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Hawkish Fed Stance & Declining Equities | Flow Traders Investment Competition | Week 33


Last week was mostly focussed around the FOMC meeting, which was held on Tuesday and Wednesday. The first two trading days remained rather quiet on subdued trading volumes as investors were waiting to the end of the FOMC meeting on Wednesday. After the FOMC meeting,  the summary of economic projections was released. This showed that policymakers were expecting two rate hikes by the end of 2023, indicating a faster pace of tightening than in earlier projections. 


After the summary of the economic projections, J. Powell reiterated that high inflation is likely to be transitory but stressed uncertainty about the inflation outlook. U.S. equities declined modestly for the day on Wednesday. On Friday, U.S. stocks declined again after the St. Louis Fed president mentioned that he expects the Fed’s first rate hike in late 2022, before the early 2023 beginning of the tightening cycle that market participants expected. Large-cap equities held up better than small-caps. Growth stocks easily outperformed value as investors sold companies in the energy and financials sectors amid fears that the Fed will remove its accommodative policies and raise rates sooner than markets had anticipated.


Equities elsewhere around the globe also reacted heavily on the Fed’s hawkish stance. The STOXX Europe 600 Index slid 1.19%. Germany’s Xetra DAX Index fell 1.56%, Italy’s FTSE MIB Index declined 1.94%, and France’s CAC 40 Index eased 0.48%. The UK’s FTSE 100 Index slipped 1.63%. Japan’s stock markets generated mixed returns for the week, with the Nikkei 225 Index rising 0.05% and the broader TOPIX Index down 0.38%. Chinese stocks recorded their third weekly loss. The large-cap CSI 300 Index fell 2.3% and the Shanghai Composite Index shed 1.8%. 


In UK, P Boris Johnson delayed a full reopening of society in England, which had been slated for June 21, for another month and said the vaccination campaign would be accelerated. The number of infections caused by the so-called Delta variant has surged in the UK. Thereby increasing the chances of a new fourth wave. Other notable economic events were the UK inflation which jumped again in Mayto 2.1%; UK payrolls rising for a sixth consecutive month; and the Eurozone Industrial production, which was stronger than expected in April, rising 0.8% sequentially


The investment competition is slowly coming to an end, with only a handful of trading days remaining. Blood was clearly visible on the (Wall) street this week, especially within the competition. Although the top three is not visible, we can observe that Alpha Investments lost 3 spots and went down to the 6th spot, implying that they were ranked with the Third place last week. With a weekly loss of 2.60% they are the second biggest loser this week. CFQ managed to achieve the biggest loss this week with a formidable -12,12%! Note that CFQ also had a magnificent loss of -9.56% last week. Fundamenta Fortis is entering the top 3, since they are not visible in the list anymore, thereby joining Conquistadores Capital, Merx, and the AEX. The M^2 for the AEX this week was 22.79%, implying that one of the top 3 has a lower M^2, whereas the other two groups have achieved a M^2 of over 22.79% for sure so far!  

With regards to the second Investment Competition, as usual there has been no change in the rankings. iValue Investments performed the worst with a loss of 3.51%, further adding insult to injury. Æthelstan Investments performed the best with a small return of 0.47%, but only time will tell whether they will catch up to the number two above them, Aurelia. Das kapital managed to mantain their position at the top with an M^2 of 10.01%


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