Trade war may ruin Trump’s re-election | Flow Traders Investment Competition | Week 4

The events of the past week resulted in quite a bearish trend on the markets, with S&P 500 and AEX both decreasing by 0.22 and 1.16 percent respectively. Nasdaq lost –0.38%, and Eurostoxx 50 decreased by –0.64 percent. The Dow Jones Industrial Average decreased by 0.4%, and the VIX lost a mere –3.3%.

Regardless of the negative change in the markets, American garlic growers say they have finally started to win their 25-year battle with Chinese import due to Trump’s new policies. The US president initiated a second round of tariffs on garlic from China this year, increasing it to 25% and boosting demand for the US-grow crop. Back in the 1990s, China was flooding the US market with garlic by selling it at less than fair value, resulting in case-by-case penalties. Sadly, these penalties could be easily evaded, but due to Trump’s policy “all tariffs are assessed and billed up front, making it impossible for dumpers from China to evade them” says the California-based Christopher Ranch. Moreover, the trade war with China also resulting in US farmers losing more than half of their sales to China, increasing the amount of bankruptcy filings since the start of the trade dispute. Due to the political importance of farming states like Wisconsin and Pennsylvania, which supported the current president back in the 2016 election, Trump’s chance of winning the next election seems to be quite small. Because Trump promises to compensate for loses and secure a good position for US agricultural goods in the “phase one” trade deal with China, farmers have been willing to give the president the benefit of the doubt, but whether that patience will last until next November is not certain. The past month US shoppers have started spending again, with retail sales climbing 0.3%. The increase was assisted by an increase in vehicle sales and higher fuel prices. Due to shoppers cutting back on big-ticket household items and clothing, retailers worry for the coming Christmas spending season.

In Europe, Christine Lagarde won the European Parliament approval to lead the European Central Bank with 394 out of 600 EMPs. In her maiden speech as head of the ECB on Friday, Lagarde proposed a new European policy mix, resulting, amongst other elements, in a coming fiscal policy in the EU. Countries with large budget surpluses have been under pressure to spend more and thus boost the 19-member region that all share the euro currency, and are expected to spend even more. Countries such as Germany and The Netherlands, deemed to have the fiscal capacity to spend even more, are reluctant to do so as they do not want to increase their debt levels even more. Deutsche Bank CEO Christian Sewing backs Lagarde’s vision for the EUs fiscal stimulus, mainly because the amount of investing is being increased within the proposed policy. Sewing showed concern for the direction the investment we’re going to, saying that “we need to invest in digital infrastructure and education”.

On to the investment competition. Hermanszoon Capital has lost its first place to Concordia International, dropping 12 spots this week with a M2 of 0.50%. Concordia International, having a 4.24 percent M2, are followed by Basura, remaining number 2 with a return of 4.27%, this weeks highest. Batavia Investments have gained the most spots, 31 to be exact, and are now in 10th place. Victoria, dropping 31 spots, has lost the most this week and ends up in the 41st place.

Sebastian Cornielje