Emerging Markets: The Biggest, Fastest Growing, and Arguably Least Understood Pool of Credit in the World

Economic

Summary:

Learn why emerging market debt is best used to reduce risk rather than chase yields.

In amateur tennis, fully 80% of points scored are the result of an errant shot, such as hitting the ball out of bounds. This was the insight that Charles Ellis used to characterize investing in his classic “The Loser’s Game.” It is not what investors get right that defines success, it is what they do not get wrong.

While he was writing in 1975, this idea captures a lot of what happened to emerging market (EM) debt during the mid-2000s. Investors who were leaning into risk and trying to time the market around macro events started to play a loser’s game. The winner’s game, in contrast, shifted toward bottom-up trades that are uncorrelated to election cycles, geopolitical events, and other systemic macro events – areas where it has become more difficult to have an edge as an investor.

EM debt has become the largest pool of credit in the world, according to the Bank for International Settlements, surpassing the U.S. over the past decade. Along the way, many of EM’s fundamental attributes have been transformed. As the market has evolved, so too must investment strategies adapt.

The best countries or regions are generally not those being hyped as the next success stories. In contrast to conventional wisdom, EM often rewards investors who minimize losses rather than maximize gains, and who avoid concentrated positions in high-yielding countries. We believe EM debt should be used primarily as a diversification tool – rather than a source of seeking high returns – prioritizing lower-risk countries and senior debt structures.

EM debt has similar default and recovery rates to U.S. corporate debt but also more volatility, especially for lower-quality issuers. That’s one reason why we believe bottom-up relative-value analysis and portfolio construction are more important to EM today than top-down macro analysis. In addition, active management in EM debt has consistently outperformed passive investing, according to Morningstar data.

Rapid economic growth through the early 2000s masked many underlying complexities in EM, but growth has slowed. In this piece, we attempt to unmask the asset class, identifying universal features of EM and how they can help in achieving broader investment objectives.

Storytelling versus hypothesis testing

The optimistic stories told by EM investors for decades revolved around demographics, urbanization, a rising middle class, and GDP growth catching up to developed market (DM) levels. Today’s stories are more nuanced. Catch-up growth continues, but at a slower pace. Policymakers are better at business cycle stabilization, but there is greater political and geopolitical uncertainty than before.

These stories aren’t inaccurate, but they have not always mattered for investment returns. EM equities should have been the biggest beneficiary from stronger growth, for example, but fared worse than both DM equities and EM debt.

Here, rather than storytelling, we take a more scientific approach. The investment hypothesis for EM debt is as follows. It should be used primarily as a means to reduce concentrations to other domestic risks without sacrificing yield.

Investors should not treat EM as a space to hunt for high returns. It may sound counterintuitive, but the case for EM debt should not be anchored on spreads, yields, or some other valuation metric. It should be based primarily on diversification benefits, in our view.

Therefore, investors should consider taking a page from Warren Buffett’s book: prioritize lower-risk countries with reasonable valuations over high-risk countries with great valuations, and move to more senior parts of the capital structure (from equity to debt).

Of course, there are exceptions. But this is the top-level hypothesis that seems best supported by the data.

An anatomy of the asset class

The number of investable EM countries has more than doubled in the past 20 years. We now model about 200 individual macro risk factors (such as foreign exchange, rates, and spreads) across about 85 countries. Correlations across this matrix range from 0.8 to -0.7, according to data going back 20 years, calculated by PIMCO. So there is extreme diversity within the asset class.

Moreover, some factors are “risk-on” while others are “risk-off,” i.e., positively or negatively correlated to global systemic factors such as oil or equities. There are now about 12 sovereign bond issuers that have provided similar portfolio ballast during risk-off events over the past 15 years as U.S. Treasuries, the perceived ultimate risk-off asset. During this 15-year period, a basket of EM local bonds hedged to U.S. dollars (as gauged by 5-year swaps) generated higher returns than comparable U.S. Treasuries (also as gauged by 5-year swaps) and had a similar success rate in hedging equity drawdowns but less of a payout when drawdowns occurred.

This increase in the number of countries has been overshadowed by the rise in available instruments, which has grown nearly 20-fold (see Figure 1) in the past two decades. Investors can now disaggregate country-level macro risk factors into fine granularity.

Emerging Markets: The Biggest, Fastest Growing, and Arguably Least Understood Pool of Credit in the World_1

Emerging Markets: The Biggest, Fastest Growing, and Arguably Least Understood Pool of Credit in the World_2

Recovery values (and loss-given-default) are also nearly identical, at about 40%. However, there are three nuances to note.

Default probabilities for issuers rated CCC are higher for EM than for U.S. corporates. (Spreads are wider too, so we are not commenting on whether this cohort is relatively rich or cheap.) This is because the rules of the game can get rewritten for the lowest-quality EM issuers because of political upheaval, whereas U.S. corporate issuers rated CCC operate within a more defined system of stable rules and bankruptcy law.While the EM and U.S. corporate default data share a similar mean, the EM data has a wider standard deviation. Default events in EM have a wider range of outcomes.Workouts can take longer in EM. A U.S. corporate restructuring may take months to work through a court system. By contrast, it may take years to negotiate terms among international creditors, the International Monetary Fund, and other bilateral lenders. All else equal, this means that the present value of a nonperforming EM debt instrument undergoing a restructuring will be lower (even if the ultimate recovery value is the same).

Asymmetry of certain risks

There is an additional empirical nuance, perhaps the most important one of all: the mark-to-market efficiency of returns along the quality spectrum, as captured by metrics such as the Sharpe ratio, a gauge of risk-adjusted return. Similar to fundamental credit risk, measures of mark-to-market volatility increase much more on the lowest-quality bonds in EM than in U.S. corporate debt, rendering a lower Sharpe ratio for EM debt rated single B and CCC.

Drawdowns are also disproportionately deeper during times of acute stress for EM (see Figure 4). Worst of all, the sensitivity to market-based returns, or betas, becomes asymmetric, meaning the downside capture during a market sell-off is larger than the upside capture during a rally.

Emerging Markets: The Biggest, Fastest Growing, and Arguably Least Understood Pool of Credit in the World_3

None of this means that there cannot be compelling value in EM debt rated single B and CCC. But it does explain why too many investors have been seduced by the siren song of high-yielding, low quality frontier markets. The bonds may be cheap, but the efficiency of the resulting returns is poor for investors with anything short of a very long time horizon.

This explains why EM debt offers higher spreads compared with U.S. corporates despite similar fundamental credit risk – about 70 basis points on average on a risk-neutral basis over the past five years. The additional spread is not a sign of market inefficiency. It is compensation for other burdens, such as unfamiliarity (i.e., the need to explain newspaper headlines to one’s investment board), wider bid-ask spreads in secondary markets, and additional mark-to-market volatility, especially on lower-quality bonds. In theory, these additional burdens shouldn’t matter to long-term value investors. But in practice they do.

Investment approach

This siren song also explains why some investors say they’ve been on a roller coaster ride with EM in the past. Beyond general asset class volatility, many have been exposed to poor sizing of the asset class in their broader portfolio, and imprudent risk scaling within the EM debt allocation. Let’s look more closely at both.

Strategic asset allocation (sizing the beta)

If diversification is the main objective, then the correlation of EM debt to a broader portfolio is the most important metric. This is true for any asset class, but it is especially important for satellite exposures that play a more peripheral role in portfolio construction.

An asset inclusion test offers a clear framework. It reduces the decision whether to include an asset class to an optimization function: Maximize a portfolio’s Sharpe ratio subject to the constraints of risk, return, and correlations of the individual assets.

The result is a measure of each asset’s marginal impact on the portfolio’s overall Sharpe ratio. This will be fairly unique for each investor. But generally speaking, EM debt scores better than most other assets. It does so because of favorable correlation characteristics, not solely because of higher yields.

The correlation between EM debt and U.S. corporate debt is about 0.63 over the past 10 years, using J.P. Morgan data. This is relatively low within the world of fixed income spreads. And this is the point: EM debt must be assessed jointly by its risk, return, and diversification properties at the broader portfolio level, rather than narrowly on some rich/cheap valuation metric, and not independently from one’s overall portfolio.

Abiding by these guidelines leads to a more sober assessment of sizing in strategic asset allocations. Many clients, ranging from insurance companies to pension funds, typically have chosen an allocation of 2% to 8%.

Risk scaling (seeking alpha)

Investors are always at the mercy of what the market offers. If markets evolve, so too must investment strategies.

Consider how the EM debt market has evolved. In the early years (1990s and early 2000s), there were few countries in EM. Most issuers readily overpaid to access international capital. Growth was booming but punctuated by homegrown shocks (e.g., 1994 in Mexico and 1997 in Asia). The key skill set was top-down macro analysis. Investors could beat the market by leaning into risk and harnessing excess yields, while hopefully sidestepping country-specific sell-offs.

Today, there are far more countries and instruments to consider. Growth is middling and recent shocks are mainly exogenous and systemic (e.g., the 2008 global financial crisis, 2013 Treasury taper tantrum, and 2020 pandemic).

It is difficult to have an edge in macro analysis. Not only is it a more crowded field, but the nature of risk has shifted – from economic complexity, which can be modeled, toward political uncertainty, which can be impossible to predict.

In our opinion, the key skill set for investing in EM debt today is bottom-up relative-value analysis and portfolio construction. It is the ability to identify small arbitrage opportunities, instrument by instrument, and then combine and scale each in a way that a basket of these trades is more efficient than any one is independently.

Convexity – or the nonlinear relationship between prices and yields – is key. It embeds downside cushion during market sell-offs – prices fall but decreasingly so. This is particularly important given the excess volatility and asymmetric beta sensitivities noted earlier, especially at the lower end of the quality spectrum.

Of course, top-down macro analysis remains critical – but as a starting point. It must be thoroughly mapped to create space for the bottom-up alpha process to flourish. We model and measure 10–15 distinct bottom-up trade types and scale them in portfolios based on their Sharpe ratios and correlations to the beta. This is an engineering challenge, which leads to much more bounded results than if it were a forecasting challenge.

Playing a winner’s game

The tennis analogy mentioned earlier – winning by limiting errors – is not just a metaphor. It comes through clearly in the data. Consider the best and worst EM debt investors over the past decade (see Figure 5), and compare the journey, month-by-month, of each along the way. Did the best investors achieve their status by maximizing victories or by minimizing defeats? The answer is clear.

Emerging Markets: The Biggest, Fastest Growing, and Arguably Least Understood Pool of Credit in the World_4

The best and worst investors had about the same frequency of 1st-quartile monthly returns (23% versus 21%, respectively). But the best investors had a dramatically lower frequency of bad months. They experienced 4th-quartile monthly returns 21% of the time, versus 38% for the worst managers.

This is consistent with the asymmetric return profile of the asset class discussed earlier. The efficiency of returns from higher-quality countries can be overshadowed by the inefficiency of returns from lower-quality countries. Likewise, years of positive alpha, or market outperformance, can be wiped out in a single drawdown episode.

Our process is explicitly designed around these empirical realities for the asset class. It is designed to minimize the incidence of 4th-quartile monthly returns. (Please reach out to your PIMCO representative for statistics specific to PIMCO.)

What about passive investing? It has been remarkably consistent, ranking at the lower end of the 3rd quartile year after year (see Figure 6).

Emerging Markets: The Biggest, Fastest Growing, and Arguably Least Understood Pool of Credit in the World_5

The vast majority of active managers perform much better. Moreover, this better performance does not have to feel like a roller coaster.

Investors can treat EM debt as a structural allocation, used to de-concentrate from domestic sources of credit risk. They can size the allocation based on its effect on the Sharpe ratio of their overall portfolio. And, most importantly, investors should manage the EM allocation with caution. That can mean avoiding the temptation to migrate toward high-conviction, high-concentration positions in high-yielding countries, which can magnify macro-driven volatility. That game may have worked two decades ago. But it is a difficult game to win today.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Goldman Sachs

Economic

Stocks

Chinese stocks may be poised to climb again, even after gains from an immense rally in September faded. Recent Chinese policy announcements suggest the government is determined to support the stock market at the same time that the outlook for earnings growth is moderately improving, according to Goldman Sachs Research.

Some investors may be hesitant to chase returns after the whipsaw in stock prices, says Goldman Sachs Research’s Kinger Lau, chief China equity strategist. The last few recoveries in China’s equities were short-lived and weren’t accompanied by policy follow-through. But there are signs this cycle could be more enduring.

“History suggests this rally may have more legs, especially if policy pledges and earnings come through,” Lau says.

Why China’s Stock Market May be Poised for Further Gains_1

One of the main reasons Chinese equities may rally is that the government appears determined to have a significant impact — unveiling more than 10 key measures and papers since late September, spanning monetary and fiscal policy and property and equity markets.

China watchers may have suffered from “policy fatigue” in the past year, given that the delivery on policy promises has been perceived as underwhelming, Lau says. The policy announcements from late September may be different. They have not only positively surprised investors, but those efforts have changed the policy narrative.

“The magnitude, breadth, and comprehensiveness of this easing package is arguably the most significant in recent history,” Lau says. It may rival major support packages in the past, notably the A-share (stocks listed in mainland China) rescue plan in 2015. “Investors are getting what they have been hoping for, to a large extent,” he says.

Every RMB 1 trillion of fiscal stimulus that goes to the real economy (and not for debt repayment) should lift China’s real GDP growth by 40 basis points, which in turn would add 2 percentage points to the earnings growth of stocks in China’s main indexes, the MSCI China and the CSI300. The other factor that could also boost earnings is a moderate pickup in consumption demand.

As a result, our analysts raised their price-to-earnings targets, forecasting that MSCI China companies could trade at 12.0x earnings and CSI300 stocks could reach 14.2x earnings (up from 10.3x and 12.8x respectively). This pushes their new 12-month index forecast for the MSCI China to 84 and for the CSI300 to 4600, increases of 27% and 15%, respectively, from their previous 12-month targets. Goldman Sachs Research’s earnings growth forecasts are modestly below consensus for this year and next.

What if the announced policy moves fail to materialize and this market recovery turns out to be another head fake? Lau suggests that Chinese stocks — the second-largest equity market in the world — still have an important role to play for investors.

The recent historic rally shows that not trusting the policy moves can be costly, especially when valuations are low and investor holdings of the securities are light.

Chinese stocks are idiosyncratic and provide diversification benefits at a time when risky assets globally are becoming more synchronized.

Chinese retail and institutional investors might be on the cusp of a long-awaited shift from investing in property to equities.

Given persistent pressure on the housing market, equities may be a higher priority for the government in order to provide financing for the economy as well as a way for Chinese to invest and grow their wealth.

Chinese stocks are still trading at a valuation discount to other benchmarks. Lau says this shows that some investors remain reluctant to take risks based on long-term Chinese growth. However, he points out that recent indications of policy support should help reduce the risk of most severe downside scenarios, such as an economic hard landing or policy misstep, and therefore boost Chinese stocks.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

JPMorgan

Economic

If the U.S. economy were a pop star, it might be peak Taylor Swift. On nearly every major measure of economic health, the economy is in great shape and far ahead of its developed market peers. Real GDP is growing solidly, inflation is approaching the Fed’s 2% target and job growth has been robust even with a sub-4.5% unemployment rate for the last 3 years.

Yet people feel quite differently about the economy from how it’s objectively performing. Consumer confidence registered 98.7 in September, well below its 122-135 range prior to the pandemic and its peak of 145 in the summer of 2000. Why don’t Americans feel better?

Many households may not feel like they are doing as well as they should be given a strong economy

Low-income households typically have meager investment nest eggs—roughly 50% of households make below $50K in after-tax income1. As such, tremendous gains in equity investments and investment income over the last few years have disproportionately benefitted wealthier households.

However, real estate has been a boon for many Americans. U.S. homeownership is at 65%, the highest since 2011 (excl. pandemic distortions). As such, despite significant gains for the wealthy, the bottom 50% have still seen their net worth nearly double since the fourth quarter of 2019 (see chart).

Inflation is down, but sticker shock persists

Consumers don’t think in terms of year-over-year changes – they think in terms of price levels, after-tax income and the money left over after they’ve paid all their essential bills. After adjusting for inflation, low-income households (<$60K) got less goods and services for their buck from mid-2021 through mid-20232.

Food in particular has been a sore subject. Spending on off-premises food and beverage consumption has grown a cumulative 23% since mid-2020, but adjusting for inflation amounts to just 2% of real growth. Similar increases in essential goods and services (i.e. insurance, rent and interest) may explain why inflation uncertainty is still elevated for those making below $50K3.

Consumers are slowly getting their purchasing power back, low-income inflation-adjusted spending recently returned to mid-2021 levels, but it’s likely going to take more time and disinflation progress for sentiment to turn.

Keeping emotion out of investments

As we show in the Guide to the Markets, political affiliation can greatly influence views on the economy. Considering this year’s presidential election and the fragmentation of the news environment, it’s no wonder why consumers may feel quite differently amongst themselves.

Despite lackluster sentiment, Americans have not stopped spending. Consumption is expected to have grown at a solid 3% ann. pace in the third quarter, supporting continued earnings growth for U.S. companies. The economy is by no means perfect, but there are still plenty signals of healthy and improving fundamentals that should lift sentiment over time and contribute to continued investment gains. For investors, large divergences in economic perceptions also underscore the importance of keeping emotion out of investing, during and beyond political elections. With the Economy so Strong, Why Don’t Americans Feel Better?_1

With the Economy so Strong, Why Don’t Americans Feel Better?_1

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Central Bank

Forex

RBA policy to remain unchanged

The upcoming Reserve Bank of Australia (RBA) policy meeting on November 5 is highly anticipated, with the bank adopting a wait-and-see approach and holding the cash rate steady while monitoring economic developments. The focus will be on ensuring that inflation continues to decline and that the economy remains on a stable growth path, with potential rate cuts anticipated in early 2025 if conditions improve.

RBA in Wait-and-See Mode Despite Drop in Inflation_1

Inflation ticks down within target

Recent inflation figures show a mixed but overall encouraging pattern. In the September quarter, the headline inflation rate dropped to 2.8%, the lowest level in three and a half years. Significant drops in fuel and electricity prices, aided by government rebates, drove this decline. However, underlying inflation, measured by the trimmed mean, remains above the RBA’s target band at 3.5%. This persistent core inflation suggests that the RBA may need to maintain a cautious stance as service sector inflation, particularly in rents, insurance, and childcare, continues to exert upward pressure.

RBA in Wait-and-See Mode Despite Drop in Inflation_2

GDP and economic growth

The development of Australia’s GDP has been modest. The June quarter of 2024 saw a 0.2% q/q increase in economic growth, which is consistent with the ongoing trend of gradual but consistent expansion. The weakest annual growth since the early 1990s, with the exception of the pandemic period, was 1.5% in the 2023–24 fiscal year. Although government expenditure has provided some support, this lethargic growth is a result of subdued household consumption and a decline in discretionary spending.

Various factors, including international economic conditions, domestic inflation patterns, and labor market robustness, will influence the RBA’s decision. The recent decrease in headline inflation is promising; however, the RBA remains vigilant about the stickiness in underlying inflation and its possible effects on the economy. The GDP data underscore the necessity for ongoing support to foster economic growth and tackle the difficulties confronting households and companies.

Aussie stands near critical area

Investors will closely scrutinize the language and tone of the RBA’s statement, even though the immediate decision to hold rates might not cause significant movement. Investors will look for clues about future monetary policy direction, which will influence the Aussie’s trajectory in the coming months.

Aussie/dollar rebounded off the 0.6535 support level, which overlaps with the medium-term uptrend line, with the next strong resistance coming from the 200-day simple moving average (SMA) near 0.6620. However, a tumble beneath the diagonal line could open the way for a test of the bearish spike of 0.6360, achieved on August 5.

RBA in Wait-and-See Mode Despite Drop in Inflation_3

Source: XM

Risk Warnings and Disclaimers

Add to Favorites

Justin

Political

Rural Georgians are voting early at a higher rate than those living in Democratic-leaning counties that were key to President Biden flipping the state blue in 2020, the most recent data show.

Of the state’s 159 counties, the top 23 for absentee and early in-person voter turnout were won by former President Donald Trump in 2020, according to the state's elections website.

That includes the rural counties of Towns, Oconee and Rabun – which have seen 69.06%, 65.51%, and 64.46% of their active voters already casting ballots, respectively.

Towns County voters outpaced the Georgia county average early turnout rate by roughly 15%, the Atlanta Journal-Constitution reported.

That includes suburban blue-leaning Cobb County and Gwinnett County, as well as the Democratic stronghold of Fulton County – home to Atlanta.

Of Fulton County’s active voters, 53.51% cast ballots before Election Day.

Georgia has smashed early voting records since early voting began on Oct. 15. On Wednesday evening, state officials announced that more than half of the state’s total active voters have already cast ballots.

Turnout in several rural areas that favored Trump is already close to total 2020 turnout, projections show.

Atlanta metro-area counties that voted for Biden are still significantly larger than rural areas with higher turnout, however.

Nearly 385,000 Fulton County voters cast early in-person ballots, followed by 275,207 from Gwinnett County and 271,426 from Cobb County.

By contrast, just under 7,000 Towns County residents voted in person during Georgia’s early voting period, which runs through Friday, Nov. 1.

Regardless, the spike in early voting in rural parts of Georgia could be a sign that Trump and Republicans have been successful in their efforts to gin up enthusiasm among their base.

It also could change perceptions of the way analysts and predictors interpret voter turnout – traditionally, early voting would heavily favor Democrats while an Election Day surge could help Republicans.

Dave Wasserman, of the nonpartisan Cook Political Report, noted on X that early turnout in some rural red Georgia counties was on track to match their total turnout, but said it was not necessarily an indicator of who would win.

"It's notable that a place like Towns Co. (Trump +61 in '20) is at 92% of its final '20 turnout, while Clayton Co. (Biden +71) is at 69% of its '20 turnout," he wrote on X.

"Doesn't tell us who will win GA, just that Dems have more work to do than Rs to turn out their vote in the final days."

Source:Fox News

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Cryptocurrency

Some Bitcoin speculators panicked as the market dipped below $70,000, the latest data confirmed.

Data from onchain analytics firm Glassnode shows that short-term holders (STHs) offloaded 54,000 BTC on Oct. 31 — the most since April.

STH profits fizzle as BTC price gives up gains

Opportunistic Bitcoin traders quickly lost their cool as BTC/USD reversed from near all-time highs this week.

According to Glassnode, which tracks transfer volumes from STH entities to exchanges, Oct. 31 alone saw 54,352 BTC (about $3.76 billion) sent in inbound exchange transactions. Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_1

Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_1

Bitcoin STH transfer volume to exchanges. Source: Glassnode

STHs are wallets hodling a given amount of BTC received for up to 155 days. They typically display reactionary trading behavior, in contrast to long-term holders (LTHs) whose funds can sit dormant in wallets for months or years.

Price volatility is a classic trigger for the STH cohort, and Glassnode reveals that their aggregate profit margin is quickly being erased, likely adding to the sense of urgency to sell.

The STH spent output profit ratio (SOPR), which quantifies that figure, currently measures less than 1.01, with 1 as the breakeven point. On Oct. 29, it was nearly 1.04. Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_2

Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_2

Bitcoin STH-SOPR. Source: Glassnode

Glassnode additionally shows that a significant portion of the coins sent to exchanges on Oct. 31 were from STH entities at a loss.

Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_3

Bitcoin STH, LTH transfer volume to exchanges. Source: Glassnode

Bitcoin risks “deviation” above $70,000

Exchange order book liquidity data from monitoring resource CoinGlass shows the next area of interest circled around $68,000. Ask liquidity has returned to sit between the current spot price and the all-time highs. Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_4

Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_4

BTC liquidation heatmap (screenshot). Source: CoinGlass

Analyzing the latest moves, traders were split over their significance. While some warned that the entire trip past $73,000 could be a “deviation,” others argued that BTC price behavior continues to echo previous halving years.

“Derisking into the election 5-6 days before it takes place happened in both 2020 and 2016,” X account HornHairs told followers.

“Price then went on to never retest the lows set the week before the election ever again. Be careful what you sell here.” Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_5

Bitcoin Speculators Send $4B to Exchanges as BTC Price Loses $70K_5

Source: Keith Alan

As Cointelegraph reported, the week’s key United States macroeconomic report in the form of nonfarm payrolls data is due on Nov. 1 and is being keenly watched by risk-asset traders.

Source: Cointelegraph

Risk Warnings and Disclaimers

Add to Favorites

Justin

Political

Before Election Day has even arrived, the “Stop the Steal” movement has reemerged in force, with some of the same activists who tried to overturn former President Donald Trump’s 2020 loss outlining a step-by-step guide to undermine the results if he falls short again.

For months, those activists – who have been priming Trump supporters to believe the only way the former president can lose in 2024 is through fraud – have laid out proposals to thwart a potential Kamala Harris victory. Their plans include challenging results in court, pressuring lawmakers to block election certification, and encouraging protests – culminating on January 6, 2025, the day Congress will once again certify the results.

“I have a plan and strategy,” Ivan Raiklin, a former Green Beret and political operative who has close ties to associates of Trump, told a group of Pennsylvania activists earlier this month. “And then January 6th is going to be pretty fun.”

Trump’s allies – and the former president himself – are increasingly pushing debunked claims of voter fraud, spreading their rhetoric through podcasts with massive audiences, megachurch sermons and political rallies in key states. Some Trump backers, including pastors associated with Christian nationalist ideas, have described the election as a fight between good and evil, describing Harris as the antichrist or suggesting that God has anointed Trump as the victor.

Four years ago, Trump’s unsuccessful efforts to overturn his loss to President Joe Biden didn’t truly materialize until after the election. They were largely improvised and ad hoc, with a flurry of hastily filed lawsuits that went nowhere and efforts to convince state legislators to block certification that fell short.

But this time around, MAGA activists have been planning to undermine a potential Harris victory well in advance of the election, with some even arguing that state legislators should simply ignore the election results and award electoral votes to Trump by default.

Congress passed a measure in 2022 that makes it harder to overturn a certified presidential election, and with Trump now out of office, he and his allies cannot wield levers of the executive branch to try to influence the election. But experts say that the people involved in these conspiracy theory-driven efforts appear to be better organized, more determined and, in some cases, more extreme than four years ago.

Federal law enforcement officials are also ringing alarm bells. A bulletin put out earlier this month by the Department of Homeland Security and the Federal Bureau of Intelligence warned that extremist rhetoric about the election could motivate people to “engage in violence, as we saw during the 2020 election cycle.”

Marc Harris, a former investigator for the House select committee that investigated January 6, 2021, told CNN he’s concerned that the tactics to undermine the election have evolved since 2020, even with the safeguards put into place since then.

“Those looking to overturn the election are way ahead of where they were in 2020,” said Harris. “But on the flip side, the pro-democracy defenders are also more prepared. How that shakes out is not clear to me.”

Baseless fears of a ‘steal’

Unfounded claims about malign forces conspiring to cheat Trump out of an otherwise inevitable election win have been increasing in recent weeks from influential members of the MAGA movement.

“Yes, the steal is happening again,” Emerald Robinson, a right-wing broadcaster with nearly 800,000 followers on X, declared in a blog post earlier this month, criticizing the fact that votes may take days to count in some states. “It doesn’t take days to get election results. It takes days to cheat.”

Patrick Byrne, the former Overstock.com CEO who donated millions of dollars to efforts investigating the 2020 election, warned on Telegram this week of a cyberattack that would rig the election and lead to imminent “death and cannibalism” unless Americans stand together.

And Greg Locke, a prominent Tennessee pastor who spoke near the Capitol the day before the January 6 riot, told his followers in a sermon earlier this month that the US would be hit with “a catastrophic storm that is going to be man-made” in the days before the election, as an apparent method of stealing the vote.

“If Kamala wins this election, hear me when I tell you, we will never have another one,” Locke predicted.

Some of the debunked ideas that surfaced after the 2020 election and sought to explain how Trump lost remain rampant, such as the notion that voting machines are flipping votes to favor Democrats or that election officials in swing states have been complicit in widespread voter fraud.

“The same systems are being used. Many of the same players are in place,” Joe Hoft, who has contributed to the conspiracy-theory-peddling website The Gateway Pundit, told CNN when asked about the 2024 election. “I don’t trust the process. The process is broken.”

In recent episodes of “War Room,” a prominent program airing election conspiracy theories started by former Trump adviser Steve Bannon, guests have repeatedly suggested that Democratic governors in swing states or Democratic members of Congress could block certification of a legitimate Trump victory.

They’ve cited comments like Democratic Maryland Rep. Jamie Raskin telling Axios earlier this month that he didn’t assume Trump would use “free, fair and honest” means to win – even though Raskin said he would “obviously accept” a Trump victory if it was honest.

“They call us election deniers all the time,” GOP Georgia Rep. Marjorie Taylor Greene said on a “War Room” episode last week, in which she raised concerns about overseas military voting. “But it looks, it appears to be that there is a big fight being set up over the certification of the election and the outcome of the election.”

Greene has also floated a conspiracy theory that recent US Capitol Police training exercises are connected to a plan by congressional Democrats to keep Trump out of power even if he wins.

Trump himself has echoed some of the conspiracy theories pushed by his supporters, suggesting that election fraud is rampant in 2024. But party officials have struck a different tone.

“You can trust American elections,” Lara Trump, his daughter-in-law and the Republican National Committee co-chair, said on a call with reporters Wednesday. Touting her party’s election-integrity efforts, she said that “we want to make people all across this country feel good about the process of voting in the United States of America.”

“President Trump, Team Trump, and the RNC have been incredibly consistent and clear: we are actively working to protect the vote and all Americans must get out and vote to make this election TOO BIG TO RIG,” Karoline Leavitt, a spokesperson for the Trump campaign, told CNN.

Plans to block a Harris win

While some groups have been gathering supposed examples of election fraud for lawsuits to challenge a potential Harris win, other pro-Trump activists have coalesced around a plan to ensure Trump returns to the White House: state legislators can simply allocate their state’s electors for Trump regardless of vote counts.

The strategy generated headlines last week after Rep. Andy Harris, the chairman of the hard-right House Freedom Caucus, said it “makes a lot of sense” to allocate electors that way in North Carolina, where he suggested damage from Hurricane Helene may disenfranchise some voters.

Harris, who later walked back his comments, initially voiced support for the proposal after hearing a presentation from Raiklin, who’s known for having posted a memo that argued then-Vice President Mike Pence could have blocked certification of the 2020 election results.

Raiklin has been espousing the plan for legislators to seize control of awarding electoral votes in various states in recent weeks and receiving support from other far-right figures. Mark Finchem, a Republican candidate for state senate in Arizona, wrote on X that the “extraordinary circumstances” in North Carolina – a reference to the hurricane damage – “provide a justifiable pathway for the legislature to take action.”

Noel Fritsch, publisher of the far-right online publication National File, has argued that the US Constitution gives all state legislatures the power to choose electoral college members, which he told CNN he believes could create more national stability.

“Any movement toward direct democracy is, of course, as history shows, a move toward chaos, and that’s what we’re seeing,” Fritsch said. He cited arguments from some Republican Florida legislators who claimed they had the power to a select a slate of electors during the razor-thin 2000 presidential race.

But the recent proposal from people like Fritsch and Raiklin is rife with flaws, according to legal experts and officials. Karen Brinson Bell, the executive director of North Carolina’s election board, called the proposal a “violation of law,” and officials in the state have said that voting is proceeding without major issues despite the impact of the hurricane.

Derek Muller, a law professor at the University of Notre Dame, told CNN that state legislatures would have to first repeal their laws that dictate how elections operate before appointing electors directly.

“It’s too late for the legislatures to act,” Muller said. “You’d have to go through and remove all those laws on the books, and if you’re doing that in the middle of this moment when there’s already elections happening, then you’re going to risk due process violation of changing the rules arbitrarily.”

Concerns about violence

Incidents of political violence and threats have already occurred this year, including two apparent attempts to assassinate Trump, shootings involving a DNC office and suspicious packages mailed to election offices.

In the weeks ahead of the election, some pro-Trump activists have been openly alluding to more violent chaos that they say is on the horizon.

Donald Trump’s former national security adviser Michael Flynn said on a program last week that he thought Trump would win all 50 states if there’s a fair election but offered a grim prediction if the winner remains unknown for days.

“I feel like people are going to go to those locations where there’s counting and there could actually be violence because people are going to be, people are so upset after 2020,” said Flynn, who four years ago drew comparisons to Civil War battlefields in a speech the day before the Capitol riot.

Some extremists are already preparing “violent activity that they link to the narrative of an impending civil war, raising the risk of violence against government targets and ideological opponents,” according to a DHS memo from September obtained by the watchdog group Property of the People and shared with CNN.

Posts in recent months on the obscure message board 8kun, formerly 8chan, have called for violence against undocumented immigrants and urged “election steal defense prep,” while messages on a forum called “The Donald” encouraged violent shows of “force” to stop the “steal,” according to an October bulletin from Colorado’s Department of Public Safety also obtained by Property of the People.

On Telegram, violent rhetoric related to election denialism has more than quadrupled over the course of October, according to the Global Project Against Hate and Extremism, a nonprofit that tracks such content.

But unlike 2020, more extremist groups may have moved their discussions off public online forums and into private chats, hiding online conversations that may involve planning for the days after the election, said Devin Burghart, the executive director of the Institute for Research and Education on Human Rights, a nonprofit that studies far-right movements.

Still others have cast the stakes of the election in foreboding, apocalyptic terms.

Speaking this month at a political rally known as the ReAwaken America Tour, Pastor Mark Burns of South Carolina called on supporters to keep Harris out of power by any means necessary.

“Is there anybody standing with me who would do whatever it takes to make sure she’s not the next president of the United States? Because we are at war,” Burns said. “This is about good versus evil, of a real enemy come from the gates of hell.”

Asked about his comments, Burns told CNN he was referring to spiritual war and that he condemns “talks of physical violence in any form if in the unlikely event that President Donald Trump loses the election.