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The Best of Times, the Worst of Times

| January 22, 2024

We have our answer (to the question we looked at two weeks ago). The Bitcoin ETFs were approved as expected on January 10, and it turned out to be a “buy the rumor, sell the news” event.

There has been significant volatility as tremendous amount of money has moved around. As expected, there have been flows coming out of the only previously easily tradable Bitcoin vehicle (GBTC), while all the rest of the new ETFs have seen inflows. You can see below that GBTC has seen $2.2 Billion in outflows in the first 5 days of trading, thanks, almost certainly, to the fact that GBTC’s fees are significantly higher than those of its competitors.

As expected, Blackrock (iShares) and Fidelity are the two leaders in the clubhouse for new inflows. Also interesting, the total net flows into the Bitcoin ETFs for the first five days was roughly $1.1 billion (including the $2.2 billion in outflows from GBTC).

But, while this money is moving around, Bitcoin has dropped from about $47,000 to $41,000.  I would expect this to churn around here before the April “halving” (let me know if you want to know more about that…it does not mean a halving of the price!).

Shifting gears, let’s look at some newly reported economic data, particularly in light of the “markets” reclaiming all-time highs over the past couple of trading days. Today, The Conference Board released the leading economic indicators (LEI) for December (yes, it’s ironic that the leading indicators are reported in arrears!). These were once again negative, although by a smaller amount than in prior months. And although it is very negative on a year over year basis, it is potentially turning up. Will that be a good thing for the economy and the markets? We shall see.

Meanwhile Bank of America is reporting the fastest easing of financial conditions in 50 years.

That has pushed speculative positioning in the NASDAQ to all-time highs.

Will the future be like the past? We don’t know for sure, but here’s what the post-WWII equity concentrations looked like.

Finally, the market cap weighted S&P 500 has broken above its previous highs, while most of the rest of the market is still struggling.

Meanwhile, the S&P 600 small cap stocks are still over 10% from their 2021 highs.

 

Will the Magnificent 7 propel this market to new heights or will the economic data prove to be correct? I guess we will find out in the fullness of time.

That’s it for today, I hope you have a great week. If you have any comments or questions, please feel free to reach out to us.

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