Hi Investors! The UK's Demise has been greatly exaggerated, and global liquidity is rising, Bitcoin's time to shine?

Welcome back to another week of Market Movers, where I summarise the top headlines that attracted my attention this week to keep you up to speed with the markets and give you some light reading for the weekend.

As usual, lets start with a look at the general markets, followed by the digital asset space.

Don't forget to check out the Risk On Investor resources page for access to the growing selection of calculators, tools and video guides to help you become a better investor. There is also more content posted frequently on the YouTube channel to keep you informed and entertained - you can also read back on previous newsletters if you're a new joiner to the investor club

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Have a great weekend

Chaz (RiskOnInvestor.com)

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Disclaimer - The opinions of the author in this newsletter should not be taken as financial advice. Any mention of investment products is not a recommendation to buy.

If you are looking for financial advice, please seek the services of an industry professional and do your own research.

Capital is at risk when investing

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Major Market Indices

The Demise of the UK is Greatly Exaggerated

As someone who lives in the UK it can sometimes be difficult to take a step back and look at where the UK is.

Yes there is some bad economic news floating around, but fundamentally there are lots of strong areas economically in which the UK excels, but if you live here you might not be aware, why? Bad news is all the rage in politics.

Over the last few weeks there has been punch after punch from the new government as they try and lay the groundwork for what they are calling 'painful' decisions in the upcoming budget.

To set the scene, I think no charts show the issue as simply as the one below.

The UK has struggled to grow GDP per capita since 2008, so whilst total GDP has grown, it's only due to the expansion of population, in other words, either the UK as a whole has a productivity problem, we are attracting the wrong type of people, or a combination of the two.

So why am I optimistic?

The UK has two of the most important ingredients needed to grow an economy, stability and innovation.

Stability

The UK has just been through one of the most instable periods in its history.

Leaving the EU did damage to its relationship with key trade partners, and despite only having 57 prime ministers since 1721 (303 years) working out as a new prime minister every 5.3 years the UK has had 5 prime ministers in the last 5 years. (more than 10% of all the UK's prime ministers have served in the last decade!)

So where is this stability?

I think it is returning.

Structurally, like it or not, the first past the post electoral system means that the UK generally has majority governments. In other words, governments can usually enact the policies they want, which brings predictability and therefore stability.

As a comparison, you only have to look across the channel to France which in the fifth republic (1958-present) has had 25 prime ministers, on average serving 2.6 years - less than half the time of their British counterparts and is currently embroiled in a constitutional mess with no single party seemingly able to break the deadlock for a number of months now.

Innovation

Innovation isn't exactly the first thing you think of when you think of the UK, but it has a rich tradition in science, engineering and technology stretching back hundreds of years, in fact, I recently stumbled across this video which provides an Aussie take on British scientific contributions and is worth a watch if you can spare 15 minutes.

And that tradition is still alive and kicking.

The UK attracted a third (32%) of all european technology funding through the first half of 2024 (Source) and the majority of that funding has shifted from the traditional areas of technology and engineering towards, financials and healthcare

This has led to an explosion in the number of unicorn startups in the UK (Unicorns are companies worth in excess of $1billion)

This makes the UK home to the third most unicorn companies, behind the US and China and it really dominates the european startup scene because of that

So the UK has the potential to foster innovation, enough wealth to fund it, and a government that has come out and said it wants to be pro-growth. So all the potential building blocks are coming together, but can the UK fulfil it's potential and turn these private unicorns into wealth generators for the wider economy?

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Digital Assets

Federal Reserve Cuts - New Money Incoming?

This week the US federal Reserve cut the target rate by 0.5% to mark the start of monetary easing in the world's largest economy.

More importantly, Powell cracked out his purple tie to deliver his press conference which has become the financial meme and signifies he is ready to ease (I highly doubt he means this)

Immediate reactions from crypto has been very positive with Bitcoin briefly touching $64k (may be different at the time you read) and global stock markets also welcoming the news.

I'm personally hesitant around rate cuts in it's long term outlook. I think the US is in a goldilocks zone right now, the economy is strong and unemployment is low by historical standards, so from that point of view, lower rates is beneficial for asset prices as it starts the process of making money cheaper, but in the longer term the Federal reserve now has to try and find the neutral rate, and find it at the right pace to avoid stifling the economy and causing a slowdown.

Some commentators are pointing towards the measure of global liquidity (chart below) which appears to finally be rising after being stagnant for a couple of years, and when overlaid on the price of Bitcoin looks highly correlated.

So does this mean crypto is off to the races?

I have no idea.

Traditionally the fourth quarter has been very strong for crypto but with upcoming elections in November in the US there may be a lot of market instability until the outcome is known which may hamper asset prices.

I am personally very comfortable in my exposure to crypto with significant holdings in Bitcoin proxies and Ethereum (as well as a speculative position in a gaming token)

[DISCLOSURE - Chaz holds $MSTR, $RIOT, in an ISA and $wStETH and $GALA in unsheltered positions]

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Latest from the YouTube Channel

It's been a while since I reviewed the Bitcoin miners, so on my YouTube channel I have presented some of the latest data after compiling all the latest financial results - watch here​

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Have a great weekend!

Chaz

P.S - Want to work with me? Reach out by replying to this email and lets chat