Tensions are Rising | Flow Traders Investment Competition | Week 35

The markets finally showed some retraction again last week. The Dow Jones Industrial Average closed the week on -3,31%. The S&P 500 and the NASDAQ closed on -2,86% and -1,90% respectively. In Europe it was not much different, as the Euro Stoxx 50 closed on -1,99% and the AEX closed on -1,41%. The VIX closed on -1,11%.

A major cause for this drop is likely to be found in the news that the US is seeing record levels of daily new coronavirus cases. Many states had started reopening their economies, but it seems like they might have to reverse that measure. Many states are now slowly starting to put more restrictions back in order, which could eventually lead to imposing full lockdowns again. Markets reacted heavily on the news, and most stocks dropped significantly.

One of the most prominent companies that took a dive was Facebook, whose shares fell by ten percent last week. The company is facing criticism over its policy on hateful posts, in particular on posts by Donald Trump, which Twitter did decide to flag. Several civil rights groups started a boycott on the company, which a 150 companies are now participating in. Those companies include large companies, such as Unilever and Verizon, which would hurt Facebook’s revenue significantly. It looks like the movement is spreading beyond Facebook, as multiple companies are now halting advertisements on other platforms as well, such as Instagram, Snapchat, and Twitter. The aim of this movement is to get social media companies to create better policy on hate speech and misinformation.

The last story concerns the Wirecard scandal. For those that haven’t followed the story: Wirecard has filed for insolvency after the discovery that 2,1 billion USD went missing. This is likely fraud, as the company forged banknotes to cover up this hole in the balance sheet. Now, the company’s auditors are facing criticism. Even though EY discovered the issue, critics say the auditors were too late, and should’ve seen it coming way before. EY discovered the matter only after the Financial Times posted multiple publications on the matter, which triggered an investigation by KPMG. Critics say the matter should’ve been discovered way earlier, because there were multiple suspicious facts. In EY’s defense, in hindsight, everything is easy to find.

Let’s move on to the Flow Traders Investment Competition. We are getting really close on the end of the competition now. Next Generation made a great final sprint by jumping 16 places. Phoenix had another bad week and dropped 10 places again with a weekly return of -10,05%. The top three will remain a secret for now. More on that will follow at the end of the competition.

Robert Foppen