PentaNews November 2021

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PentaNews November 2021

Dear friends

In early November the Federal Reserve finally decided to slow its money printing by about $15 billion a month while keeping interest rates steady. It sounds like a big reduction, but in fact they still pumped over $100 billion fresh money into the system last month…

The Fed’s decision had a positive impact on the market, sending the NASDAQ and S&P 500 to new record highs.

Meanwhile, climate issues took center stage at the G20 summit. Nations agreed to limit global warming to 1.5 degrees above pre-industrial levels and pledged to be carbon neutral by 2050. In the final draft, however, consensus could once again not be reached on a clear phase-out of fossil fuels by 2030.  It’s obviously a hot topic, but I feel like we are running out of time….

Inflation in the U.S. hit a 30-year high, due to the rebound in the economy and massive COVID incentives. This weighed on the consumer sentiment report, which fell to a 10-year low, leading to the first week of declines in U.S. stocks since early October.

After a long standoff, the House of Representatives then passed its $1 trillion infrastructure bill. It includes $550 billion for transportation projects, utilities and broadband networks, leading to a steep rise in construction stocks.

U.S. technology stocks soon began hitting all-time highs as well and Tesla shares rebounded strongly from a 12% drop after Elon Musk sold over 8 million shares. He had promised on Twitter(!) to sell a 10% stake in his company so he can pay more taxes(!).

However, as news of the South African Omicron variant emerged around the globe in late November, the momentum in the markets began to reverse from greed to fear.

Prices of risky assets plunged, several countries imposed travel restrictions, and Moderna announced that a new vaccine update was already on the way.

Bonds fluctuated between inflation concerns and fears of stagnation following another global economic lockdown. The gold price continued to benefit and might gain more by year end if the dynamics persist.

All in all, it was a month with many ups and downs with most asset classes ending down:  S&P 500 -0.8%, MSCI World Index -2.3%, 20-year bonds +2.8% and gold -0.7%.

Our strategies could not escape the market dynamics and unfortunately also suffered some losses with Universal ending -1.0%, Progressive -0.6% and CryptoMax -4.2%.

November was also dominated by high volatility in the crypto markets. After weeks of mixed performance, Bitcoin quickly shot up to a new all-time high of $69’000 in early November. However, it crashed again within hours, punishing over-leveraged buyers with liquidations. Ethereum also hit a new all-time high and even outperformed Bitcoin, before the Omicron scare sent all top ten cryptocurrencies deep into negative territory.

On the entertaining side of things, the government of El Salvador doubled down on its crypto strategy, announcing plans to build a volcano-powered “Bitcoin City.”

According to current plans, the city would be circular, with an airport, a business district and residential areas, with the central square resembling a Bitcoin symbol when viewed from above.

President Nayib Bukele plans to finance his ambitious project in a deliberate provocation to the IMF with a $1 billion Bitcoin bond to be issued in 2022. Sounds interesting, but is probably more for the truly fearless investors…

And now, of course, all eyes are on December, which is traditionally a positive month. Let’s hope that the market has a few Christmas presents in store for us this year as well….

Stay happy, healthy and wealthy!

Omar

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