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13 hours ago
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Wall Street's Booming June Is Big Bet Against Economy Doomsayers
(Bloomberg) -- Wall Street is throwing a summer party with markets just closing out their best cross-asset advance in more than a year on receding fears of a global trade war, igniting a buying frenzy in everything from tech funds to junk bonds. Philadelphia Transit System Votes to Cut Service by 45%, Hike Fares US Renters Face Storm of Rising Costs Squeezed by Crowds, the Roads of Central Park Are Being Reimagined Mapping the Architectural History of New York's Chinatown Sprawl Is Still Not the Answer With the S&P 500 enjoying its first record since February, it's the triumph of investor optimism at a moment of high uncertainty around the economy, valuations and government policy — with the White House delivering a Friday surprise by threatening to end negotiations with Canada over a digital services tax. Still, bulls are latching onto signs of cooling inflation and improving consumer sentiment even as jobless claims rise, the housing market stays cool, global trade softens and hopes fade for an imminent Federal Reserve interest-rate cut. Rather than falter, bullish conviction has surged to levels not seen since Donald Trump returned to the White House, powering a lockstep rally across stocks, bonds, commodities and credit that rivals the broadest monthly gain since May 2024. Volatility that shook markets just weeks ago has completely faded, replaced by a headlong rush into risky bets. Retail traders have dived back in as systematic investors have hiked exposure. The exuberance now hinges on the economic backdrop delivering enough good news to justify stretched prices. 'The market is exhibiting signs of complacency,' said Raphael Thuin, head of capital market strategies at Tikehau Capital. 'Across a range of potential risks — be it trade negotiations, a broadening macroeconomic slowdown, geopolitical tensions, growing fiscal deficits, or rising interest rates — market participants appear to be pricing in optimistic outcomes.' Worrywarts on the economy and markets have been famously wrong, month after month. Yet the likes of JPMorgan Chase & Co. still put the risk of a recession at 40%, citing tariffs and the prospect of weaker household spending colliding with falling business sentiment. He's among those fretting that global growth will slow in the second half of the year. While a report Friday showed US consumer sentiment hit a four-month high in June as inflation expectations improved, other data this week painted a less encouraging picture. Purchases of new homes fell in May by the most in almost three years. Recurring applications for unemployment benefits are now at the highest level since 2021, aligning with other data pointing to a slowdown in the labor market. Consumer spending declined in May by the most since the start of the year. Those reports were backdrop to testimony this week by Fed Chair Jerome Powell before Congress, where he said interest rates would probably be coming down already if not for uncertainty around Trump's trade policy. He joined a parade of central bank officials who made clear in speeches they'll need a few more months to be sure tariff-driven price hikes won't raise inflation in a persistent way. None of that derailed the risk rally. The S&P 500 surged 3.4% this week and closed at a record high. Junk bonds extended gains for a fifth week as 10-year Treasury yields fell around 10 basis points. Bitcoin is back above $100,000 and Coinbase Global Inc. hit its first record since 2021. Altogether, the pan-asset tandem rallies in June of US stocks, long-dated Treasuries, junk bonds and the Bloomberg Commodity Index set them for their best monthly performance in 13 months. Volatility-controlled products have been amping up exposure, with one Nomura Securities International measure showing projections for the biggest buying spree since at least 2004. Quants chasing trends across assets have also bolstered their long exposure to stocks after turning short for a few weeks, according to Barclays Plc. It's precarious positioning for investors, who just endured one of the more volatile quarters ever recorded, said Julie Biel, portfolio manager and chief market strategist at Kayne Anderson Rudnick. 'People forget that FOMO isn't unbridled optimism, it's fear driven. So if we have weakening margins or earnings or employment data really deteriorates, there isn't a lot supporting the market,' Biel said. 'We learned the lesson earlier this year of why a narrow market isn't a robust one.' One sign of doubt under the surface: Popular funds tied to speculative bets that led the recent market gains — from tech disrupters and small-cap stocks to gold miners and uranium — are flashing signs of caution. Traders are loading up on protective options, with demand for downside insurance rising. In funds like the ARK Innovation ETF, the iShares Russell 2000 ETF and the VanEck Gold Miners ETF, options markets are pricing in significant downside risk, according to Barclays Plc. Brent Schutte, CIO of Northwestern Mutual Wealth Management Company, isn't chasing the bounce, citing stretched S&P 500 valuations. He's tilted toward cheaper, small and mid-cap stocks and internationals. 'People have just been conditioned to buy the dip and until it doesn't work, that will continue,' Schutte said. 'Today you see weaker data, but no one pays heed to it just because it hasn't really worked as a signal of impending economic contraction in the past.' --With assistance from Emily Graffeo. 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13 hours ago
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Bessent Plays Down Speculation of Any Early Trump Fed Chair Pick
(Bloomberg) -- Treasury Secretary Scott Bessent played down speculation that President Donald Trump may consider an early move to nominate a successor to Federal Reserve Chair Jerome Powell, pointing to one potential timeline that could see a name emerge in October or November. Philadelphia Transit System Votes to Cut Service by 45%, Hike Fares US Renters Face Storm of Rising Costs Squeezed by Crowds, the Roads of Central Park Are Being Reimagined Mapping the Architectural History of New York's Chinatown Sprawl Is Still Not the Answer 'I don't think anyone is necessarily talking about that,' Bessent said when asked in a CNBC interview Friday about the potential for Trump to name a so-called shadow Fed chair. Bessent pointed out that there are two scheduled openings on the Fed board early next year: Adriana Kugler's term is up in January, and Powell's term as the chair concludes in May. Powell has a separate term as a board member, and that stretches to 2028. Powell himself declined to say earlier this month whether he would consider remaining on the board once his chairmanship concluded. 'So, Chair Powell doesn't have to leave — he could stay on the board, not as chair,' Bessent noted. If that happened, and Trump opted not to choose any existing board member as chair, the administration would need to use Kugler's slot for the chairmanship, a scenario that Bessent referenced. 'So there is a chance that the person who is going to become the chair could be appointed in January, which would probably mean an October, November nomination,' Bessent said. The Treasury chief also noted that Trump is 'obviously worried that the Fed is behind the curve again' in failing to resume interest-rate cuts this year despite inflation being 'way down.' Asked about his own potential candidacy to become Fed chair, Bessent said, 'Look, I'll do what the president wants, but I think I have the best job in Washington.' America's Top Consumer-Sentiment Economist Is Worried How to Steal a House Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Apple Test-Drives Big-Screen Movie Strategy With F1 ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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14 hours ago
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Crypto's Audacious Bid to Rebuild Stock Market on the Blockchain
(Bloomberg) -- First, they came for the currency market. Then, the money market. Now, crypto's big disruptors are targeting the multi-trillion-dollar heart of global capitalism: the stock market. Philadelphia Transit System Votes to Cut Service by 45%, Hike Fares US Renters Face Storm of Rising Costs Squeezed by Crowds, the Roads of Central Park Are Being Reimagined Mapping the Architectural History of New York's Chinatown US State Budget Wounds Intensify From Trump, DOGE Policy Shifts Dismissed as a fringe fantasy years ago after a regulatory backlash and the collapse of early projects, the first attempts by the digital-asset industry to put shares on the blockchain fizzled out. This time, a new cohort of players — from crypto giants Coinbase Global Inc. and Kraken to retail favorite Robinhood Markets Inc. — is making a fresh run at rewiring the very plumbing that governs equities around the world. The ambition is predictably audacious from a crypto community built to gut out the middlemen and outsmart the regulator. The promise: a financial system where trading Apple Inc. or Tesla Inc. stock is as fast and easy as sending a text message. No more extended settlement periods. Just instant, cross-border transactions, around the clock, five, or even seven, days a week. But beneath the braggadocio lies profound challenges that threaten this tokenization effort, or the process of creating digital representations of real-world assets on a decentralized network. The effort runs straight into custody and counterparty risk: each token is typically backed by a real-world share that must be funded and held in custody. Stock investing also involves a complex web of legal protections, ownership structures and corporate actions deeply embedded in centralized, regulated systems. This world of complexity makes tokenizing stocks a world away from the likes of digital art. 'You are changing the way things are trading,' said Bryan Routledge, an associate professor of finance at Carnegie Mellon University's Tepper School of Business. 'You're not just changing the format of an asset.' Despite the hurdles — and fundamental questions about whether demand for these products even exists — players are lining up. Kraken's Bermuda entity plans to start selling tokenized stocks in late June, and Robinhood is preparing a similar service in Europe. Many such efforts are debuting in overseas jurisdictions, seen as crucial test beds while the US regulatory picture remains in flux. Startups like Ondo Finance are planning launches this summer, and Dinari hopes to offer tokenized equities trading in the US in the coming months. Galaxy Digital has been talking with regulators about tokenizing its shares. Securitize, a digital-asset securities platform known for helping BlackRock Inc. digitize a money-market strategy, is another key player at the center of the push. 'We are talking to many different asset issuers of both existing publicly traded equities as well as about a lot of organizations thinking about doing on-chain IPOs,' said Michael Sonnenshein, chief operating officer of Securitize. The token, stored in a crypto wallet like an e-ticket on a phone, is a unique, transferable digital receipt. It's the verifiable proof of a claim on one real share, held in trust by a regulated financial institution. Whether it truly mirrors a stock's price comes down to a simple test: can it be swapped for the real thing? In the safest setups, the answer is yes, which keeps prices in sync. But often, the token is just a digital I.O.U. from the issuer, and its value depends entirely on trusting that company to pay up. The initiative isn't happening in a vacuum. It's one front in a broader effort to move real-world financial assets onto blockchains, a market McKinsey & Co. projects could reach $2 trillion by 2030. So far, the clearest successes have been in tokenizing assets with simpler plumbing. The market for on-chain US Treasuries, led by firms like Securitize and Ondo, now exceeds several billion dollars. Major players like BlackRock and Citigroup are actively digitizing funds to improve efficiency and appeal to crypto-friendly users. But tackling public equities is a higher order of ambition, targeting the dynamic, live-wire infrastructure of capitalism itself, where corporate actions like mergers, stock splits, and shareholder votes happen in real time. Fueling the push, the election of Donald Trump has raised hopes among proponents that their plans can achieve critical mass with regulators. Hester Peirce, who leads the Securities and Exchange Commission's crypto task force, has spoken favorably about tokenization in recent months, suggesting that trial runs in contained settings — known as 'sandbox structures,' where firms can operate under relaxed rules to test new models — may be a way to test the concept. That way, 'innovating firms are able to get to market quickly under appropriate, reasonably calibrated conditions,' she said in a May 8 address. 'They do not have to comply with inapt regulations, which, in many cases, were developed well before the technologies being tested existed and may be obviated by attributes of that technology.' Still, as each player builds its own token with a unique risk profile, it's an open question whether the industry will manage to create a unified and liquid market. Regulators' caution is rooted in recent history. The idea of a blockchain-based stock was broached as far back as 2015 by the former chief of but efforts have remained niche. Back in 2021, Exodus Movement Inc. tokenized its shares via Securitize, yet today those shares still account for around 78% of all tokenized equities. The total market stands at just $388 million, according to tracker a fraction of the $120 trillion-plus global equities market. A more ominous precedent was set by the Mirror Protocol on the Terra blockchain, which drew SEC scrutiny even before Terra's collapse triggered some $40 billion in losses. That history explains the establishment's measured pace. Depository Trust & Clearing Corp., which settles most US stock trades, is treading lightly, with a planned pilot later this year expected to involve a small cohort of institutional players in a controlled setting. 'We have no desire to do this in a big bang,' said Nadine Chakar, global head of DTCC Digital Assets. Proponents argue the push creates new rails for global finance. In places with unreliable financial systems, the appeal of direct access to US equities is clear. The vision, according to DTCC's Chakar, is one of 24-hour trading, faster settlement, and the ability to use stocks as collateral in decentralized apps. This resonates with crypto-native investors who, according to Wyatt Lonergan of VanEck Ventures, 'want the comfort of, say, Apple stock' within their digital ecosystem, especially during volatile crypto markets. But for the average US investor, these are largely solved problems, with fractional shares and one-day settlement already standard. This raises the central, unanswered question of whether this represents genuine, scalable demand or simply a convenient narrative. With no real evidence that mainstream investors are asking for these products, the tokens risk being viewed as just the latest shiny digital object for platforms in a constant search for new revenue streams. All told, it's the latest offensive in crypto's war on Wall Street. The industry is riding a $3 trillion bull market, a political thaw in Washington, and fresh momentum in infrastructure. 'It definitely will be competition,' Routledge said, predicting a clash with the entire ecosystem of exchanges and brokers. 'If you look at the growth of trading in cryptocurrencies, it was this analog of tokenization that really lit the fuse.' America's Top Consumer-Sentiment Economist Is Worried How to Steal a House Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push Apple Test-Drives Big-Screen Movie Strategy With F1 Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags ©2025 Bloomberg L.P. Sign in to access your portfolio
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a day ago
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Euro Poised for Best Run Since 2017 as Traders Target $1.20
(Bloomberg) -- The euro is set for its longest stretch of monthly gains in eight years, boosted by rising confidence in Europe's economic prospects and a hunt for alternatives to the dollar. Philadelphia Transit System Votes to Cut Service by 45%, Hike Fares US Renters Face Storm of Rising Costs Squeezed by Crowds, the Roads of Central Park Are Being Reimagined Mapping the Architectural History of New York's Chinatown US State Budget Wounds Intensify From Trump, DOGE Policy Shifts The common currency is up more than 3% in June, its sixth month of advances and the best stretch since 2017. It climbed to $1.1744 this week, the highest level since September 2021. Key to the euro's gains are bets that the Federal Reserve is only starting its interest-rate cuts while the European Central Bank is coming to the end of its easing run. While European governments are readying tens of billions of euros of extra spending, US economic data is coming in soft. Wagers on long-term dollar weakness are also getting support from speculation the next Fed chair will heed President Donald Trump's calls for aggressive rate cuts. 'The fleeting support for the greenback, born of geopolitical tensions and its traditional safe-haven appeal, has all but evaporated,' said Antonio Ruggiero, strategist at foreign exchange and global payments firm, Convera. 'The euro will continue to benefit from persistent dollar pessimism.' Concern Trump's trade policies could tip the nation into recession have dealt a blow to the dollar's safe-haven image. European policymakers have called for steps to boost the euro's global standing amid the shifting landscape. Treasuries Rally, Dollar Slumps as Trump Eyes Powell Successor Options traders have wasted no time leaning into the latest burst of strength. Volumes on Thursday surged to the fifth-highest on record, according to Depository Trust & Clearing Corporation data compiled by Bloomberg. Roughly one in four bullish euro options this week targeted a move to $1.20 or higher, while options sentiment posted the ninth-most bullish repricing since at least 2005. Full Steam Ahead Trading volume in the euro exceeded €63 billion ($73.8 billion) on Thursday, more than quadruple the volumes seen for the yen and five times the volumes for the Canadian dollar. The euro was up 0.2% at $1.1722 as of 8:10 a.m. in London. 'It's full steam ahead for euro bulls,' said Shoki Omori, chief strategist at Mizuho Securities Co. in Tokyo. 'We're seeing that reflected in options markets.' This week, the euro cleared a key options hurdle at $1.17 as tensions in the Middle East receded and expectations the Fed will need to push on with rate cuts intensified. Money markets are pricing in 61 basis points of Fed easing by year-end, compared with just 25 basis points from the European Central Bank. Traders will be looking to clues on rates from ECB President Christine Lagarde when she speaks next week at the central bank's annual Sintra forum. Not everyone is convinced the euro's six-month charge will continue. According to Francesco Pesole, strategist at ING Groep NV in London, fresh catalysts are needed for the common currency to test its next milestone. 'Something needs to happen on tariffs, Treasuries or the Fed, for a run to $1.20,' Pesole said. What Bloomberg Strategists Say... 'European currencies are best placed to transform the dollar's weakness into strength given that the Bank of Japan is dragging its feet on further policy tightening. Even so, the euro's journey higher will be far from linear.' — Ven Ram, Markets Live strategist. Click here for the full piece. Still, data showing how investors are positioning suggest there's reason for the market to be confident about further gains. Asset managers are the most bullish on the common currency since early 2024, Commodity Futures Trading Commission statistics show. Hedge funds are also the least bearish on the euro since April. With the ECB nearing the end of its easing cycle, 'portfolio flows and reserve diversification out of the dollar may favor alternative reserve currencies such as the euro,' Oversea-Chinese Banking Corp. strategists including Frances Cheung and Christopher Wong wrote in a note. --With assistance from Mark Cranfield. (Updates throughout.) America's Top Consumer-Sentiment Economist Is Worried How to Steal a House Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push Apple Test-Drives Big-Screen Movie Strategy With F1 Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags ©2025 Bloomberg L.P.
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a day ago
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Nvidia breakout puts $4 trillion market value within reach
(Bloomberg) — Two years after Nvidia Corp. (NVDA) made history by becoming the first chipmaker to achieve a $1 trillion market capitalization, an even more remarkable milestone is within its grasp: becoming the first company to reach $4 trillion. Philadelphia Transit System Votes to Cut Service by 45%, Hike Fares US Renters Face Storm of Rising Costs Squeezed by Crowds, the Roads of Central Park Are Being Reimagined Mapping the Architectural History of New York's Chinatown US State Budget Wounds Intensify From Trump, DOGE Policy Shifts After the emergence of China's DeepSeek sent the stock plunging earlier this year and stoked concerns that outlays on artificial intelligence infrastructure were set to slow, Nvidia shares have rallied back to a record. Its biggest customers remain full steam ahead on spending, much of which is flowing to its computing systems. A 64% gain from an April low has pushed its market capitalization to $3.78 trillion, overtaking Microsoft Corp. (MSFT) at $3.70 trillion to again become the world's most valuable company. With a broadening customer base clamoring for Nvidia's latest AI accelerators and competitors still distant, bulls are betting the chipmaker's shares have plenty of room to run. 'We believe that Nvidia is truly uniquely positioned, and that it will sustain its position over the next decade-plus,' said Aziz Hamzaogullari, chief investment officer at Loomis, Sayles & Co. and founder of the firm's growth equity strategies team. Hamzaogullari isn't alone. This week, Loop Capital analyst Ananda Baruah raised Nvidia's price target to $250 from $175, a level that would equate to a roughly $6 trillion market value. Baruah, who has a buy rating on the stock, expects annual AI spending from various types of customers to rise to nearly $2 trillion by 2028. 'While it may seem fantastic that Nvidia fundamentals can continue to amplify from current levels, we remind folks that Nvidia remains essentially a monopoly for critical tech, and that it has pricing (and margin) power,' Baruah wrote in a research note on June 25, referring to Nvidia by its ticker symbol. The bullish sentiment behind Nvidia and other makers of AI gear is a stark reversal from earlier in the year when the emergence of advanced chatbots like DeepSeek, developed relatively cheaply in China, sparked fears that Nvidia's customers would cut spending. Instead, US tech giants are plowing even more money into computing infrastructure. Microsoft, Meta (META), Inc. (AMZN) and Alphabet Inc. (GOOG, GOOGL) are projected to put about $350 billion into capital expenditures in their upcoming fiscal years, up from $310 billion in the current year, according to the average of analyst estimates compiled by Bloomberg. Those companies account for more than 40% of Nvidia's revenue. Of course, there are still plenty of risks that could derail Nvidia's rally. The company relies on Taiwan Semiconductor Manufacturing Co. (TSM, for the production of its chips, exposing Nvidia to US President Donald Trump's trade policies, which can change on a whim. Trump's 90-day pause on the stiffest tariffs is set to end on July 9. At the same time, there's no guarantee Nvidia's biggest customers won't change their tune on spending in coming years. Many of them are developing their own chips to avoid the steep prices commanded by Nvidia. 'The valuation depends on the persistence of growth, and we already know that Nvidia's largest customers are trying to figure out ways to be more efficient with their spending, not just with Nvidia, but also offloading to their own silicon,' said Dan Davidowitz, chief investment officer at Polen Capital Management. 'You have to have very robust assumptions to get comfortable with the valuation, and we just don't have a good enough view on what that demand looks like.' Nvidia shares are priced at 32 times earnings projected over the next 12 months, compared with 22 times for the S&P 500. The stock's valuation doesn't bother Loomis Sayles's Hamzaogullari, who remains a firm believer that AI will transform society and is convinced that Nvidia will remain a key winner as productivity gains from the technology expand. 'That doesn't mean it will be steady Eddie all the time, that there won't be disruptions in spending, but this is a secular structural change, and Nvidia remains one of the biggest beneficiaries,' Hamzaogullari said. 'The stock still looks attractive given that backdrop.' Top Tech News Masayoshi Son acknowledged the outlines of a succession plan, addressing what may be the single biggest concern among investors, and name-checked the head of SoftBank Group Corp.'s telecom unit Junichi Miyakawa. House Republicans aim to get the Senate's landmark stablecoin legislation — known as the Genius Act — to President Donald Trump's desk for signature as soon as the week of July 7, according to people with direct knowledge of the strategy. Apple and Google's Android have been warned by a top German privacy regulator that the Chinese AI service DeepSeek, available on their app stores, constitutes illegal content because it exposes users' data to Chinese authorities. The US will need more nuclear power as it enters into greater competition with China, said Mike Gallagher, head of defense at Palantir Technologies Inc. Alibaba Group Holding Ltd. elevated e-commerce head Jiang Fan while trimming the members of a longstanding leadership body, as the Chinese tech giant pivots toward AI and overseas expansion. Earnings Due Friday No major earnings expected —With assistance from Phil Serafino. America's Top Consumer-Sentiment Economist Is Worried How to Steal a House Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push Apple Test-Drives Big-Screen Movie Strategy With F1 Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags ©2025 Bloomberg L.P.
