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In today's newsletter, we examine promising signs for the stock rally, fueled by positive derivatives data and market breadth indicators, suggesting a potential extension in the recovery of the S&P 500. Simultaneously, the SEC's approval of the first spot-Bitcoin exchange-traded funds (ETFs) sparks a significant boost for crypto stocks and Ether, outperforming Bitcoin. As traders reassess the timeline for Federal Reserve interest rate reductions, the euro's recent surge faces a pause, driven initially by expectations of an early rate cut but now subject to market recalibration. While the support for the dollar remains steady, the euro could emerge as a beneficiary once the Fed begins reducing rates, challenging current market enthusiasm, particularly if upcoming US inflation data exceeds forecasts.

Matheus Zani & Daniel Porto

R&D Featured Article

Raise against the machine: How AI will augment investor instincts

Over the past two decades, AI and data analytics have become pivotal in shaping investment decisions, with Gartner predicting that they will influence over 75% of venture capital investments by 2025. This transformative technology, seamlessly integrated with human analysts, offers the chance for venture capitalists and early-stage investors to notably reduce risk across the investment journey. AI tools excel in processing vast financial data, enhancing decision-making accuracy, and expanding the range of relevant insights. The models, already deployed by various firms, prove effective in early-stage sourcing, screening, portfolio value creation, and streamlining due diligence in later stages. Beyond quantitative analysis, AI plays a role in mitigating personal risk by providing objective benchmarks and psychometric insights into founders' personalities. The technology's application in foreign investing, particularly in managing FX hedging and risk, showcases its potential to broaden investment horizons while minimizing volatility. As AI adoption becomes more widespread, the future of successful investing will likely hinge on a judicious combination of data-driven strategies, a clear investment thesis, and effective management.

2. SEC Approves First Spot-Bitcoin ETF

The approval of the first spot-Bitcoin exchange-traded funds (ETFs) by the SEC is providing a significant boost to crypto stocks and Ether, Bitcoin's rival. In pre-market US trading, exchange platform Coinbase and miners like Cleanspark and Marathon Digital are gaining, reflecting the broader access to Bitcoin facilitated by the SEC decision. Ether, the second-largest cryptocurrency, is also experiencing notable gains, outperforming Bitcoin both today and year-to-date. Investors are eyeing potential SEC approval for ETFs directly investing in Ether, with fund flows into Ethereum ranking second only to Bitcoin. Options indicate bets on an 18% Ethereum rally by March.

3. Euro's Rally Faces Pause as Markets Reassess Fed Rate Cut Timeline

After an impressive quarter that saw the euro surge over 4%, traders are reassessing the timeline for the Federal Reserve's potential interest rate reductions. The euro's strength was largely driven by expectations of an early Fed rate cut, but recent data on the US labor market and comments from Fed officials suggest markets may have overestimated the likelihood of an imminent cut. The current support for the dollar may persist as inflation-adjusted rates in the US are expected to remain relatively stable. However, once the Fed starts reducing rates, the euro could become a notable beneficiary. Market enthusiasm, currently widening the gap between fundamental expectations and the euro's spot value, may face challenges, particularly if upcoming US inflation data exceeds forecasts.

Charted Territory

What to look out for today

USD - Consumer Price Index
USD - Initial Jobless Claims
USD - Monthly Budget Statement
JPY - Current Account
JPY - Foreign Investment in Bonds & Stocks

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