TPP Strategy Of The Month:

The?FTSE 100?was down by as much as 6%?at one point?in August.

The index’s woes reflected a series of poor macroeconomic data that engendered a sell-off in UK stocks in what is already a risk-off environment.

The?FTSE 100‘s performance in?August was?not down to a slew of poor earnings reports, but rather poorly received macroeconomic data. As such, the FTSE 100 finished down around 3% for the month. So, why is that?

Well, in this low-growth, high-interest rate environment,?the market is highly sensitive to?new?economic data. This relationship between?macroeconomic data, interest rates, and the market, has determined the trajectory of the index in August:

• On August 3, the Bank of England (BoE) increased the bank?rate by 25 basis points to 5.25%;
• On August 11, the?Office for National Statistics (ONS)?announced that the economy grew by 0.2% in Q2 — more than expected;
• On August 15, the ONS said that wages ex. bonuses had grown at a record pace of 6.8% in July.

Not?all of?the above events engendered a downward movement in the FTSE 100, however. In fact, there was very little movement after the BoE increased?the?bank rate. This is because decisions by the BoE tend to be priced into the market before they’re?actually made. On this occasion, the market was weighted towards a 25bps hike, with some investors pricing in a larger 50 basis points increase.

With interest rates already higher than they’ve been for decades, the market?can be volatile and is?heavily impacted by economic data. Hence, the latest?GDP,?wage growth, and core?inflation?data were particularly impactful.?

Both of these?events serve to?contribute to an already acute inflation issue?and?add further pressure on the central bank to consider tightening monetary policy to?pre-empt?potential inflationary risks.

Collectively, these events emphasise the intricate relationship between market dynamics, economic indicators, and the decisions made by the BoE, creating an environment where even seemingly minor shifts can reverberate throughout the financial landscape?and impact the stock market.

U.S. equities also finished lower in August as the S&P 500 and Nasdaq-100 Indices posted their first monthly declines since February. The “Magnificent Seven,” responsible for over 75% of the Nasdaq 100 gains in 2023 through July, saw mixed results for the month. While AI is still a major growth topic here, the Nasdaq 100 (heavily weighted in the tech space and thus the AI discussion) declined 1.5% for the month yet is still up over 42% YTD.

The U.S. government’s credit rating was downgraded one notch (AAA to AA+) at the beginning of the month by Fitch Ratings, citing rising debt at the federal, state, and local levels and a “steady deterioration in standards of governance” over the past two decades.

The downgrade, along with heavy treasury issuance, BOJ actions and changing views on “higher for longer” interest rates, caused U.S. treasury yields to move from below 4% to as high as 4.35% before ending August at 4.11%. The bond market volatility caused stocks to sell off for most of the first three weeks of the month before they staged a rebound in the final week.

Fed Chair Powell, in his Jackson Hole speech, took a middle-of-the-road stance with plenty of takeaways for both bears and bulls. Reaffirming a data-dependent approach, Chair Powell (as well as ECB president Christine Lagarde and other central bank policymakers) will continue to “proceed carefully” while assessing incoming economic data affirming their commitment to reducing inflation to the 2% target level. Powell “will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.”?

China’s economic growth concerns also played a role in the August pullback. Credit, economic and deflation data all came in weaker than expected, including an unexpected rate cut, rule changes on equity trading, weak consumer confidence, mortgage rate cuts, limiting access to youth unemployment data and bankruptcy filings by some of the country’s largest real estate developers. The Golden Dragon China Index was down over 16% in August before rallying at month’s end to close out down 10.3%.

With inflation falling and the labour market softening, the “soft-landing” scenario may happen over time. The belief the Fed may not need to raise rates again is playing out as Fed fund futures are now pricing in only a 40% chance of a 25bps hike by year-end.?

S&P 500 companies reported their 3rd straight quarter of Y/Y declines at -4.1%, which is better than the expected 9% drop analysts predicted at the beginning of the season.

According to Bloomberg data, the average upside beat was 7.79% for the quarter, while sales increased by 2.00%.

The earnings growth rate declined 5.95%, while sales growth rose by nearly 1%. Sectors that saw outsized earnings growth included Consumer Discretionary (+34%), Communications (+15%) and Real Estate (+8%), while Energy (-51%), Materials (-29%) and Health Care (-27%) declined. Interestingly, FactSet pointed out that 288 of the S&P 500 constituents mentioned the term “inflation” on their Q2 calls.

Leader Board - Top Trading Strategy

So, it was a bad month for equities, but how did TPP perform?

Most of our TPP traders were long, although some did manage some great short-term trades and hedges which have mitigated losses, and in some cases, made positive gains by the end of the month.

The overall average was slightly negative, although not by much. A few strategies deserve special mention ending the month in the green!

Our CAC long or flat strategy made some good profit in the CAC having waited for the drop to come before buying in. It never happens instantly but this is a good example of buying in to sell out. The strategy did sell back out on the 28thmeaning it was up another 2% in the month of August placing it in the top ten for 2023 with a return so far this year of 17.5%.

However, one of TPP’s top strategies also placed some great trades last month. European Stock Basket also profited from the drop in the CAC 40 as well as buying into the drop in the S&P500. They have now gone short the Nasdaq so it will be interesting to see what happens next.

These well-placed trades meant that this strategy is now up 26.7% so far this year. If this carries on, they are a serious contender for strategy of the year.

The only strategy to beat ESB last month was Stock Mixed. Posting 3.9% in August puts it way out in front and favourite for the 2023 title.?34.8% with 4 months to go is a truly remarkable achievement and long may it continue.

What TPP offers, nobody else does. Wealth managers and advisors will champion trackers and then fail to match them. They will tell you that time in the market is what really matters. While there is truth to this, time in the market with significantly higher returns each year, will make a significant difference.

If you invest ￡50,000 with a return on investment of 6% for 10 years, your total account equity after those 10 years will be ￡90,969.84. That isn’t bad. Is your IFA earning you that? They might be, but after costs, they probably aren’t.

However, if you average a return of 15% over the same amount of time, the initial ￡50,000 becomes worth ￡222,010.66.

That is a return worth looking for.

Recently we have witnessed some large movements in the markets.?Elite and experienced traders wait for movements like the ones we have witnessed as of late to make tweaks to their portfolios, which often result in extra portfolio gains. It's what separates TPP from the masses. It's one of the many competitive edges that we have. At TPP we offer a multitude of different strategies and trading techniques- they all have one thing in common.?They are all designed to beat their market benchmark.?Their track records suggest they will do exactly that.? TPP has been built for frustrated investors. It's time to empower yourself and beat your market benchmark. It's time for change.?No more exposure to underperforming?funds. More exposure to a game changing platform. Don't just hear about the revolution: Join it. Welcome to the future of investing.???