The Final Weeks | Flow Traders Investment Competition | Week 34

Stocks recorded gains and erased part of the previous week’s steep declines. The technology-heavy Nasdaq Composite Index fared best and briefly moved close to the all-time intraday high it established on June 10. Energy stocks led the rebound, helped by signs that major oil-exporting nations were adhering to previously agreed on production cuts as well as optimism for increased global demand. The pan-European STOXX Europe 600 Index ended the week 3.31% higher, while Germany’s Xetra DAX Index climbed 3.51%, France’s CAC 40 Index added 3.23%, and Italy’s FTSE MIB Index advanced 3.99%. The UK’s FTSE 100 Index rose 2.93%. Stocks in Japan produced small gains for the week. The Nikkei 225 Stock Average advanced 0.78%. The TOPIX Small Index was up 1.6% for the week, outperforming both the Nikkei and the large-cap TOPIX Index. China’s domestic large-cap index, the CSI 300 Index, gained 2.4% for the week, outpacing the 1.6% advance in the country’s benchmark Shanghai Composite Index. 

Stocks had a poor start to the week, as concerns over the worsening of the pandemic in several states as well as a new outbreak in Beijing seemed to continue weighing on sentiment. The market then rebounded Monday following the Federal Reserve’s announcement that it will begin buying a broad portfolio of U.S. corporate bonds. With financial stress increasing and corporate debt levels increasingly elevated, markets responded favorably to the Fed’s announcement as it further signaled its commitment to financial support across the economy.  Markets early in the week also seemed to get a lift from a major study showing that a drug, dexamethasone, helped save lives in serious COVID-19 cases.

The week’s economic data offered mixed signals as to whether the economy will be able to manage a V-shaped recovery. On Tuesday, the Commerce Department reported of a 17.7% surge in retail sales in May, better than double consensus expectations and the biggest gain in history! Stimulus checks as well as enhanced unemployment benefits likely contributed to household spending levels. However, labor market data disappointed. Weekly jobless claims fell less than expected, and continuing claims remained elevated, at over 20.5 million. A gauge of current manufacturing activity in the mid-Atlantic region surprised dramatically on the upside, indicating considerable expansion instead of continued contraction, but overall industrial production in May rose less than expected. Important economic data being released include existing home sales on Monday, the preliminary Purchasing Managers’ Index for June on Tuesday, and personal income and spending on Friday.

Economic data in the U.K. was similar. UK inflation slowed to a four-year low of 0.5% in May, from 0.8% in April, as crude oil prices fell. The number of people claiming out-of-work benefits in the UK climbed by 528,000 in May, to 2.8 million. The number of payroll employees fell by 600,000 between March and May as employers cut jobs; the number of self-employed dropped 131,000 in the three months ended April 30, a record decline of almost 9%. Also, the Bank of England (BoE) enlarged its bond-buying program by GBP 100 billion and left its key interest rate at a record low of 0.1%. Meanwhile, in Japan, the central bank did increase the number of loans available in a lending program that is designed to support smaller businesses.

We are entering the final phase of the investment competition! On top of the mountain, we have Clear Water Group sitting on the throne, with a tremendous M2 of 27.95%. Following up, we have Omega Investments with an M2 of 12.73%. The rankings among both ends of the competition have not changed since last week, indicating a short momentum: winners stay winners, while losers remain losers. Talking about losers, Phoenix, this week had both the greatest absolute and relative loss of 6.58% and 10 spots. The biggest risers, this week, are multiple Investment Groups who gained four positions: Metrics Fund, Negotium Novum, and Mayfair Investors.

 

Amar Soebhag