US Payrolls increased 42% more than expected | Flow Traders Investment Competition | Week 6

Little change in value on the markets this week, with the S&P 500 increasing by a mere 0.06 percent, and the AEX gaining 0.66%. On the other hand, Eurostoxx 50 and NASDAQ both decreased this week, losing –0.29 percent and –0.15% respectively. The Dow Jones Industrial Average also resulted in a loss this week, a 0.34 percent decrease to be exact, while the VIX gained by 4.6 percent during last week.

In the US, the nonfarm payrolls surged by 266,000 in November, much better than the 187 thousand expected by economists polled by Dow Jones. The unemployment rate ticked down to 3.5% from 3.6%, back to the 2019 low and matching the lowest jobless rate since 1969. The reason for the drop in unemployment was, in part at least, the end of the GM strike, which had a big effect on boosting employment in motor vehicles and parts by over 40 thousand, part of an overall 54,000 gain in manufacturing. Average hourly earnings also rose by 3.1 percent from a year ago, slightly above the 3% expected by the polled economists of Dow Jones. The US trade deficit has dropped as well this month and is currently the lowest that it has been in the past year. Imports have dropped by 1.7%, or 4.3 billion dollars, to an overall 254.3 billion dollars. The exports dipped a mere 0.2 percent, resulting in a total of 207.1 billion. The decline might signal a weakening US consumer, affected by the trade war with China that rages on. For nearly two years, both countries have hit each other’s products with tariffs, denting investor sentiment throughout that period. Joe Biden, 2020 front-runner for the presidency, has said that Trump’s attacks on the Fed, as well as its Chairman Jerome Powell, are an abuse of power. Though other presidents have tried to manipulate the Fed into making an accommodative monetary policy in the past, the previous cases involve less personal attacks and certainly less frequent criticism. Even after the Fed performed the third interest rate cut this year, Trump has criticized the Fed, saying that “the people are very disappointed in Jay Powell”.  Moreover Trump’s recent activities. He said he will restore tariffs on steel and aluminum imports from Brazil and Argentina, saying their low currency has made US food exports less profitable. Brazil’s president Jair Bolsonaro – often called the ‘Trump of the tropics’ – will seek talks with the US president next week he said.’

In Europe, the EU finance ministers agreed that digital currencies like Facebook’s Libra should not be allowed in the European Union until the risks they could pose are clearly addressed. The ministers also praised the European Central Bank’s endeavors on a public digital currency, which could present an alternative to private initiatives. The public digital currency might even be necessary if payments within Europe remained as expensive as they currently are. The current trend, showing an accelerated decrease in cash usage, could possibly be a sign that the public digital currency is adaptable. Several EU countries have stressed that countries facilitating tax avoidance should get stricter sanctions. Currently, there are only eight countries blacklisted when it comes to tax avoidance, mostly Pacific and Caribbean islands with little financial relations with the EU, but no real jurisdictions within the continent. The countries want to cast a wider net on countries with an amiable tax policy, and also put countries that are put on the gray list by committing to change, on the blacklist until they deliver on their promises.

On to the Flow Traders Investment Competition, where Concordia International and Fundamenta Fortis have managed to hold on to their first and second place, with an M2 of 4.72 and 3.50 percent respectively. The investment group dropping the most places this week is Atlas Capital, 30 spots to be exact, ending up at the 38th place with an M2 of –1.11%. The rising star of this week is Bullseye International, gaining a whopping 22 spots, and ending up in 10th place with an M2 of 1.22 percent. The largest change in return was accomplished by Omega Investments, 0.94 percent to be exact, taking 3rd place this week.

Sebastian Cornielje