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July performance of Element ONE

Element ONE
Issuer: ELEMENT ONE LTD 
ISIN Number: VGG299771086
IssueDescription: USD CL B SHS
ISO CFI: CICXXX

Element ONE investment fund performed +3,1% during July 2021

  • Share price — $1 907,17.
  • Investment in Datto (NYSE: MSP) was valued at $26 p/share by the end of July, which is 3,2% above the entry point. 
  • Investment in Coinbase (NASDAQ: COIN) closed a month with a loss of -6,5%

5 best-performing companies in our portfolio

  1. Cinemark (Nyse: CNK)
  2. Li Auto (Nasdaq: LI)
  3. Stable Road Acquisition Corp (Nasdaq: SRAC)
  4. Property Solutions Acquisition Corp (Nasdaq: PSAC)
  5. Republic Services, Inc. (RSG)

In the independent rating of investment analysts — invest-idei.ru, Raison Asset Management is ranked 3rd out of more than 50 companies.

S&P 500

The S&P 500 index maintains its position at historic highs, and in July appreciated by 2.22% — from 4294.25 to 4389.50.

This month saw a three-year anti-record for outflows from small-cap stocks.

FED members comments in July

  • Fed Chairman Jerome Powell: The US economy is still far from the point at which the Fed will be ready to cut back on asset purchases. The Fed doesn’t have to grab on to new labour force statistics to start rolling back. The shock associated with the opening of the economy led to a rise in inflation rates above the 2% level, and of course, we are not satisfied with this. The Fed’s job is to determine how to respond to higher than expected inflation.
  • US Treasury Secretary Janet Yellen: I believe that rising inflation is temporary and will decline to normal levels in the near future in line with the Fed’s target. The spike in inflation reflects bottlenecks in the economy and challenges to restarting operations.
  • Christopher Waller: I am optimistic about the next two employment reports and I have a favourable outlook for the US economy after the pandemic emerges. The Fed could start rolling back its stimulating monetary policy as early as October and complete this process in about 5 or 6 months. My baseline forecast is that inflation will recede.
  • James Bullard: Inflation will be more resilient than many expect. The FOMC is expected to start downsizing and complete asset purchases by the end of the first quarter of 2022.
  • Robert S. Kaplan: The Fed should begin to cut its support for the economy by the end of the year — in part to reduce the likelihood of a sharp tightening in the future. Inflation will decline to 2.4% next year from 3.5% this year and is likely to be felt more broadly. I think we can prepare for the withdrawal announcement already in September, and it will last about 8 months. The Fed could start by cutting $ 10 billion in bond purchases a month and $ 5 billion in mortgages a month.
  • Thomas Barkin: The US employment target is the main starting point for slowing down bailout stimulus.
  • Neil Kashkari: COVID-19 delta variant could undermine the labour market recovery and the timing of the cutback of the Fed’s asset purchase program.
  • Richard Clarida: The Fed may announce the end of its asset repurchase program by the end of this year. I expect inflation to moderately exceed 2% in 2022 and 2023. 
  • Lael Brainard: The US labour market has not made enough progress to warrant phasing out bailout stimulus now, but is on track to hit a key threshold around the end of the year.

Summarizing all announcements and comments, we can assume that the Fed may begin to slow down stimulus measures much earlier than was announced at the last FOMC meeting.

The latest statistics on the two main benchmarks of the Fed: inflation and the labour market

Change in the number of employed in the non-farm payroll (July): actual — 943K, previous — 938K

Unemployment rate (July): actual — 5.4%, previous — 5.9%

Consumer price index (CPI) (YoY): actual — 4.5%, previous — 3.8%

US GDP deflator (Q/Q): actual — 6.1%, previous — 4.3%

One-year inflation expectations in the United States

Inflows to inflation-protected bonds

Actual 10-Year US Treasury Yield = -1.127%

Bank of England 

  • The Monetary Policy Committee voted unanimously to keep interest rates at 0.1% and by a majority vote to keep the amount of quantitative easing at 895 billion pounds.
  • “Inflation is above our target of 2%. We expect further growth in inflation in the coming months. We expect inflation to subside and reach our target in about two years.”

Bank of England inflation expectations in the mid-term

International Monetary Fund

  • The IMF approved the allocation of $ 650 billion for economic recovery. About $ 275 billion of the new appropriations will go to emerging markets, including low-income countries. The decision on the allocation of funds comes into force on 23 August. The funds will be transferred to the member countries of the fund in proportion to quotas.
  • IMF Head Kristalina Georgieva: “This is a historic decision — the largest SDR allocation in the history of the IMF and a powerful stimulus for the global economy during an unprecedented crisis.”

Europen Central Bank

  • The financing terms were assessed as too fragile to significantly slow down the pace of purchases.
  • Excessive tightening of financing conditions at the moment could jeopardize the ongoing economic recovery and inflation forecasts.
  • Any change in net purchases that are not based on a clear improvement in the mid-term inflation forecast would unnecessarily tighten economic growth.
  •  Rates will remain at or below current levels until inflation reaches 2%. A temporary excess of the inflation target of 2% is allowed.
  • QE unchanged: PEPP (Pandemic emergency purchase program) — 1.85 trillion euros, APP (Asset Purchase Program) — 20 billion euros per month.

Press conference by ECB President Christine Lagarde

  • The inflation forecast is still well below the target. Inflation will continue to rise in the coming months. To raise rates, inflation cannot be lower than 2%. 
  • The rise in inflation will be temporary.
  • Economic recovery in the Eurozone is going according to plan. Prospects depend on the course of the pandemic and vaccinations.
  • Delta variant is a growing uncertainty.
  • ECB is ready to adjust all instruments if necessary.

ECB inflation expectations

Japan Central Bank

  • Minutes from the meeting: all members no doubt agree to increase incentives if needed.

Central Bank of Russian Federation

Head of the Central Bank Elvira Nabiullina

  • Inflation in Russia will become a long-term phenomenon, and the Russian Federation is likely to continue a tight monetary policy.
  • The first signs of easing inflationary pressures have appeared, but this is still not enough to speak of a steady slowdown in inflation. In autumn, the regulator will consider reducing the inflation target to 2% or 3%.

Ministry of Economic Development

  • Ministry may raise expectations for inflation in 2021 from 5% in the updated forecast at the end of August.
  • There are signs of a slowdown in the recovery growth of the Russian economy.
  • All decisions on the budget rule in Russia have been made; it’s easing in 2022 is not being discussed.

Central Bank Rates

  • FED: 0,25% (prev 0–0,25%)
  • ECB: 0% (prev 0–0%)
  • CBRF: 6,50% (prev 5,50%)

Commodities

The overall commodity market, represented by the Invesco DB Commodity Index Tracking Fund (ETF), increased by 1.30% from 19.25 to 19.50.

Gold

In July, the price of gold futures (GC) appreciated by 2.57%, reaching $1817.20 at the end of the month.

The demand for gold from the world central banks has grown significantly in the first half of 2021

Oil

The oil market experienced increased volatility. Futures on the WTI mark since the beginning of the month has decreased by 11.51% — to $65, but then the price recovered, and according to the result of the month, the increase was 0.65% at a price of $ 73.95 p/barrel.

Latest data on US oil reserves

COVID-19

  • The delta variant is spreading rapidly and now accounts for 83% of all cases in the United States.
  • BBG: The effectiveness of existing COVID-19 vaccines is declining due to the spread of the delta strain.
  • China’s National Immigration Office said it would temporarily suspend the issuance of entry and exit certificates unless a visit to the country is urgent or necessary.