Banks Eye Stablecoin Profit Surge

CRYPTO
Banks Eye Stablecoin Profit Surge

Banks are eyeing the lucrative stablecoin market, inspired by Tether’s massive profits. Once hesitant, banks are now actively exploring stablecoin issuance, with players like Societe Generale-Forge already launching euro-backed stablecoins for retail investors. Others, including Deutsche Bank’s AllUnity, BBVA, and Revolut, are also preparing entries. This shift follows Tether's decision to discontinue its EURt stablecoin and the regulatory clarity brought by Europe’s Markets in Crypto-Assets Regulation (MICA).

Visa is piloting stablecoin solutions with BBVA and engaging banks globally, while Hong Kong’s Standard Chartered aims to launch HKD-backed stablecoins. U.S. banks are expected to follow suit if stablecoin legislation advances, fueled by Tether's forecasted $10 billion in annual profits. However, risks persist: stablecoins could weaken banks’ liquidity, confuse consumers about deposit insurance, and face competition from central bank digital currencies (CBDCs). Despite challenges, stablecoins promise to transform banking, bridging blockchain technology and traditional finance.

FINANCE
S&P 500 Rally Shocks Forecasters

The S&P 500’s remarkable performance in 2024 has stunned Wall Street, far surpassing expectations of modest growth. Initially, analysts anticipated a slowdown after a 20% surge in 2023 fueled by AI breakthroughs and economic resilience. Instead, the index has soared 25% this year, marking one of the strongest back-to-back gains since the late 1990s.

The Federal Reserve’s easing policies and a robust economy bolstered corporate profits, driving optimism across markets. Excitement around AI technologies boosted tech giants like Nvidia, Apple, and Amazon, while Donald Trump’s presidential victory further fueled sentiment with promises of tax cuts and business-friendly policies.

Even historically bearish analysts, including Morgan Stanley’s Mike Wilson and JPMorgan’s Marko Kolanovic, reversed their forecasts, conceding the market’s unexpected strength. The rally also highlighted the outsized influence of the "Magnificent Seven" tech stocks, which significantly contributed to the S&P 500’s gains.

Despite some concerns over stretched valuations and potential risks from Trump’s economic policies, analysts remain optimistic. Bloomberg’s strategist survey predicts further growth in 2025, with targets ranging from steady performance to a bullish 19% rise. The market’s resilience has cemented the S&P 500’s position as a powerhouse, showcasing its ability to defy forecasts and deliver strong returns.

FINANCE
Trump Tariffs Could Reshape Global Trade

The global economy awaiting President-elect Donald Trump’s next term differs significantly from his first, potentially giving the U.S. a strategic advantage in a tariff war, according to Eswar Prasad, a Cornell University economics professor. Writing in The New York Times, Prasad argued that the U.S.’s relative economic strength could make it better equipped to weather tariffs than other nations.

Trump’s campaign emphasized aggressive tariffs, including 20% across-the-board duties and up to 60% on Chinese goods. After his election, Trump threatened immediate actions, such as a 25% tariff on Canada and Mexico over immigration issues and a 10% levy on China.

While critics warn tariffs will increase consumer prices, Prasad highlighted U.S. productivity growth as a mitigating factor. A stronger dollar from tariffs could also reduce import costs, offsetting inflationary pressures.

Meanwhile, weaker economies like China, Europe, and Japan face greater challenges. Prasad suggested Trump’s tariff policies may compel global trading partners to adapt, further solidifying the U.S.’s position in a shifting economic landscape.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.