Market Overview

Since the third quarter, well-performing assets include the Russell 2000 Index, gold prices, financial stocks, and U.S. Treasuries, while poorly performing assets include Ethereum, crude oil, and the U.S. dollar. Bitcoin and the Nasdaq 100 Index have performed almost flat.

The US stock market is currently still in a bull market, with the main trend remaining upward. However, in the last few months of the year, the trading environment may lack performance themes, and both the upside and downside potential of the market will be limited. The market is continually lowering its earnings expectations for the third quarter.

Recently, the stock market valuation has experienced a correction, but the rebound was also quick, with a price-to-earnings ratio of 21 still far above the 5-year average.

93% of the companies in the S&P 500 Index have reported their earnings, with 79% of them exceeding earnings expectations and 60% exceeding revenue expectations. The stock price performance of companies that exceeded expectations is basically in line with historical averages, while companies that fell short of expectations performed worse than historical averages.

Currently, corporate buybacks are the strongest technical support in the U.S. stock market. Corporate buyback activities in the past few weeks have reached twice the normal level, about $5 billion a day, annualizing to $1 trillion. This buying power may gradually fade after mid-September.

Large tech stocks have shown weakened performance in the mid-summer, primarily due to lowered profit expectations and a decline in market enthusiasm for AI themes. However, the long-term growth potential of these stocks still exists, and there is limited downside price movement.

From October last year to June this year, the market has experienced some of the best risk-adjusted returns for this generation, with the Sharpe ratio of the Nasdaq 100 index reaching 4(. Currently, the stock market's price-to-earnings ratio is higher, economic and financial growth expectations are slower, and the market's expectations for the Federal Reserve are also higher, making it difficult to expect the stock market to replicate the performance of the previous three quarters. We are seeing large funds gradually shifting towards defensive themes, such as increasing holdings in the healthcare sector, and this trend is not expected to reverse quickly. Therefore, it is prudent to maintain a neutral stance on the stock market in the coming months.

![Cycle Capital Macroeconomic Weekly Report (8.25): Trend Slowing, but Neutral to Optimistic about the Market for the Remainder of the Year])https://img-cdn.gateio.im/webp-social/moments-9db89ee82ca5eccb2334930354dfd33a.webp(

Federal Reserve Chairman Powell made the clearest statement on interest rate cuts to date at the Jackson Hole conference on Friday, confirming that a rate cut in September is a done deal. He also stated that he does not wish to further cool the labor market and has increased confidence in the path of inflation returning to the 2% target. However, he still insists that the pace of policy easing will depend on future data performance.

Powell's statement this time did not exceed market expectations, so it did not cause much fluctuation in traditional financial markets. The market is most concerned about whether there is a chance of a single 50 basis point rate cut within the year, but Powell gave no indication of that. Therefore, the expectations for rate cuts this year have changed little from before.

If the future economic data is optimistic, the current expectation of a 100 basis point interest rate cut may even be adjusted downward.

The cryptocurrency market has reacted quite strongly, possibly due to an excessive accumulation of short positions leading to a squeeze ). For instance, the recent rapid increase in open positions often coincides with negative funding rates for contracts (, as well as the slower pace at which cryptocurrency market participants understand macro news compared to traditional markets. Whether the current market environment supports the cryptocurrency market in reaching new highs remains to be seen. Generally speaking, in addition to a loose macro environment and a tendency towards risk in sentiment, there must also be a lack of native cryptocurrency themes, such as NFTs, DeFi, the opening up of spot ETFs, and meme trends. Currently, the only strong theme seems to be the growth of the Telegram ecosystem; whether it can become the next theme will depend on the performance of the latest token issuance projects and the quality of new users they bring.

The recent surge in the crypto market is also related to the significant downward revision of last year's non-farm payroll figures in the U.S. this week. However, this revision may be excessive, as it overlooks the contribution of illegal immigrants to employment. Initially, these individuals were included in the employment statistics, so this correction is not very meaningful. As a result, the traditional market reacted mildly, while the crypto market interpreted it as a sign of significant interest rate cuts.

From the experience of the gold market, most of the time the price is positively correlated with the holdings of ETFs, but in the past two years, the market structure has changed, and most retail and even institutional investors have missed the rise in gold, while the main buying force has shifted to central banks.

The inflow speed of Bitcoin ETFs has significantly slowed down after April. In terms of Bitcoin standards, it has only grown by 10% over the past five months, which matches its price peak in March. If the risk-free rate of return decreases, it may attract more investors to enter the gold and Bitcoin markets, which is very likely.

![Cycle Capital Macro Weekly Report (8.25): Trends Slow Down, but Remain Neutral to Optimistic about the Market for the Remainder of the Year])https://img-cdn.gateio.im/webp-social/moments-c675476dd97413f93db474e8d4769094.webp(

From the perspective of stock positions, earlier in the summer, subjective strategy funds performed well, timely reducing their positions, and had an opportunity to be aggressive in August. Recently, subjective strategy funds have been replenishing their positions very quickly, and the position has returned to the historical 91st percentile, but systematic strategy funds are responding slowly, currently only at the 51st percentile. Bearish investors in the stock market closed their positions during the decline.

In terms of politics, Trump's approval rating has stopped declining, and betting odds are increasing. Over the weekend, Trump also received support from Little Kennedy, and Trump's deal may heat up again, which is overall positive for the stock market or the crypto market.

Capital Flow

The Chinese stock market continues to decline, but China-themed funds are experiencing a sustained net inflow. This week saw a net inflow of $4.9 billion, reaching a new high in five weeks and marking the 12th consecutive week of net inflow. Compared to other emerging market countries, China also has the highest inflow. In the current market downturn, those increasing their positions against the trend may be state-owned teams or long-term funds, betting that as long as the stock market does not shut down, it will eventually rebound.

However, structurally speaking, Goldman Sachs' clients have basically been reducing their holdings in A-shares since February, with recent increases mainly in H-shares and Chinese concept stocks.

![Cycle Capital Macro Weekly (8.25): Trend Slowing, but Neutral to Optimistic Outlook for the Market for the Rest of the Year])https://img-cdn.gateio.im/webp-social/moments-c20d1fa2f14a9fd14073752e2cd3dc13.webp(

Despite a recovery in global stock markets and an influx of funds, the low-risk preference money market has also seen inflows for four consecutive weeks, with a total scale rising to $6.24 trillion, once again setting a historical high, indicating that market liquidity remains very ample.

The financial situation of the United States deserves continuous attention, as it is essentially hyped as a theme every year. It is expected that the U.S. government's debt may reach 130% of GDP within ten years, and interest payments alone will amount to 2.4% of GDP, while military spending to maintain U.S. global hegemony is only 3.5%, which is clearly unsustainable.

![Cycle Capital Macro Weekly (8.25): Trend Slowing, but Neutral to Optimistic on Market for the Rest of the Year])https://img-cdn.gateio.im/webp-social/moments-28c07cb7668a88dc8898c81dc7aecc43.webp(

US Dollar Weakens

In the past month, the US Dollar Index )DXY( has fallen by 3.5%, marking the fastest decline since the end of 2022, which is related to the market's increased expectations for a Federal Reserve rate cut.

Looking back at the beginning of 2022, the Federal Reserve adopted an aggressive interest rate hike policy to combat inflation, which strengthened the US dollar. However, by October 2022, the market began to anticipate that the Federal Reserve's interest rate hike cycle was nearing its end and might even start considering rate cuts. This expectation led to a decrease in demand for the US dollar, causing it to weaken.

The current market seems to be a replay of the past, only that the speculation back then was too advanced, while today the interest rate cut is about to land. If the dollar falls too much, the unwinding of long-term arbitrage trades may become a force suppressing the stock market.

![Cycle Capital Macro Weekly Report (8.25): Trends Slow Down, but Neutral to Optimistic About the Market for the Remainder of the Year])https://img-cdn.gateio.im/webp-social/moments-64585bf2523c9889940e1a31b46148a2.webp(

Next week's two major themes: inflation and Nvidia

Next week's key focus on price data includes the PCE) Personal Consumption Expenditures( inflation rate in the United States, the preliminary CPI) Consumer Price Index( for Europe in August, and the CPI in Tokyo. Major economies will also release consumer confidence indices and economic activity indicators. Regarding corporate earnings, the focus will be on Nvidia)'s earnings report after the U.S. stock market closes on Wednesday.

The PCE released on Friday is the last PCE price data before the Federal Reserve's next decision on September 18. Economists expect the core PCE inflation month-on-month growth to remain at +0.2%, while personal income and consumption are expected to grow by +0.2% and +0.3%, respectively, remaining the same as in June. This implies that the market expects inflation to maintain a moderate growth momentum without further decline, leaving room for potential downward surprises.

NVIDIA Earnings Preview - Clouds Disperse, Expected to Inject a Strong Boost into the Market

NVIDIA's performance is not only related to AI and technology stocks but also serves as a barometer for the overall sentiment of the financial market. Currently, the demand for NVIDIA is not an issue, and the key theme is the impact of the delay in the Blackwell architecture. After reviewing multiple institutional analysis reports, I found that the mainstream opinion on Wall Street believes this impact is limited, and analysts generally maintain an optimistic outlook for this earnings report. Over the past four quarters, NVIDIA's actual reported results have consistently exceeded market expectations.

The key indicators expected by the market include:

• Revenue of 28.6 billion USD, a year-on-year increase of 110%, and a quarter-on-quarter increase of 10%.
• Earnings per share of $0.63, a year-on-year increase of 133.3%, and a quarter-on-quarter increase of 5%
• Data center revenue of $24.5 billion, a year-on-year increase of 137% and a quarter-on-quarter increase of 8%.
• Profit margin 75.5%, unchanged from the previous quarter

The most concerning issues are:

1. Has the Blackwell architecture been delayed?

UBS analysis believes that the first batch of Nvidia's Blackwell chips may be delayed by up to 4-6 weeks for shipment, with an expected delay until the end of January 2025. Many customers have switched to purchasing the H200, which has a very short delivery time. TSMC has begun production of the Blackwell chips, but due to the complex CoWoS-L packaging technology used in the B100 and B200, there are yield challenges, and the initial output is lower than originally planned. The H100 and H200 use CoWoS-S technology.

However, this new product was not included in the recent performance forecast. Since Blackwell is not expected to enter sales until the fourth quarter of 2024 and the first quarter of 2025, and NVIDIA only provides guidance for single-quarter performance, the delay will have little impact on the performance for the second and third quarters of 2024. At the recent SIGGRAPH conference, NVIDIA did not mention the impact of the delay of the Blackwell GPU, indicating that the impact of the delay may be minimal.

2. Is there an increase in demand for existing products?

The decline of B100/B200 can be offset by an increase in H200/H20 in the second half of 2024.

According to HSBC's forecast, the production of the B100/B200 substrate (UBB) has been revised down by 44%, although deliveries may be partially delayed until the first half of 2025, resulting in a decrease in shipments in the second half of 2024. However, H200 UBB orders have significantly increased, expected to grow by 57% from the third quarter of 2024 to the first quarter of 2025.

Based on this estimate, the H200 revenue for the second half of 2024 is expected to be $23.5 billion, which should be sufficient to offset the potential $19.5 billion loss related to B100 and GB200 revenues - equivalent to 500,000 B100 GPUs or a $15 billion implied revenue loss, as well as an additional facility related revenue loss of $4.5 billion. We also see potential upside from the strong momentum of the H20 GPUs, primarily aimed at the Chinese market, with possible shipments of 700,000 units or an implied revenue of $6.3 billion in the second half of 2024.

In addition, the leap in TSMC's CoWoS capacity may also support revenue growth from the supply side.

On the customer side, ultra-large-scale technology companies in the United States account for more than 50% of Nvidia's data center revenue, and their recent comments suggest that the demand prospects for Nvidia will continue to increase. Goldman Sachs' forecasting model shows that global cloud computing capital expenditures are expected to grow by 60% and 12% year-on-year in 2024 and 2025, respectively, higher than previous forecasts of 48% and 9%. However, it can also be seen that this year is a year of significant growth, and it is unlikely that the same growth level can be maintained next year.

3. The degree of momentum slowdown

In addition to the slowing growth of spending by large enterprises next year, NVIDIA's side...