Stocks ready for new highs | Flow Traders Investment Competition | Week 8

Stocks worldwide rose further into record territory, amid continued optimism on the resolution of the US-China trade war and strength in US consumer spending. For the last week, the S&P 500 index rose 1.6%, NASDAQ index increased 2.2%, and the Dow Jones index rose 1.1%, while the VIX decreased 1.0%. Eurostoxx 50 index and AEX index showed the same pattern as US Equity indexes, both increasing 1.2% and 1.1%, respectively, during the last week.

Details were reached on the “Phase One” US-China trade deal, which is expected to nearly double American exports to China over the next two years. China also said it would constrain intellectual property theft, enforce technology transfers and deepen access to its financial markets, while both sides suspended additional tariffs, and the US reduced existing levies.

In the US, Q32019 trade balance narrowed more than expected to a US$124.1 Bn. deficit. Meanwhile, Q32019 US consumer spending growth was revised higher to 3.2% from 2.9%. On Wednesday, the House of Representatives voted to impeach President Donald Trump on the charges of abuse of power and obstruction of Congress. The impeachment trial will go to the Republican-held Senate in January, where a two-thirds vote is needed to convict. On Friday, the House of Representatives approved legislation to implement the US-Mexico-Canada trade deal (USMCA trade deal), which is expected to add 0.5% to US GDP growth, according to Treasury Secretary Steven Mnuchin. According to the Congressional Budget Office, automakers will take a nearly US$ 3.0 Bn. hit over the next ten years due to the agreement.

In the UK, the parliament voted 358 to 234 in favor of Prime Minister Boris Johnson’s plan to leave the EU on January 31. Johnson’s bill forbids an extension of the transition period past 2020. “transition period” means the UK would be out of the EU, but still subject to many of its rules.

In Sweden, the central bank (Riksbank) hiked its benchmark repo rate by 25 bps to 0.0%. This move ended five years of negative interest rates. The Riksbank was not the first to drop below zero when it cut to -0.10% in 2015, but it is the first to get rates into more normal territory. Rates are negative in the Eurozone, Japan, Denmark, Switzerland and Hungary.

The crisis at Boeing deepened after the company halted production of a 737 line for the first time in two decades. While Boeing does not expect to lay off any production line workers at this time, the move could have repercussions across its global supply chain and the US economy.

Now let’s take a look at what happened in the investment competition the last week before Christmas holidays. Just like last week, the S&P 500 is still outperforming all investment groups. The top 5 has not changed, with Omega still leading with an M2 of 5.08%. Hercules moved into the left column, gaining an impressive 16 spots this week. The group with the highest profit this week was Floryn, with an impressive 2.61% return this week.

Gino Beteta