SignalPlus Macro Analysis (20240527): ETH ETF is about to be approved, BTC ETF has seen net inflows for three consecutive weeks

Last week, the so-called "single pillar" market continued, with Nvidia almost single-handedly supporting the market. The persistently high PMI and inflation expectations, along with the noticeably more hawkish statements from the Federal Reserve, posed new challenges to the narrative of an ideal scenario. According to Wall Street observations, last week was the week with the least sector gains since October of last year, showing that market leadership momentum is increasingly concentrated, with Nvidia undoubtedly being the biggest contributor to last week's gains.

As we entered the long weekend, the U.S. Treasury yield curve showed a bull flattening trend, with the 2-year yield approaching 5% again. The interest rate market will focus on this Friday's PCE data, with the market expecting core PCE to grow by 2.8% year-on-year. Meanwhile, the stock market rose amid gradually decreasing trading volume and weakening market confidence, with valuations rising alongside a seemingly slowing economy, making it more difficult to form strong opinions, compounded by the Federal Reserve's limited influence.

Over the past 1.5 months, the divergence between economic data and unexpected inflation seems to have become more entrenched. Undeniably, U.S. economic data shows a trend of softening, while inflation data is moving in the wrong direction. At the same time, Bloomberg's new NLP model indicates that the language of Federal Reserve officials has clearly become more hawkish; however, the asset markets seem to ignore this, with foreign exchange, stocks, interest rate volatility, and credit spreads all hitting mid-term lows. Nevertheless, this situation is bound to change. Our view is that the macro market is currently somewhat shortsighted, with almost no stock short positions maintained over the past six months.

The cryptocurrency market continues to be buoyed by the rapid developments surrounding ETH ETF approvals, with issuers quickly submitting updated S-1 filings. ETH is expected to challenge $4000, while the ETH/BTC ratio has rebounded to its 6-month average. At the same time, the inflow of funds into BTC ETFs has also benefited, with strong cumulative inflows over the past three weeks. Finally, as the U.S. election day approaches, both competing sides seem to have decided to view cryptocurrency as a platform to attract young voters, such as libertarians and swing voters. Former President Trump has made a series of radical pro-cryptocurrency statements (including accepting cryptocurrency donations).