There was a rally on Wall Street. Both the Dow and S&P are at fresh, all-time highs. Dow reached 34K for the first time. The S&P banked its first 4-week winning streak since last August. Growth is accelerating, economically and with earnings. Inflationary pressures have risen, but the Fed has been steadfast in its commitment to support. Asset prices keep soaring. From Stocks and Houses to Baseball Cards and NFT’s (Non-Fungible Tokens), stuff keeps catching a bid.
After a sharp spike in Q1, interest rates have fallen. In fact, Thursday saw the largest daily decline in 10-Year Treasuries since November. Sellers have become buyers. Japan is reported to be active here. The 10-Year yield went from 1.8% down to a 1.53% weekly low. That’s a big move in Treasury Town. That was fuel for stocks, particularly Growth. Tech had a good week, after a tough March.
The Dollar fell to a multi-decade low as percentage of market share of global reserves. It fell below 60% for the first time since 1995. It fell to a historic low at 46% of global reserves exactly 3 decades ago. It reached its high, well north of 70%, in the mid-2000s. The Euro was designed to rival the Dollar on the global stage. It has not lived up to that expectation. In case you were wondering, the Euro makes up nearly 1/4 of global reserves, its highest level in 6 years. The Japanese Yen represents 6%.
The Dollar remains the dominant world currency. But don’t look now, because Crypto is surging far and fast. Bitcoin hit another new record, reaching $64K. The Crypto Craze is on. Interest in cryptocurrencies surged this week, not so coincidental, with the direct listing of trading exchange platform Coinbase. It chose to go direct, bypassing the traditional IPO path. Demand was high. Could this mark a near-term top? We say probably. Coinbase surged 30% on its debut Wednesday morning. But it closed well below its opening price. It closed lower still on Thursday and eked out a gain Friday. The long-term potential for cryptocurrencies is real. The near-term hype seems a little overheated.
Investor and entrepreneur Peter Thiel recently caught headlines claiming that Bitcoin is being used as a financial weapon by China. There is no evidence to support that claim. However, China would definitely like to see the American Dollar replaced as the global currency. I will add that Russian President Vladimir Putin would too.
China is thinking big, really big. The #2 economic power wants to dominate the Digital Age. China could have eyes on overthrowing the Dollar as the global reserve currency from both a technological and economic perspective by advancing with their own central bank digital currency. China accounts for roughly 65% of all Bitcoin mining globally. In comparison, the United States accounts for just 7%. The Chinese government has backed the development of Bitcoin’s underlying blockchain technology. However, it has also cracked down on digital currencies themselves.
The Global Economy is accelerating in recovery. At least with the mighty. China posted record GDP growth in Q1, at a whopping 18%. Retail sales in the US grew nearly 10%, crushing expectations. People are spending. The re-opening of America is real. The vaccine rollout continues with strong momentum at home, despite the J&J pause. Not so much overseas. Virus spikes have many nations back on lockdowns.
Geopolitical tensions keep rising around China, Russia, North Korea and Iran. China was not declared a currency manipulator by the Treasury Department, but will remain on a watch list. Pressure is mounting on China’s activity around Taiwan, Hong Kong, with the Uighurs and in the South China Sea. The White House slapped sanctions on Russia, while offering up a summit. Stick and carrot tactics are back. The stakes are high. The Market shows little to no concern on this subject. Investors keep their focus on stuff, and stuff keeps catching a bid.
Have a nice weekend. We’ll be back, dark and early on Monday.