Only 2 weeks out | Flow Traders Investment Competition | Week 33

Rate cut on the horizon

Markets gained a lot last week, with the S&P 500 increasing by 2.1%, as the Dow Jones Industrial Average rose by 2.35 %.  NASDAQ and FTSE100 both gained 2.7% and 0.5%, respectively, and Euro Stoxx 50 gained by 2.4% as the VIX had a mere 0.89% decrease this week.

The Federal Reserve has opened the doors to an interest rate cut. The Fed’s change in tone comes after the introduction of the new tariffs on 200 billion dollars worth of Chinese imports, and president Trump’s recent threat to impose new taxes on Mexican goods. Trump says the stronger dollar is hurting US companies, and a rise in rates would only encourage foreign investors to buy the greenback and increase its strength further. There have been a number of occasions over the past year where Trump attacked the Fed and its Chairman Jerome Powell, pressuring them to keep interest rates low, he even talked privately with advisors about firing him. Thus far the Fed has held their ground, and the policy setting Federal Open Market Committee (FOMC) kept the key rate in the 2.25-2.5%, yet noted that because of uncertainties concerning the outlook of the trade war with China, the Fed “will act appropriate to sustain the expansion”.

Because of certain suspicious transactions, thought to have been meant to get permits for expansion in Mexico and Brazil, Walmart has had to appear in front of the federal court in Virginia last week, where the company settled on foreign corruption charges with a fine of 144 million dollars to the SEC, and an additional 138 million dollar fine to the Department of Justice.

The digital coin of Facebook, the Libra, has received very mixed reactions last week, with people saying it’s the savior of 1,7 billion people without a bank account, and on the other hand it’s like a ticking time bomb under the global financial system. A series of articles that were posted on the site of the Financial Times have deduced that the so called “Zuck Buck” is nothing more than a global central banking system, where if possibly billions of people would transact their national currency in the Libra and started paying via their cellphones, it would indeed result in a global “shadow coin”.

In the UK, Boris Johnson’s failure to address questions concerning a police call out to the flat of his girlfriend on Thursday threatens to derail his Tory leadership, as polls show support for his challenger Jeremy Hunt growing. Though the alleged fight has not harmed his reputation too bad, senior Tories still question the frontrunner’s suitability for Number 10.

On to the Flow Traders Investment Competition. The top 3 has been censored until the End of the Year BBQ. Merx moved up because of their investments in John Laing and their turbo long on DAX. MBA investors gains on their S&P 500 ETF as well as their Alibaba turbo long, and a turbo long on Facebook. Negotium Novum, Floryn Vrouwen and Borsa Valori chose to sell a large part of their portfolio, with Phoenix selling all of their positions. Last but not least, Basura gained on their Healthcare and Technology ETFs. The Competitions will end on Thursday the 4th of July, and the winner will be revealed on the 11th of July to celebrate ending of the competition.

Written by Sebastian Cornielje

B&R Beurs Investment Competition