Market report

Good end to 2023 but difficult start to the new year, Bitcoin becomes socially acceptable.

January 16, 2024
5 min.
Good end to 2023 but difficult start to the new year, Bitcoin becomes socially acceptable.

Chart of the week

Source: Twitter, Game of Trade, @GameofTrade, 13.01.2024

The chart shows the extent to which the US Federal Reserve is supplying the economy with more money. As some of the money ends up in the stock market, growth in the M2 money supply usually has a positive impact on the stock markets.
Why this is important
After the sharp increase in the money supply during the COVID period, the central bank will reduce the money supply again in 2022 and 2023.
A rising money supply is like a safety net for the stock markets. We are therefore currently without a safety net and the markets are more susceptible to a correction than in previous years.

Good end to 2023, but a difficult start to the new year
Many people remember 2023 as a bad year on the stock markets. War in Ukraine and the Gaza Strip. High inflation, global warming etc. Stock market sentiment was poor for most of the year.

Now, the figures speak a different language. In local currency terms, the stock markets in America were up 24%, in Europe 18% and in Germany 20%. Switzerland did slightly less well, with a 4% gain, and China was down 4%. In most countries, however, returns were above the long-term average.
One fly in the ointment, however, is that in America at least, the return of the index was dominated by 7 stocks (Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Nvidia and Tesla). If you didn't have these 7 stocks in your portfolio, you only had a return of 2-3%.

This is further proof that we should not be overly influenced by media sentiment and that it is important to have a long-term investment strategy.

The returns in November and December played a large part in the good annual return. In December, it was primarily the US Federal Reserve that caused a price firework. After the press conference in December, many investors interpreted the statements to mean that the central bank expected interest rate cuts in 2024.

Source: Twitter, Jim Bianco, @biancoresearch, 12.01.2024

The chart shows the interest rate cuts expected by the voting members of the US Federal Reserve (yellow) and the interest rate cuts expected by the market on January 9, 2024 (blue) and January 12, 2024 (red).

The market currently expects up to six interest rate cuts in 2024.

Source: CME FedWatch Tool, 13.01.2024

As the chart shows, the market expects a rate cut at every Fed meeting from March 2024 onwards.
However, you should be careful what you wish for. Central banks have the task of keeping the economy in balance. Inflation should be around 2% and the unemployment rate should not be too low. If the economy is in equilibrium, the central banks will not change their policy. So if you want one or six interest rate cuts, you assume that the equilibrium will change. Six interest rate cuts are only possible if the situation for the economy and companies deteriorates sharply or if there is a threat of deflation. Both scenarios are not really desirable.
In principle, not much has changed compared to 2023. The long-term economic indicators point to a coming recession, but the growth figures for national economies and company profits are still developing positively. The tug-of-war between the two fundamentally different views continues.

Source: Isabelnet, 13.01.2024

The chart shows the US recession and Fed cycles. There is a time lag between the first interest rate hike and a possible recession. The chart shows when, based on the first rate hike at the end of 2021, the recession would have started in the last 13 cycles.

It is repeatedly argued that the danger of a recession is over, as it should have come long ago. This is not correct. As the chart shows, a start in 2024 would be the average of the last recessions.
Even if the current rate cut fantasies are probably exaggerated, we are not in the bear camp.

Source: Yardeni Research, 13.01.2024

What continues to give us confidence is the outlook for companies. Further increases in company profits are expected for 2024 and also for 2025. The chart above shows the expected company profits. These are normally high at the beginning of the year and then fall slightly. However, they should not be lower in the fourth quarter of 2023 than in the third quarter of 2023.
The stock market started the new year cautiously, but after the record rally in November and December 2023

Source: Isabelnet, 23.02.2023

Based on our long-term cycle model, we still see ourselves in phase four. After the first interest rate cut, we would then switch to phase 1. But it is still too early for that.

Bitcoin becomes socially acceptable
This week, the first spot ETFs were finally approved by the US Financial Market Authority. It is now possible for US investors to integrate Bitcoin into their asset allocation easily and without having to open accounts in the Cayman Islands.  
We refer here to the market report of November 13, in which we reported on the positive effects of this. Since the rumors about the approval have intensified, Bitcoin has already gained over 80%. Since the date of the market report on November 13, it has gained 35%.

Source: TradingView, Marmot

The chart shows how the gold price has developed since the first spot ETF on gold was launched. In the following 10 years, the price has risen by 350%.

The increase could be even higher for Bitcoin, as the supply is limited and can only grow slightly.
In the first week, up to USD 5 billion was invested in the new spot ETFs. This size is considerable and is likely to have beaten several records. However, the providers were probably a little too euphoric. As OTC transactions (over-the-counter transactions) show, the providers have probably provided up to USD 30 billion in bitcoins. Over the next few weeks, they will probably reduce their holdings again, which should have a negative impact on the price.

Source: Twitter, ʎllǝuuop ʇuǝɹq, @donnelly_brent,, 12.01.2024

The chart shows the reaction of the Bitcoin price after the launch of the first futures and futures ETFs. However, it should be noted here that the two futures launches shown always took place after the end of the halving. (We also reported in detail on the halving in our market report of November 13).
We think that the air is now out and that there will be a consolidation of a few weeks. Probably not longer, due to the positive effects of the halving in April 2024.
But beware: Bitcoin's volatility will remain high and is therefore not suitable for all investors. Price increases of 50% are not uncommon, but so are decreases in value of 50-60% in a short period of time.

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