News and analysis

Tezos (XTZ) has gained 1.5% to $0.684 on Monday, moving above key support at $0.600. This follows a 6.8% rise last week, outperforming Bitcoin's 5.1% jump to $62,748. Tezos has exited its descending channel as of mid-September, with recent momentum driven by the Tezos Paris protocol upgrade back in June.

If Bitcoin (BTC) continues its rally towards $70,000, Tezos could rise further, potentially testing the next resistance level at $0.800, representing an 18.0% increase from current levels.

The owner of Facebook and Instagram climbed a higher hill, as it has grown by nearly 4% the next day after the Fed's interest rate reduction job. The former all-time highs was at $542.81 (after the U.S. Independence Day weekend) and then at $544.23 (end of August, just a day before Fed chair speech in Jackson Hole). And now the peaking price of Meta stock exceeded $560 per share. Breaking the former resistance by only a modest 3.2% percentage technically paves the path to at least $595 to $600, if I consider a 10% potential gain based on the auspicious moment before the next stop point for the bullish attack.

As to the end of July, Meta quarterly results included equity per share of $5.16 vs $4.73 in consensus estimates, on revenue of $39.07 billion vs $38.31 billion expected. $5.18 on revenue of $40 billion is expected in the next release on October 23. Meta previously said that it had 3.27 billion daily active people (DAP), while Facebook alone currently has nearly 3.065 billion monthly active users (MAUs). That’s about 36% of the world’s entire population.

In reality, I have much better, braver aspirations when buying Meta now, because I like the cumulative effect of positive results so that the market ultimately ignored all of its previous objections against this case, in the seeming absence of any visible fresh business reasons for the upside momentum exactly here and now. Unless one counts a dismissal of its shareholders' lawsuit on Apple privacy settings' influence on income from advertisement and the U.S. Senate committee hearing where Meta's President of Global Affairs Nick Clegg displayed good will in not only labelling allegedly fake content about elections but also in suppressing its circulation in Meta-governed social networks.

That's great for Meta business that the company has no communication problems with the currently democratic White House inhabitants. Mark Zuckerberg & Co, with their big money, learned how to bend under censorship requirements in the years of the Covid-19 pandemic, and in 2020 elections, easily adjusting to any kind of the environment. They blocked unwanted users and deleted posts, which the powers-that-be considered as a terrible eyesore to tear it down. It means that the green light from the government would be provided to Meta at least until January. In theory, Mark Zuckerberg & Co may have troubles in the event of a change of power, but I feel that endless political fighting in comments and posts will kick up all kinds of dust for at least another six months.

Even if we assume an almost impossible thing that the transfer of power in the U.S. would take place quietly and calmly, without public objections from the losers, they will certainly continue to appeal to social opinion for a long time. As an absurd example, one may say that Trump's masculine white racists did not allow millions of legal voters to come safely to polling stations, etc. Anyway, there will be a lot of relevant text content and Reels from both camps. Even Trump supporters who prefer to use X (formerly Twitter) and Truth will continue to act and resist on the field of their opponents', which will bring Meta billions of views and billions of dollars for displaying advertisements. These will be later reflected by great quarterly numbers of daily active users and profits, which would bring money not only to Meta, but to its shareholders. This is one more reason why I am going to hold Meta, expecting it will hit much higher targets. For me, a realistic target area is somewhere between $650 and $750. Converting visitors into money is only a matter of technology, which Meta can easily handle.

Investors previously blamed Meta for excessive spending on AI features and the virtual Metaverse, which delayed market cap growth compared to other tech giants like Google or Microsoft. Now the stock finally got a positive momentum to catch up its lost time.

The Dow Jones Industrial Average, which contains 30 major Wall Street firms of the so-called "old economy", climbed to its fresh historical highs above 42,000 at closing price on September 19 following the U.S. Federal Reserve's jumbo 50 basis points rate cut the night before. More monetary easing is projected, even though Fed chair Jerome Powell commented that central bankers' forecasts "don't point to urgent action". Cheaper funding definitely has a positive impact on further bullish stance, yet the smaller caps' benefit theory is not borne out by the facts right now, as the Russell 2000 index behind smaller caps segment is still lagging behind, not daring to rewrite its own record book at the moment. This is seemingly going to happen sooner or later as well, yet now large components are clearly getting advantages, despite the weakest links of the Dow like sinking Boeing and wallowing Disney, added by profit taking in generally accepted anti-crisis assets like Coca-Cola, Procter & Gamble, McDonald's or Walmart, offset a speedy growth in the Dow flagmans, currently led by shining Caterpillar (+5.15% during one latest trading session), Salesforce (+5.32%) and Goldman Sachs (+4.03%).

Big marketplaces spearheaded by Amazon and consumer discretionary stocks like the Home Depot or Target may get the most out of the situation of cheaper borrowing costs, while the financial segment enjoys reducing the load on bank balances because of rising prices for their enormous bond portfolios, which is the opposite side of decreasing bond yield expectations. Deeper rate cuts would help small-cap firms in boosting income, as most of them hold floating-rate debt, yet there is another angle here, that of the lingering uncertainty over the U.S. economy's actual direction. A one-off 0.5% recalibration of the Fed's policy, with another 0.5% to 0.75% of cuts on the table before Christmas may cause ambiguous emotions in investing minds.

"Small cap earnings are still in a recession..., sales have disappointed and guidance remains below consensus," the Bank of America analysts said this week, while "weakening macro calls into question whether profits can stage the recovery investors had been expecting this year", so that the outlook for the segment looks "tough". The former American president Donald Trump described the situation more harshly in his charismatic manner by saying that a super-sized rate cut was a sign "the economy would be very bad, or they're playing politics, one or the other."

When the Fed's Powell is stating the economy is "in a good place" and the decision "is designed to keep it there", downplaying any concerns about a recession and stressing a solid yet somewhat cooling labour market, there is quite a reasonable question, on what grounds do they start the cycle of monetary easing with an untypical big rate cut. One version is that they know something rather sad that is still hidden from prying eyes, and the other idea or answer could be within the words by Kamala Harris, Trump's Democratic rival in this election campaign, when she called the Fed's rate cuts as "welcome news for Americans who have borne the brunt of high prices". If nobody can lower prices in the stores everywhere, then the Fed may reduce the borrowing costs to settle in the hope in trusting hearts. Well, the crowd of gullible people who are eager to invest more cheap money into assets is another effective tool for achieving our next target at 44,500 as minimal for the Dow Jones index, if we rely on measured distance that the market usually covers when expanding its price ranges on daily charts.

For me, it doesn’t matter at all, if the Fed’s rate cut cycle would actually start with a small 0.25% or a double 0.5% move this Wednesday’s night. The ratio of 0.25% supporters versus 0.5% adepts is changing rapidly, while Jerry the Hatter with his Tweedledees and Tweedledums are approaching faster to their appointed Mad Tea-Party. However, the after-party trajectory and economic foundations are much more important, than a precise Sept 18 temperature of their tea.

Indeed, FedWatch Tool today shows that only 7% of futures traders on CME believe in three consecutive 0.25% steps before the end of the year. Meanwhile, more than 40% are betting for a 1.25% rate cut in total at September, November plus December meetings, as nearly 20% (a giant number in this context) supports the idea of moving the current rate range of 5.25%-5.50% to 3.75%-4.00%. A 1.5% difference is the way which could be related mentally only with an emergency case like sharp jumps in unemployment or much deeper decrease of ISM services activity index, which now looks so high and safe at this height.

Well, the S&P 500 broad barometer of Wall Street is now an inch away from its 5,650 launching pad for more strength. But the majority of a bullish camp is seemingly a sort of positive doomsters, always and secretly or openly believing in a worse scenario but seeking for cheaper money to invest in market giants. An easy thing to understand, based on objective FedWatch data patterns. And no more strange, as the crowd is following such a scenario of protecting money from troubles for many months.

Is it a realistic approach? As a matter of facts, again, the National Federation of Independent Business (NFIB) just said a week ago, 37% of small enterprises in the U.S. faced historically low levels of income because of too high costs on personnel, materials, energy, lower volumes of physical sales and elevated interest rates altogether. This is even more than 35% of sufferers at the pandemic bottom in 2020. A clear evidence of non-O.K. scenario, which is perfect for the market’s growth, if this belief is based on large and quick rate cut hopes, isn’t it?

The only thing here that I personally do not believe in a 0.5%+0.5%+0.5%=1,5% path of the Fed. Therefore, I would not bet even a penny for this brave version. However, I am ready to bet a few pounds on further climbing of the S&P 500 to new peaks like 5,850 or even higher. And if you ask me why, my answer would be that I believe in the Fed’s Hatter Jerry Powell’s capacity to take more thick and poker-faced rabbits from his Mad Hat. They will feed us with their “soft landing” fairy tales, which would be far from reality, but will please the other camp of O.K.-scenario betters, led by big fund guys from The Bank of America, City etc. Thus, the “ultra-left” wing of recession believers who are betting for a 1.5% rate cut before Christmas time comes, and the “right” wing of “soft-landers”, will join together in their efforts to push the Wall Street higher and to bring me money. If you now ask for my opinion, then now I agree with both sides, ha-ha ))) as both of them are going to make me more or less relaxed two or three months with my bullish stakes on giant stocks, ETFs and indexes. And so, I love those good people from both camps with all sincerity of my independent heart.