Market Sentiment - The beginning of December has seen a shift in market sentiment, with technology and cryptocurrency sectors experiencing declines after a solid rally in the previous week due to expectations of Federal Reserve interest rate cuts [1][2] - The Bank of Japan's Governor has adopted a more hawkish tone, raising expectations for a December rate hike, which has contributed to the current risk-off sentiment in the market [2][3] Impact on Carry Trade - Concerns are growing regarding the unwinding of the carry trade, where investors borrow in low-interest yen to invest in higher-yielding assets. A potential rate hike from the Bank of Japan could lead to repatriation of funds back to Japan [3][4] - The ten-year yield in Japan has reached a 17-year high, which may further exacerbate the unwinding of the carry trade and impact liquidity-sensitive sectors like technology and cryptocurrency [3][4] NVIDIA and Market Concerns - NVIDIA has faced significant pressure in the market, but recent comments suggest a potential turnaround in sentiment, although concerns regarding secular financing remain prevalent [6][7][8] - The latest earnings report from NVIDIA was positive, indicating strong performance despite market nervousness surrounding secular financing and its implications for the ecosystem [11][13] Cryptocurrency Market - The cryptocurrency market is experiencing challenges, with institutional demand remaining weak. November saw significant outflows from ETFs, totaling 3.48 billion, marking one of the worst months for the sector [15][16] - The unwinding of the yen carry trade is causing fears of reduced liquidity, which is particularly detrimental to the cryptocurrency market [15][16]

Core Viewpoint - The yen carry trade is expected to make a comeback due to the anticipated slower interest-rate hikes under Sanae Takaichi's leadership, which could attract traders back to borrowing the low-yielding yen to invest in higher-yielding currencies [1][2][4]. Currency Market Reaction - Japan's currency has depreciated approximately 2% against G-10 currencies this week, driven by expectations of Takaichi's pro-stimulus policies leading to a delayed timeline for the Bank of Japan's (BOJ) policy tightening [2][4]. - The yen is nearing a six-month low against the dollar, with market concerns about increased government spending and inflation under Takaichi's potential administration [4][6]. Interest Rate Expectations - Market participants have reduced their expectations for immediate policy tightening, with swaps indicating a 22% chance of a BOJ rate hike at the upcoming meeting, down from about 57% prior to the leadership vote [6]. - Etsuro Honda, an advisor to Takaichi, suggested that a rate increase this month would be premature, advocating for a more suitable timing in December [5]. Carry Trade Dynamics - Analysts believe that if Takaichi maintains her stance that a weak yen is not detrimental to Japan's economy and opposes rate hikes, the carry trade could resume, leading to further yen depreciation [8]. - Masayuki Nakajima from Mizuho Bank predicts that yen selling may accelerate, potentially pushing the currency towards 180 per euro [7].

Group 1 - The investing group Reading the Markets, led by Michael Kramer, provides daily commentary and videos to help members understand market drivers and trends [1] - The group offers education on macro trends, interest rates, and currency movements to assist members in making informed investment decisions [1] - Subscribers benefit from unprecedented access to expertise at a low subscription price compared to similar services [1] Group 2 - Michael Kramer is affiliated with Mott Capital Management but operates independently, providing his own analyses and opinions [3] - The report emphasizes that opinions and analyses are solely those of Michael Kramer and should not be considered as specific investment recommendations [3] - There is no guarantee of completeness or accuracy in the information presented, and past performance does not indicate future results [3]

Market Outlook - Yen carry trade marked the bottom in 2024 [1] - Geopolitical tensions (WWIII situation) marked the bottom in 2025 [1] Investment Strategy - Expectation of parabolic gains following the identified market bottoms [1]