Five Things You Need to Know to Start Your Day: Americas

Good morning. The booming US stock market is making some people nervous, but maybe the Magnificent Seven aren’t so expensive after all. Plus [View in browser]( [Bloomberg]( Good morning. The booming US stock market is making some people nervous, but maybe the Magnificent Seven aren’t so expensive after all. Plus, there’s a big bet riding on market calm and unstoppable crypto markets may score a win in London. Here’s what people are talking about. — [Sofia Horta e Costa]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Bubble anxiety There’s so much debate over whether the US stock market is overheating that my colleagues [Alexandra Semenova]( and [Matt Turner]( dug into the data to see what the evidence suggests. Some of their charts [may dispel concerns of a bubble forming](, namely one showing an equal-weighted version of the S&P 500 just hit a record — an indication that the rally isn’t as concentrated as feared. JPMorgan’s strategy team has also weighed in, noting that the so-called Magnificent Seven stocks — a group that includes Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia and Tesla — are actually cheaper relative to the market than they were five years ago. Morgan Stanley’s Michael Wilson, who has been a [bearish voice]( on Wall Street, says the burden is now on improving earnings to support the gains in stocks. Meanwhile, the team at Barclays says investors should consider selling US government bonds after [an “excessive” rally](. S&P 500 futures are about 0.4% lower as I type, while Treasuries are flat. Betting on calm It’s not quite a repeat of the trade that imploded in the “Volmageddon” event of early 2018, but it’s a distant cousin. Known as short-volatility bets, they’re now back in a different guise but [at a much bigger scale](. Billions are now pouring into ETFs selling options on stocks or indexes in order to juice returns, translating into a huge bet on stock calm. Assets in such products have almost quadrupled in two years to a record $64 billion — though some of that will be paired with a long position on the stock market. With the short volatility trade sucking up assets and major event risks like the US presidential election on the horizon, some investors [are starting to get nervous](. Coming up… Speaking of market calm — the big macro event on this week’s economic calendar may be tomorrow’s February [US inflation report](. The last print tripped up stock markets and marked the worst CPI day for the S&P 500 since September 2022. The index has been moving more[in either direction]( on US inflation days and some investors are gearing up for wilder swings should the monthly consumer price index reading continue to show inflation remaining stubbornly sticky. Scroll down to see Joe Weisenthal’s take. Unstoppable crypto Bitcoin has just topped $71,000 [for the first time](, advancing for a sixth straight day and taking this year’s rally to almost 70%. Digital assets scored another win today as the London Stock Exchange said [it will soon accept applications]( for ETNs backed by Bitcoin and Ether, even as the UK regulator said such products could only be available to professional investors and are [ill-suited for retail consumers](. A batch of new Bitcoin ETFs in the US has attracted almost $10 billion in net inflows since they launched two months ago, igniting a broad surge in crypto markets. And Coinbase, the biggest US cryptocurrency exchange, is one of the top gainers in early New York trading today. Last week [it climbed above its listing price]( for the first time in more than two years. Nerves fray in Japan As the Bank of Japan’s March 18-19 meeting draws closer, the country’s markets are beginning to price in the risk that policymakers[will scrap]( the world’s last negative interest rate. A stronger yen is hurting exporters, triggering the [biggest drop in Japanese shares]( since early October today. The latest round of speculation has been fueled by media reports that the central bank is considering scrapping its yield curve control program, and that a rising number of policymakers are leaning toward ending negative rates due to expected larger wage increases. Data earlier today also showed Japan’s economy [avoided falling into a recession]( at the end of last year — an outcome that could improve the optics for any tightening of central bank policy. The BOJ didn’t buy ETFs to support the market even as the Topix fell more than 2% — a level widely seen as a trigger for previous central bank purchases. What we’ve been reading This is what’s caught our eye over the past 24 hours. - Reddit and its investors [eye an IPO]( that could be the year’s biggest. - Lessons from Silicon Valley Bank’s [epic collapse]( a year ago. - Academics[ question ESG studies]( that helped fuel an investing boom. - Portugal’s latest election sees a populist far-right party [gaining traction](. - Here are [some key takeaways]( from China’s big legislative meeting. - Oppenheimer wins [seven Oscars](, including best picture and director. And finally, here's what Joe’s interested in this morning Hello and happy CPI Week. Tomorrow, we get inflation data for February. Expectations are for a 0.3% monthly increase in core (a step down from 0.4% last month) and a 0.4% increase in headline (a step up from 0.3% last month). Since we don't really know what the future holds, let's look backwards for a second. Last week we got three things that were supportive of the idea that rate cuts are coming into view. In the JOLTS report, we saw another drop in the quits rate. Quits are now clearly lower than they were pre-Covid, as people hang on to the jobs they have for longer. All things equal, it means lower labor market friction, probably low pay hikes, and just a cooler hiring market overall. Then in the non-farm payrolls report, we saw decent headline job growth, but January's huge 353k job gain was revised down to 229k. So the start of the year was not as hot as it initially looked. Meanwhile the unemployment rate bounced from 3.7% to 3.9%. That's not a fatal jump. It's still a ways to go before Sahm's Rule is triggered. But it is an indication of risk to the employment side of the Fed's mandate. Meanwhile, in his testimony to Congress, Fed Chairman Jerome Powell reiterated that he still views policy as restrictive and that [the FOMC is "not far" from having the confidence to cut rates](. Of course, the idea that monetary policy is restrictive might raise some eyebrows. Stocks are basically at all-time highs. Bitcoin is above $71K this morning. All that's true, but the Fed doesn't have a mandate to depress asset prices. So what matters more is whether what's happening in financial markets flows through to economic activity. Of course it's certainly possible for these asset prices to swing into a change in the public's proclivity to consume, or corporations proclivity to invest. But that either will or will not show up in the data. So far it's not clear if it is having much impact on real-world activity. Anyway, we'll learn more tomorrow. For now we see more signs of labor market normalization, and a Fed Chief who views the current stance of monetary policy as restrictive. And just FWIW, if you ask a multi-family housing developer or a company building an EV factory whether rates are restrictive right now, you might get a different answer than if you ask a memecoin trader. Joe Weisenthal is the co-host of Bloomberg’s Odd Lots podcast. Follow him on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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