#75 Jerome Powel’s testimony

S&P crossed 3000, US 10y bonds at 2.12%, Never ending protests in Hong Kong

3 minutes read report


On the one hand, is the basic low frequency tone. The FED is already decreasing the pace of its balance sheet reduction and is set to stop the operation completely by September 2019. The FED is recognizing that weak inflation may be more persistent and is ready to act. On the other hand, is the daily Macroeconomic, higher frequency, releases that continue being strong. Both the latest Non-Farm Payrolls were way above the last 6 months average and the latest inflation reading increased significantly with core CPI m/m recording 0.3%, the largest monthly increase since January 2018. It seems that Jerome Powell is doing a great job, neither being behind nor in front of the curve, and we are set to experience a 12th year of growth.

I am taking profits on Tuesday, staying at the sidelines for the rest of the week and searching to go long equities, oil, EUR, AUD, CAD, NZD starting from Monday the 22nd of July.

The possibility of President Trump igniting trade tensions with Europe and Japan is still present. Note that last week Bob Lighthizer had a meeting with the German Finance Minister and talked about the US subsidizing Boeing and the EU subsidizing Airbus. France plans to tax US tech giants for the revenue they generate inside the country.

Major events of last week:

  • US-China: The week began, with China stating that the initial step of the resumed trade talks would be for the USA to first remove all imposed tariffs, and ended with the Commerse Minister Zhong Shan joining the negotiations, suggesting an increased commitment to the trade talks . On the left, the decreasing trading volume between the countries is already evident. The latest Chinese inflation, foreign direct investments, new loans, and trade balance bit expectations.
  • OPEC : No downward revision has been made for expected global demand growth for oil that continues to stand at 1.14mb/d. With the exception of the downward revision for the growth of Brazil, all other estimates for GDP growth, remained unchanged. The Iranian production fell to 2,2 mb/d (i. e. a -1.3mb/d reduction since last year, when the USA dropped out from the nuclear deal, announced sanctions and a 180 day grace period, followed by waivers and followed by the full implementation of sanctions that has started since May 2019)
  • Iran: An incident between the UK navy and the Iranian navy at the straight of Hormuz revealed that the freedom of navigation is already ensured by the USA.
  • Japan: Japan applied exports restrictions on chip-making equipment shipped to South Korea.
  • USA-UK: Uk’s ambassador in the USA has been changed as his bad comments on Trump administration became public.
  • Turkey: President Erdogan replaced the governor of the Central Bank of Turkey, some weeks before the upcoming monetary meeting. Meanwhile, Russia has started the delivery of the  air defense missile system S400 to Turkey. Note that within the end of the month, the deadline, for Turkish pilots to leave the USA and stop the F35 jet fighters training, expires.
  • Protests: 230K protesters demonstrated in Hong Kong during the last weekend and the protests are not set to end anytime soon. Although the extradition bill is practically dead, a complete withdrawal has not yet happened.

Major events of next week:

  • US Earnings season. Monday: Citigroup. Tuesday: JP Morgan, Wells Fargo, Fidelity, Goldman Sachs, Johnson & Johnson. Wednesday: Alcoa, Bank of America, Netflix. Thursday: Microsoft, Morgan Stanley. Friday: Blackrock


Issued by Labis Michalopoulos, CFA




For the readers of the report:

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This material is for Qualified Investors and Professional Clients only and should not be relied upon by any other person.

Past performance or past accurate forecasts is not a guide to future performance and the accuracy of future forecasts and should not be the sole factor of consideration. All financial investment decisions involve an element of risk.

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For qualified perspective clients of the advisory service:

GIPS standards are all about full, fair, consistent and comparable presentation of actual returns of the past. No models, no back-testing, no promises. I am doing that. I am publishing in real time, via a 3rd party, my actual returns since inception where one can see the most strict, comparable, revealing metric of the industry: the monthly Sharpe ratio.

My current monthly Sharpe ratio stands at 0.27 as can be found at www.forexfactory.com/dxmix

My current annual Sharpe ratio is 0.27 multiplied by 12 = 0.27 x 3.46=0.93 Annual Sharpe Ratio

The numbers used to stand at 0.5 monthly Sharpe ratio and 1.73 annual Sharpe ratio up until the August of 2019 for 45 consecutive months. On 24 August 2018, I mistakenly ordered to open a position 10 times bigger that I am used to. My equity level is currently back on track, but my statistics are no longer as impressive as they used to be. My 54 months, since inception, monthly Sharpe Ratio (that includes the leveraged AUDUSD trade) stands at 0.27, equal to 0.93 Annual Sharpe Ratio.

I cannot claim that I will be performing with the return of my best months, but I can tell that I will hover around my average returns. Claiming with a 95% confidence, that my next month* return will be within my average monthly return ± 2 standard deviations is a well educated statement I can make anytime.

My average monthly* return ± 2 standard deviations is from -16.54% up to 20.49%

My average monthly* return ± 2 stadard deviations becomes -5.74% up to 9.47% , excluding the 4 months effect of the one time mistake trade.


* the monthly returns are the actual returns within a month. They are not presented on annualized basis.

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