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Battle against inflation | Flow Traders Investment Competition | Week 1


In week 44 several central banks took measures to combat inflation. The Federal Reserve raised its interest rates by 0.75 percentage points. This increase led to the highest interest rate since early 2008. The Bank of England also raised its interest rates by 75 basis points.  For the Bank of England, this is the sharpest increase in the interest rate since 1989. Raising the interest rates makes borrowing more expensive; this can be used as a tool to cool down the economy and return the inflation to a healthy level of 2%. Even though the interest rate is at a record high at this moment, Federal Reserve Governor Christopher Waller announced that the interest rates will keep on rising. Namely, the FED is considering a 50 basis-point hike in December. Last week the stock markets reacted to this in a positive manner as the S&P500 increased with 5.61%.

The Chinese market is also expected to grow the upcoming months. It is expected that China will relax its zero-COVID policy. The market expects that this will boost the Chinese equity markets. However, it is far from certain that China will actually reopen. This means that the Chinese markets can go two ways. Either, China reopens which will boost the equity market, or the reopening is delayed, and the Chinese equities could fall by 15%. This expectation is not visible in the markets yet as the SZSE Composite Index, the main index for the Chinese market, decreased with 0.69%.

The past week has been positive for investors as the S&P500 increased with 5.61%, Dow Jones increased with 3.99% and NASDAQ increasing with 7.67%. Also the European market has been increasing, as EUROSTOXX 600 increased with 3.75% and the AEX increased with 4.69%. Overall, the equity market has been doing well this week. A reason for this might be that the increase in the CPI has slowed down. Therefore, investors expect lower inflation and hope that the interest rate hikes will come to an end soon. However, the opinions on this are divided.

Flow Traders Investment Competition 

Finally, the Flow Traders Investment Competition has started! It has been a slow start – with only 15 investment groups that have actually started the competition. The top position is now held by Mercury with a return of 5.67%. They, however did not manage to beat the market which had a return of 5.90%. On the other side of the competition we have Batavia Vrouwen, they have managed to make a negative return of 1.06%, because they did not take into account that changes in currencies can also lead to returns. To look at the positive side, from here on, the only way is up. Finally, we have five groups that did not find the investment competition important enough to sort out their administration in time, for these groups we have the same message, from here on it can only get better.


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