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The Israeli-Iranian conflict has intensified. Earlier this week, Israel launched a ground offensive in Lebanon and Iran responded by launching over 180 missiles yesterday. However, the risk off move in TradFi assets was minimal. The S&P closed 1% lower, WTI closed 2% higher, and we’re seeing minimal follow through in price action today.

Crypto, however, was hit much harder with BTC closing 4% lower. We seem to have found some support at the 60k level, but further escalation could push us much lower, possibly to the 55k level.

Middle East geopolitics will steal the limelight for now, but the shallow sell-off suggests that the market remains well bid for risk assets. This minor setback shouldn’t distract from the bigger picture.

Policy actions and the economic situation in China are reminiscent of Japan in the 1990s. To combat deflation in Japan, the BoJ cut rates, introduced Negative Interest Rates and started the then novel Quantitative Easing Program. The flush of liquidity from the PBoC and potential fiscal support will likely support asset prices in China, with bullish sentiment potentially spilling over globally to support risk assets, including crypto.

In his recent Q&A, Powell was supportive of further rate cuts in 2024. Assets prices are expected to remain supported heading into 2025, as both the largest (the Fed) and 3rd largest (PBoC) central banks in the world have started their cutting cycles in earnest.

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Range: 90k to 110k

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