Global debt surged to a record $250 trillion | Flow Traders Investment Competition | Week 3

Little movement on the European and US markets last week, with the AEX changing a mere 0.43%, and the Eurostoxx 50 only changing 0.4 percent. In the US, The Nasdaq and S&P 500 both increased by 1.2% and 0.90 percent respectively. The Dow Jones Industrial Average gained by 1.53 percent, and the VIX decreased by 10%.

Last Thursday the International Insititute of Finance (IIF) showed that global debt surged by 7.5 trillion dollars in the first six months of 2019, causing great concern for investors. A number of economists have flagged the rising debt as the next breaking point. The IIF states that global government debt will top 70 trillion dollars in 2019, up from 65,7 trillion in 2018, driven higher by the surge in US federal debt. Moreover, the Fed cautioned about rising levels of corporate debt, as well as bouts of volatility and illiquidity. The student debt was also discussed by the Fed, saying that levels have remained fairly stable, but still pose a challenge to households. Hedge fund magnate Ray Dalio warns for the potential capital war between the US and China. The US government already decided to allow one of its pension funds to invest in an international index that includes Chinese companies, resulting in quite some uproar amongst US senators, thinking the Federal Retirement Thrift Investment Board’s decision unconscionable. 

The Sterling hit a 10-day high against the dollar last Friday because of reports showing that UKIP, the Brexit Party formerly led by the infamous Nigel Farage, will not contest an additional 43 seats in next month’s UK general election. Farage had already removed any opposition to the Conservative party in the parliamentary seats it is defending.

In Europe, Greece’s Piraeus port has been earmarked for a major transformation, making it into the most crucial transit hub for trade between Asia and Europe. In 2016, China’s shipping firm Cosco purchased a majority stake in Piraeus port, Greece’s largest harbor, with a strategic location between Asia and European continents. Last week Chinese President Xi Jinping has announced that Cosco will be investing about 600 million euros to develop Piraeus further. In its quarterly economic forecast, the European Commission has predicted a 1.1 percent economic growth, a downgrade of its previous 1.2% estimate. The slowing of growth within the Eurozone will most likely stimulate Germany’s economy, resulting in a budget surplus for the coming two years.

On to the Flow Traders Investment Competition. Hermanszoon Capital stayed in first place with an M2 of 5.47%, outperforming the S&P 500 by over 2 percent. Basura moves into second place while Concordia International moved eight places from last week, having taken third place with an M2 of 1.43%. Fides Investments fell a whopping 26 places, giving them the 40th place this week.

Sebastian Cornielje