#81 New round of tariffs

30Y zero coupon German bonds were under-subscribed, EUR rallies,Jackson Hole summit, G7 summit

Issued by Labis Michalopoulos, CFA

mail: labis@quantomental.com

3+9 minutes read report, 2+6 pages


On Friday, I was noting via the ZuluTrade blog “The European manufacturing PMI continues being below the 50 threshold, revealing a contraction of the manufacturing activity, but the number is getting higher. Germany, EU’s driving force, that invented and supports the zero government deficit policy, seems to be ready to revert to significant fiscal stimulus. (responding, in a way, to our last week’s tittle) At the European Commission level, Europe seems to be ready to create a $100bn fund for the European Technology sector, has already issued significant antitrust fines to US tech giants and is already blocking Chinese giants from bidding to EU tenders. In the meantime, current migration flows increase the European labor force. One may argue that Europe will never get rid of its ongoing political uncertainty (UK is set to leave, Spain has not managed to elect a new government, Italy is set to have new elections) that results to an ongoing downward pressure on EUR. Yet, judging from the EU government bond yields, markets are downplaying these political uncertainties, and this could potentially lead to a EUR rally.” The EUR rally has actually started.

On Friday, two hours before the expected Jerome Powell speech at the Jackson Hole summit, China announced new tariffs on $75bn worth of American goods, Trump has responded by announcing to increase the current tariff rate from 25% to 30% (starting from the 1st of October) and increase the upcoming tariff rate to 15%, instead of a 10% rate. Risk-off mode prevailed for the rest of the American session.

I am favoring long EUR trades for the next week. In my book, EUR is the most trustworthy currency, out of the special drawing rights basket, that is able to support the needed global fiscal expansion, as it has enough spare capacity to offer a return to the extra liquidity that will be generated.

Major events of last week:

  • USA-China: New round of tariffs has been announced.
  • G7 summit ends on Monday. Emmanuel Macron, the French President that hosts the summit has already announced that there will be no effort to come up with a formal communique signed by the participants.
  • Jackson Hole summit. The worth noting parts of Jerome Powell speech is that no monetary policy can address the uncertainty produced by trade policies.
  • China and Russia requested a UN council meeting to be held on the recent US Missile testing. Australia joined the US led forces in the Persian Gulf.
  • EU politics. Another week has been wasted as we are approaching to the 31st of October deadline for Brexit. Polls suggest that Brexit will be voted again if a second referendum takes place.
  • Protests: Protests in Hong Kong continue for the 12th week. Today protests got violent again. Meanwhile, Alibaba postponed its secondary listing in the Hong Kong Stock Exchange

Major events of next week:

  • 1 year long, US sanctions on Russia are ending on Tuesday. New decisions are expected.


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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Any research in this document has been independently produced by Labis Michalopoulos, CFA for his own purpose, and is intentionally written in first person. The views expressed do not constitute investment or any other advice and are subject to change. The author has an interest in the currency pairs, indexes and any other security disclosed in this report, as he is an active trader.

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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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