Mixed messages | Flow Traders Investment Competition | Week 23

Last week, the market continued its way down. In the US, the NASDAQ and S&P 500 lost 1,53% and 1,51% respectively. The Dow Jones Industrial Average did even worse and declined by 1,69%. Europe did only slightly better. The Euro Stoxx 50 declined by 0,95% and the AEX declined by 1,43%. The VIX declined by 8,07%. The bottom has yet to present itself, so it seems.

The markets started off quite well, continuing its way up from the week before after Trump signed the largest ever stimulus bill. Unfortunately, on Wednesday the tides turned, and US markets dropped around 4% on the day. On Thursday, new data presented itself with regards to unemployment figures in the US. It showed that an astonishing 6,6 million people filed for their first unemployment benefits the week before, double the number of people the week before that. This is more than 3.000% of what it was before Covid-19 decided to shop up. To put this in perspective some more, in 2008 ‘only’ 665.000 people filed for their first unemployment benefits in the worst week. One can certainly imagine the economic impact this crisis will have. The market was not impressed though, and still managed to rally that day. This could have had something to do with the oil-rally that day, as WTI Crude gained 22% in a day, after Donald Trump took to Twitter to announce that a friendly chat with the Crown Prince of Saudi Arabia resulted in an expectation of production cuts. It’s a lot of uncertainty and big words from the President of the United States in one Tweet, but apparently, it was enough for the market to rally.

One stock was having a bad week in particular last week. Luckin Coffee (also referred to as “The Starbucks of China”) lost 80% of its value after word came out about fraudulent activity within the company. In late January, an anonymous 89-page report surfaced, describing flaws in the business model and accounting issues. Muddy Waters Research saw the report and immediately took on a short position. After Muddy Waters announced its short position the stock fell roughly 11% and ended up at 31,35 USD. At the end of last week, the stock traded at 5,38 USD. The size of the short position is not disclosed, but Bloomberg reports that a rightly timed put option would have yielded 1.500%. Not bad, if you ask me. So, if you see an investment group with a 1.500% weekly return in the table at the bottom, you know what they have been up to.

This week, new figures on jobless claims will be published on Thursday. The expectation is that it will be lower than the last one, at 5,15 million. Let’s see what it will be, and how the market will react to it this time. 

Let’s move on to the Flow Traders Investment Competition Update. The top six remains unchanged as compared to last week, which means that Concordia International remains on top, with Next Generation still in second place. Clear Water Group made an epic jump of 27 places, all the way to the 15th spot. Heeren XIII and Floryn had less favorable weeks dropping seven and six places respectively.