of slowing down in June.
Despite the exceptionally good ADP data, the subsequently released non-farm payroll data appeared somewhat disappointing. The Labor Department's report showed that non-farm employment in the U.S. increased by 209,000 in June (expected increase of 230,000), the smallest increase since December 2020. Notably, the non-farm data had previously exceeded market expectations for 14 consecutive times, breaking the streak at "15." The official data from the Labor Department diverged significantly from ADP, but this is not unusual, as ADP data primarily reflects the situation of global leading enterprises, while non-farm data is a relatively broader sample, so it should not be over-interpreted. From the perspective of unemployment claims, employment pressure is also on a downward trend, thus it remains an undeniable fact that the U.S. job market remains strong.

Similarly, the release of the U.S. June CPI also caught the market by surprise. Data released by the U.S. Bureau of Labor Statistics on July 12 showed that the U.S. June CPI rose by 3% year-on-year, slightly below the market expectation of 3.1%, and the previous value was 4%. This marks the twelfth consecutive month of decline in the year-on-year CPI increase since it peaked at 9.1% in June 2022, the smallest increase since March 2021. The U.S. June core CPI rose by 4.8% year-on-year, below the market expectation of 5%, with the previous value at 5.3%. The lower-than-expected CPI indicates that inflation in the U.S. has slowed down.

The strength of the employment data did not lead to an unexpected rise in CPI, indicating that the U.S. economy is temporarily very healthy. After the CPI data was released, the Chicago Mercantile Exchange's FedWatch tool showed that investors believed there was a 92.4% probability that the Federal Reserve would raise interest rates by 25 basis points at the July meeting, but a 75.8% probability that this would be the last rate hike of the year.
Investor expectations were very accurate. On July 26, the Federal Reserve raised rates by 25bp, in line with market expectations, but whether this would be the last rate hike remains controversial in the market. Looking at U.S. Treasury yields, the yield on the ten-year Treasury bond reached a recent high. Generally speaking, inflation is positively correlated with long-term risk-free interest rates. The rise in Treasury bonds also suggests that the U.S. may still face inflationary pressures. Additionally, the Federal Reserve's inflation target is 2%. Although the CPI has continuously exceeded expectations in its decline, the target has still not been met. Therefore, WealthBee believes that the likelihood of the Federal Reserve continuing to raise rates in the future is high, but the intensity will be much weaker.

Likewise, the preliminary value of the U.S. July Markit Manufacturing PMI was 49, the highest in three months, significantly above the expected 46.2, with the previous value in June at 46.3. However, the preliminary value of the U.S. July Markit Services PMI was 52.4, the lowest since February of this year, below the expected 54, and down from the previous value of 54.4 in June, although the services sector still achieved six consecutive months of expansion. The significant outperformance of the Manufacturing PMI and the resilience of the Services PMI also indicate that the U.S. economy remains resilient, and we maintain an optimistic outlook on the U.S. economy going forward.

So far this year, the Nasdaq has risen by 38%, but this increase mainly comes from the seven largest weighted stocks—Microsoft, Apple, Alphabet, Nvidia, Amazon, META, and Tesla.

On July 20, U.S. tech companies Netflix and Tesla led the earnings reports for tech stocks, but the results were disappointing. Although Netflix's subscriber loss was not as severe as expected, it still represented negative growth, and its stock price fell by 8%; Tesla's stock price also plummeted, with a decline of up to 6%, despite revenue and earnings exceeding expectations, attributed to profit margins being below expectations, and the impact of the price war is expected to expand. Musk stated in the second-quarter earnings call, "If the overall economic environment worsens, Tesla will continue to lower prices." Musk indicated that Tesla is willing to further reduce prices if necessary.
The decline in the stock prices of Netflix and Tesla also dragged down other tech stocks, further pulling down the entire Nasdaq index. The Nasdaq index fell more than 2% on July 20, marking its largest decline in over four months.
The deep entanglement of the Nasdaq index with tech giants has become a hallmark of the index, however, Nasdaq announced that it would conduct a "special rebalancing" of the Nasdaq 100 on July 24 to ensure that the weight of the five largest companies remains below 40%. WealthBee believes that this adjustment is purely for regulatory purposes, aimed solely at reducing the influence of tech giants on the index, and has no other implications. Therefore, Nasdaq's actions will not have too much negative impact on the market.
It is an undeniable fact that the Nasdaq index has entered a technical bull market. From a technical perspective, although the index has recently undergone adjustments, there are no signs of a peak. A bull market does not signal a top; respecting the trend is the only thing investors can do.

On July 13 local time, U.S. Federal Judge Analisa Torres ruled that Ripple Labs Inc. did not violate federal securities laws by selling XRP tokens on public exchanges and through algorithms, marking the first favorable ruling for Ripple by a U.S. judge, which may set a precedent for future token classification cases, eliciting cheers from the crypto community.

As a result, the price of cryptocurrencies surged that day, with Bitcoin reaching a high of 31,830 USDT and Ethereum climbing to 2,029.07 USDT, both hitting new highs for the period. Coinbase's stock price rose by over 24% in a single day.
This month, the SEC continued to pull back and forth on many cryptocurrencies, but another piece of news may put an end to all this back and forth: the U.S. passed a blockchain bill, putting BTC's global application on a countdown.
On Wednesday, the U.S. House Financial Services Committee approved the "21st Century Financial Innovation and Technology Act," supported by cryptocurrency advocates, which establishes clearer rules for the emerging industry. This legislation will set rules for when cryptocurrency companies must register with the SEC or CFTC. It provides a process for digital asset issuers to prove to the SEC that their blockchain networks are sufficiently decentralized, which will allow relevant tokens to be classified as commodities regulated by the CFTC. This means that only the CFTC and exclusive agencies will have regulatory authority, and the previous SEC handling plan may face "nullification."
Although Democrats are not satisfied with this Republican-led bill, believing it caters to giants applying for Bitcoin ETFs, the bill ultimately passed the vote. After the Mt. Gox collapse and the FTX bankruptcy, a comprehensive crypto bill has finally emerged after ten years, which will play a crucial role in addressing the global chaos in crypto. U.S. lawmakers stated that the U.S. is opening a new chapter in the digital age.
This month, the cryptocurrency market was generally in a volatile state, with Bitcoin prices dropping below $30,000 and Ethereum prices falling below $1,900. With the passing of the crypto bill, the crypto market is beginning to rebound. In fact, from a technical perspective, blue-chip cryptocurrencies have remained in a sideways pattern without breaking support levels, so the recent movements can temporarily be viewed as a washout, and there is no need to panic. News will only accelerate trends but will not change cycles. Even without news of the bill, we still have a positive outlook on the future performance of the crypto market. WealthBee believes that the current sideways adjustment period in the crypto market is a favorable time to enter the market, and investors can seize better investment opportunities during this phase.


The entire month of July can be summarized as follows: the U.S. economy remains strong, the U.S. stock market is still in a technical bull market, and the cryptocurrency market is in a sideways consolidation phase, under which circumstances, investors can choose to appropriately increase their positions.

In fact, since the beginning of the year, there has been a continuous stream of bearish remarks about the U.S. economy and the U.S. stock market, but the reality has consistently exceeded our expectations. U.S. non-farm data has exceeded expectations for fourteen consecutive times, inflationary pressures have significantly decreased, and the U.S. stock market has been rising steadily. Recently, the market has become increasingly optimistic; however, countless experiences tell us that the market always rises amidst skepticism and peaks amidst unanimous optimism. Therefore, in the face of the rise in U.S. stocks, we need to remain rational, but in the face of the panic washout of Bitcoin, we may choose to increase our positions. The passage of the U.S. crypto bill may be a milestone; although various interest groups will inevitably pull back and forth, the statements generated by these pulls are undoubtedly noise. Investors should filter out the noise, think independently, and find opportunities that suit them.