September 25: REX Wire Market Outlook

Last week the Fed, Bank of England, and Bank of Japan all held interest rates steady. However, Powell signaled (once again) that rates may remain high well into 2024. Bond prices fell further, and yields rose, on the news. Stonks sold at their fastest weekly rate this year.

The two-year U.S. Treasury note yield reached 5.2% on Thursday, marking a 1.4 percentage point increase since May and its highest level since 2006. The 10-year Treasury note yield is also nearing a 16-year high of 4.5%.

This, in turn, places more pressure on banks with large bond portfolios. It remains to be seen if any more major organizations will go under.

The FOMC's decision was unanimous. However, the committee is divided about future rate rises. Twelve officials see another hike this year, with seven believing rates have peaked. That's broadly reflected in the market's expectations.

Meanwhile Russia's ban on diesel exports helped oil take another leg upon its relentless march towards Saudi and OPEC+'s $100 target.

Shutdown

Congress has stalled on negotiations that would end the budget deadlock, with hard-line Republicans standing their ground. A resolution must be reached this week to avert a shutdown on Sunday, October 1.

This would be a source of significant pain, since a millions of federal employees would not receive pay checks, and many government services would be paused, with knock-on effects for local communities and sectors of the US economy. Markets would inevitably be affected, at least in the short-term, even if previous examples (like the 2013 shutdown) suggest it would not last.

House Speaker Kevin McCarthy has the unenviable task of finding consensus across his party, influential elements of which are adopting a "burn it down" approach.

The dollar's view of its government going into shutdown? Strengthen further, pushing riskier assets (i.e. almost everything) downwards. At almost 106, it's bumping against resistance, and a breakthrough could mean significant further gains—and pain for stocks and crypto as a result.

Crypto Takes A Leg Down

Bitcoin lost support in the closing hours of last week and dipped as low as $26,000. It has hit oversold on the 4h but volatility is still low in the grand scheme of things. The lines in the sand remain the same: $25,000 to the downside, and $28,000 to the upside. Breaking either of these will open the way to further declines or rises.

September, traditionally a terrible month for bitcoin, is almost at an end. October is historically more bullish, though this won't be enough to overcome any macro factors, should they arise. One potential catalyst we'll be watching is the SEC's next move on the Bitcoin spot ETF. There's some chance of that being approved on or before October 16. Otherwise, the decision will be bumped to 2024.

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