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The latest in financial news: A review of the spot Bitcoin ETFs after 1 month, Japan entering a recession, and mortgage rates continue to rise since the start of the new year.

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Bitcoin ETF Review

Celebrating its one-month milestone, Bitcoin ETFs have delivered impressive results. Among the 11 ETFs approved last month, five have already exceeded $1 billion in assets under management (AUM), indicating a significant surge in interest from investors looking to allocate a portion of their portfolio to Bitcoin. The growing influx of funds into Bitcoin ETFs reflects a clear desire among investors to gain exposure to the cryptocurrency. Notably, Fidelity's decision to include a small allocation to Bitcoin in their all-in-one funds has gained attention.

The current news paints a bullish picture for Bitcoin, driven by heightened demand. When considering the impending reduction in supply due to Bitcoin halving its mining rewards in April 2024, the stage is set for a substantial bull market. Globally, investors and firms have been vocal about their belief that Bitcoin's eventual worth could reach $1,000,000. With the surge in demand and the simultaneous decrease in supply, this valuation appears increasingly plausible.

Japan Enters A Recession

Beyond the realms of the United States and China, the attention of the average American is often not directed toward many global markets. However, in the past week, Japan, once the third-largest economy, has slipped into a recession, now holding the fourth-largest position. Consequently, Germany has ascended to the third-largest economy. The recent downturn in Japan's economic standing is attributed to the yen's depreciation against the US dollar. As the yen weakens, it causes a contraction in the overall value of the Japanese economy. Should the yen regain strength against the US dollar, there is potential for Japan to reclaim its status as the third-largest economy. This shift may influence decisions regarding interest rates by the Japanese central bank, known as the Bank of Japan, which currently stands at -0.1%. This negative rate implies that holding onto the yen results in savers losing money. The response of the Bank of Japan, particularly in adjusting interest rates, remains uncertain, and only time will reveal its course of action in addressing the recession.

Economists commonly define a recession as two consecutive quarters of economic decline. Recessions can be triggered by various factors, including disruptions in the supply chain (as witnessed during the COVID-19 pandemic), shifts in demand, or other economic influences. Recessionary periods are inherently unfavorable, impacting individuals' employment and their ability to support themselves and their families. These circumstances underscore the importance of creating an emergency fund, capable of covering expenses for at least six months. As the timing of recessions is unpredictable, having an emergency fund can offer a crucial safety net in mitigating concerns arising from sudden job loss.

Mortgage Rates On The Rise

The average mortgage rate has been gradually on the rise since the beginning of 2024, climbing from 6.6% to around 7.2% for a 30-year fixed rate. While this may not appear dramatic, it contrasts with the trend at the close of 2023 when mortgage rates were decreasing, dropping from 8% in October to 6.6% in December. The significance lies in the fact that even a modest 1% increase in mortgage rates can translate to an additional $250 in monthly payments, amounting to an extra $3,000 annually. For some individuals, this could mean an additional mortgage payment. To illustrate, consider a 30-year fixed mortgage for a $400,000 house at 6%, 7%, and 8% rates, the monthly payments would be approximately $2,398, $2,661, and $2,935, respectively. This simple example underscores the substantial impact that mortgage interest rates can have on housing costs.

Despite the Federal Reserve maintaining rates at 5.25-5.5%, there are no indications of an imminent rate reduction. The Federal Reserve has communicated its stance, stating that it won't consider lowering interest rates until inflation reaches 2%, yet the current inflation rate stands at 3.1%. This marks a significant departure from the 7% inflation rate observed previously.

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* Investing can be unpredictable and volatile. Investors should always do proper due diligence to determine if assets are right for them. We are not licensed tax or financial professionals.