WealthBee Macro Monthly Report: Super Earnings Week for US Stocks Approaches, Crypto Market Sees Significant Recovery in October "Uptober"

In October, the Federal Reserve released its Beige Book, which revealed the current stable operation of the U.S. economy, alleviating traders' concerns about the macroeconomic situation. The U.S. election has become the main logic driving market transactions; the earnings season for U.S. stocks is approaching, and tech stocks suffered a significant drop at the end of the month. The crypto market has become a safe haven amid the uncertainties of the election, with Bitcoin nearing its historical high, signaling that a new crypto bull market may have arrived.

For the U.S. economy, November is a month of mixed signals: U.S. non-farm payrolls increased by 254,000 in September, exceeding the expected 150,000, with August and July's employment figures revised up by 72,000. The unemployment rate in September was 4.1%, lower than the expected 4.2%, down from 4.2% in August. Average hourly wages in September grew by 4% year-on-year and 0.4% month-on-month, both exceeding expectations; the Markit Manufacturing PMI preliminary value was 47.8 (expected 47.5), reaching a two-month high, while the Markit Services PMI preliminary value was 55.3 (expected 55), also a two-month high. The stable performance of economic data has been accompanied by high inflation: the U.S. CPI in September rose by 2.4% year-on-year, slowing from the previous value of 2.5% but exceeding the expected 2.3%; core CPI rose by 3.3% year-on-year, slightly above expectations and the previous value of 3.2%. This inflation data has directly overshadowed the debate over whether to cut rates by 25 or 50 basis points in November: almost everyone is betting on a 25 basis point cut, while a small number are betting on no cut, and the voices for a 50 basis point cut have completely disappeared.

Source: fedwatch tool

The current state of the U.S. economy and the moderate decline in inflation have basically indicated that the U.S. economy is undergoing a soft landing, and the macro risks are gradually fading from traders' views. The latest Beige Book released by the Federal Reserve in October mentioned that since early September, economic activity in most parts of the U.S. has not changed much, and inflationary pressures continue to ease. Overall, the Beige Book paints a moderate economic picture of "stable economic operation, easing inflation, and some economic indicators needing improvement," essentially characterizing the U.S. economy as moving towards a soft landing. But is it really just that? The Beige Book also repeatedly mentioned the uncertainty of the November U.S. elections, suggesting that the elections are one of the factors causing consumers and businesses to delay investment, hiring, and procurement decisions. Currently, the support rates for U.S. Vice President and Democratic presidential candidate Harris and Republican presidential candidate Trump are very close, which may lead both parties to resort to unexpected means in their struggle for power.

Overall, the U.S. economy has been characterized by the Federal Reserve as a soft landing, and the economic outlook is generally expected to have a positive impact on the market, meaning that political issues have become the main reason determining the short-term market trend, thus it is necessary to pay attention to the temporary risks brought by political issues. However, unexpectedly, Halloween also prepared a "trick."

Source: S&P 500 Index heatmap.

Following last month's record high for the Dow Jones, everyone was looking forward to the Nasdaq index catching up, especially hoping that the stock king Nvidia (NVDA) would continue to break historical highs amid numerous bearish voices about the "AI bubble" and start a new market trend.

However, unexpectedly, the U.S. stock market suffered a heavy setback on the last trading day of October, with all three major indices closing lower, and tech stocks generally declining. Among them, the Dow fell by 0.90%, the Nasdaq dropped by 2.76%, and the S&P 500 index also fell by 1.86%. Apple dropped by 1.82%, Nvidia fell by 4.72%, Microsoft by 6.05%, Google C by 1.96%, Amazon by 3.28%, Meta by 4.09%, and Tesla by 2.99%. Both the S&P and Nasdaq recorded their largest single-day declines since September 4, erasing the gains made in October. As Steve Sosnick from Interactive Brokers said, "Halloween brought many investors tricks, not treats. The market sentiment seems to be shifting from enthusiasm for anything AI-related to investors hoping that companies can deliver returns from their massive expenditures."

However, setting aside market sentiment, from the latest earnings reports of the "seven sisters" of U.S. stocks, Tesla (TSLA) performed remarkably well, surging 21.92% on October 24. The earnings report showed that Tesla's revenue in the third quarter increased by nearly 8% year-on-year, still below expectations, but the earnings surprise was significant, with the gross margin rising by 195 basis points year-on-year to 19.8%, and the automotive business gross margin exceeding expectations at 17.1%; revenue from "selling carbon" increased by over 30% year-on-year, reaching a record high for a single quarter. At the same time, the computational workload for AI training grew by over 75% in the quarter. During the quarter, Tesla deployed a cluster of 29,000 Nvidia H100 chips at its Texas Gigafactory and conducted training, expecting to have a capacity of 50,000 H100 chips by the end of October. AI has also become one of the core drivers of Tesla's stock price.

This month, in addition to the AI narrative, there has been an interesting new change in the U.S. stock market, namely that politics has surpassed macro factors to become the core logic of trading. Interestingly, Trump Media & Technology (DJT) surged nearly 250% this month, which seems to indicate that, at least in the U.S. stock market, traders are generally betting on Trump's victory. This is also a market vote made with real money, and the "Trump trade" has become the main theme of the current U.S. stock market. Trump's current policy inclinations are quite clear, such as increasing tariffs on imported products from other countries to protect domestic manufacturing. Therefore, traders are generally more optimistic about U.S. domestic companies, which is also one of the logics behind the continued rise of domestic tech giants.

This October, the U.S. stock market is in the lead-up to the election, coinciding with earnings season, and this combination of factors has further intensified market volatility. Meanwhile, stock markets in Japan, France, Germany, and other countries are generally in a "lying flat" state, quietly waiting for the changes brought by the U.S. election.

After seven months of sideways movement, Bitcoin has finally welcomed a significant bull market, approaching its previous high. Especially, the U.S. Bitcoin ETF has entered a period of intensive inflow in October, dubbed "Uptober."

Since the beginning of his campaign, Trump has played the "crypto card," steadfastly courting the votes of crypto investors. In July 2024, he amended the Republican Party's official platform to include the rights to "mine Bitcoin" and "self-custody of digital assets," boldly advocating for trading without "government surveillance." The Democratic Party has also gradually relaxed its hostility towards cryptocurrencies, passing Bitcoin and Ethereum spot ETFs during Biden's term. Although Harris is not as outspoken as Trump on cryptocurrency issues, her campaign team has been trying to attract support from the crypto community, expressing a willingness to explore regulatory frameworks that do not stifle innovation. It can be said that regardless of the outcome of this U.S. election, cryptocurrencies will usher in a new round of development. Therefore, cryptocurrencies have become a "promised land" for capital seeking refuge before the election, which is almost a clear logic. Historically, markets often experience a phase of increased volatility before elections, and investors' risk-averse sentiments and uncertainties about policies will lead to frequent fluctuations in crypto market prices. For example, during the 2020 U.S. election, Bitcoin's price experienced significant volatility over several weeks.

However, overall, in the absence of on-chain narratives, politics has become the main driving force. The integration of Bitcoin into the traditional world has spread from the financial sector to the political arena, officially becoming a crucial player in the world order.

It is worth mentioning that compared to Bitcoin, Ethereum's performance has been quite poor. For the past two months, Ethereum has been in a sideways state. From the ETF data, its inflows and outflows have shown little fluctuation.

One of the important reasons for Ethereum's current weakness is the siphoning effect from other public chains like Solana. Currently, there is a strong trend of "meme trading" in the crypto community, and Ethereum is not the main battleground for memes. The U.S. election has also led to the emergence of numerous meme coins featuring Trump on the Solana chain, which has siphoned off a large amount of funds from Ethereum. This temporary community factor cannot determine Ethereum's long-term trend. After the U.S. election, when the meme trading subsides, Ethereum may have the opportunity to emerge from the shadows and welcome back the oversold funds.

As concerns about the economic situation fade, the market has returned to the AI narrative. Although the U.S. election has many investors waiting for changes, the crypto market has unexpectedly become the optimal choice for investment at present. This may be a destined outcome, as Bitcoin is indeed a higher-quality investment asset, and more and more people will notice its safe-haven attributes. With the arrival and conclusion of the U.S. election and the gradual clarification of the global macro situation, the market may re-enter the AI narrative, and the crypto market is expected to remain active, potentially ushering in a prosperous scene of "dual soaring" for stocks and cryptocurrencies again, as seen in the first half of the year.