Macro 1/2 - Gozilla and your favorite magical internet money < Macro 2/2 - Earnings , Warren Buffet and the SPX Crypto - Wrap-up
Last Week's Data Overview
Last week's data was generally positive, except for Japan, which raised its interest rates. This decision caused a widespread decline in traditional markets, especially in Asia due to the timing. The cryptocurrency market, known for its sensitivity to global downturns and operating 24/7 without a circuit breaker (a mechanism used in stock exchanges to temporarily halt trading during periods of high volatility), was also affected.
Bitcoin, which had been recovering after the speech by presidential candidate Donald Trump, eventually succumbed to the negative triggers activated the previous week.
Japan and the Effects of Interest Rates
We always pay close attention to interest rates in Japan, which recently increased its rates from 0%-0.1% to 0.15%-0.25%. This hike forced investors to sell assets for reallocation. Due to its lower interest rate and a reliable financial system, Japan has become a popular target for carry trade.
What is Carry Trade?
Carry trade is a financial strategy where investors borrow in currencies with low-interest rates and invest in currencies with higher returns.
After the real estate crisis in Japan, stimuli such as low or negative rates made the yen a safe currency for this income strategy. Investors frequently migrated this capital to countries like the USA, Australia, and Brazil. However, the strategy has been losing attractiveness as Japanese rates rise, increasing the risk and potentially appreciating the GOZILLA yen.
Recent Market Trends
As shown in the chart below, the Japanese stock market and the yen's fluctuation generally move in opposite directions. The recent change in monetary policies intensified especially last Wednesday, resulting in a drop of over 12% in the Japanese stock market. Show Less