Indian Equities Rally After Election Day

Welcome to BRC’s Breakdown.

December is usually seen as a slow month for markets. That’s probably why the markets rallied right before the final month of 2023. Equities, commodities, and crypto ended the week in the green with strong gains.

Here’s a preview of what we’ll cover:

• Macro: US Bond Yields Down As Inflation Controlled

• Around The World: Indian Equities Rise As BJP Wins The Heartland

• Crypto: Is Crypto Bad For The Environment? Ethereum Is Not.

• AI: This AI Company Is Accused Of Espionage Against The US

Macro: US Bond Yields Down As Inflation Controlled

A key development globally was the decline in US bond yields. The US-2-year bond yield declined by a massive 41 bps (1 bp = 0.01%) while 10 year yields declined 27 bps.

The reason for this sharp move is the view that the US inflation is under control and the US Federal Reserve is more likely to cut interest rates next year.

The October PCE (Personal Consumption Expenditures) price index increased 3% year-over-year (YoY), down from 3.4% YoY in September, and down from the recent peak of 7% in June 2022. The PCE price index (excluding food and energy) – increased 3.5% YoY, up from 3.7% in September, and down from the recent peak of 5.4 % in February 2022.

Jerome Powell, the US Federal Reserve Chairman, said on December 1 that –inflation is slowing steadily, but it’s too early to declare victory or to discuss when the Federal Reserve might cut interest rates.;

With US interest rates decreasing, risk assets globally were boosted. Bitcoin has hit its highest levels since April 2022 while ETH has hit its highest since May 2022 (and is lagging Bitcoin). Altcoins also participated after a week’s breather.

Around The World: Indian Equities Rise As BJP Wins The Heartland

The OPEC (Organization of the Petroleum Exporting Countries) producers agreed on Thursday to remove around 2.2 million barrels per day (BPD) of oil from the global market in the first quarter of next year - but markets are skeptical and crude oil prices declined 2% for the week.

The Indian equity markets continued their winning streak on Monday, December 4th as the state elections indicated that the ruling party – the BJP – is firmly in control of the Hindi heartland, where a large majority of the Lok Sabha seats come from.

Economists also expect the RBI to nudge up its GDP growth forecast for FY24, from 6.5% to 6.7-6.8%, following higher-than-expected growth in the September quarter (7.6% year-on-year - announced last week).

Is Crypto Bad For The Environment? Ethereum Is Not.

In September 2022, Ethereum moved from a proof-of-work blockchain consensus system to a proof-of-stake one. This was expected to make the blockchain – faster and cheaper. More importantly, it was expected to make it cleaner. Has it?

According to the Cambridge Centre for Alternative Finance, is down 99.97% since last September. Currently, under the proof-of-stake system, the network processes the equivalent of 2.8 kilotonnes of carbon dioxide in a year. One kilotonne is equal to 1 million kilograms.

This growth is despite a 23% increase in Ethereum validators in the past 9 months to 880k validators. However, since these validators do not have to actively mine crypto, but rather stake it – the energy consumption is down.

These validators are distributed mainly mainly across North America and Europe, here are the top 5 countries:

• The United States of America – 39%

• Germany – 16%

• Finland – 8%

• The United Kingdom – 7%

• France – 6%

AI May Be Used For Espionage Against The US

Amid the OpenAI drama, another angle opens up – the one of potential espionage. And it involves a company called G42, a UAE-based AI company.

Last month, OpenAI’s executive team brokered a partnership with G42 to build a language learning model. However, the US Central Intelligence Agency (CIA) has been probing G42 due to its ties with the Chinese government, similar to its concerns with the mobile phone maker Huawei.

One of the allegations includes the former work of G42’s CEO Peng Xiao who was in charge of the voice messaging app ToTok in the UAE. The CIA identified the app as being used as a spying tool to funnel information to China.

Top Headlines Of The Week:

• Brazil to Impose 15% Tax on Crypto Earnings Held on Offshore Exchanges

• Tiger Global Marks Down Stakes in NFT Companies like – BAYC and OpenSea

• Judge Claims The SEC Lawyer Lied To Freeze Crypto Company’s Assets

We at BrownRice Capital remember the indomitable and wise spirit of Charlie Munger who passed away last week!