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WEEKLY REPORT

Markets Research
SPOTLIGHT
US 10-year Bond Yield

Jun 17th Jun 21st

Peripheral countries yields rally up


Portugal, Greece, Italy, and Spain saw bond market borrowing rates rise after Fed's announcement made stocks and bonds plunge worldwide. Moreover, Portugal and Spain issued new debt this week (1500 million and 4020 million respectively). Also, the Greek political instability prevented markets from recovering, as Greeces small Democratic Left party may pull out of the government coalition. In the aftermath, European stocks presented their biggest weekly slide in 13 months.

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Indexes Performance
Jun 17
PSI 20 STOXX 50 FTSE 100 NIKKEI 225 S&P 500 DJIA
5.843,71 2.702,69 6.330,49

Fed will start reducing bond purchases


Jun 21
5.451,82 2.549,48 6.116,17

Jun 18
5.883,12 2.700,93 6.374,21

Jun 19
5.845,89 2.683,98 6.348,82

Jun 20
5.646,66 2.586,45 6.159,51

Wkly Chg %
-5,51% -4,42% -3,05%
4,28%

13.033,12 13.007,28 13.245,22 13.014,58 13.230,13

HANG SENG 21.225,90 21.225,88 20.986,89 20.382,87 20.263,31


1.639,04 1.651,81 1.628,93 1.588,19 1.592,43 15.179,85 15.318,23 15.112,19 14.758,32 14.799,40

-3,37% -2,11% -1,80%

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Commodities Energy & Metals


-4,04% 1,44% -4,64% Crude Oil WTI Natural Gas Crude Oil Brent -6,80% -8,99% -3,13% Gold Silver Copper

Fed announced that it will start to reduce bond purchases this year and end the program in 2014, if the US economy continues to improve. This statement sent the markets into a downward trend, with US stocks presenting their worst weekly drop since Apr. The bond market was also deeply affected, with the 10-year yield increasing 40 bps (standing above 2.5% for the first time in 22 months), representing the biggest weekly jump since Mar 2003. Furthermore, the USD appreciated against the other main currencies. On the economic front, existing home sales climbed 4.2% in May, far from markets expectations of a 0.6% change. Also, jobless claims rose more than forecasted to 354,000, while only 340,000 were expected.

China continues to worry while Yen falls


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Reference Rates
Jun 17
Euribor 1M Euribor 3M Euribor 6M Euribor 12M Eonia 0,120% 0,210% 0,319% 0,501% 0,080%

Jun 18
0,122% 0,210% 0,320% 0,503% 0,073%

Jun 19
0,123% 0,212% 0,323% 0,506% 0,082%

Jun 20
0,125% 0,214% 0,329% 0,516% 0,082%

Jun 21
0,127% 0,216% 0,333% 0,524% 0,082%

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Currencies
Jun 17
EUR/USD EUR/JPY EUR/GBP EUR/YUAN 1,336 126,38 0,850 8,184

Concerns over the Chinese economy were ignited, after its PMI fell to a 9-month low of 48.3 in June. Also, Chinese interbank rates hit a record high of 12,06%, on Thursday. In the aftermath of Feds announcement, the Yen weakened against the USD, leading the Nikkei 225 to its first weekly gain in 5 weeks. After several weeks of negative forecasts, a new report states that Australian GDP will grow 4.5% in 2014. Still, this was not enough to encourage investors, as stocks ended with a weekly loss and the AUD hit record lows against the USD.

Jun 18
1,339 128,03 0,857 8,208

Jun 19
1,328 128,28 0,858 8,136

Jun 20
1,323 128,33 0,853 8,109

Jun 21
1,312 128,42 0,851 8,050

Wkly Chg % -1,64% 2,20% 0,15% -1,62%

Commodities
Gold prices presented its biggest weekly drop in almost 2 years, after the USD strengthened against major currencies. Oil and Cooper prices were deeply affected by Feds decision, as well as by weaker than expected Chinese factory data. Page 1/2

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WEEKLY REPORT
Portfolio Management
Markowitz Investment Strategy
Markowitz S&P 500

Jun 17th Jun 21st

Markowitz keeps trend as markets plunge


During this week, Markowitz underperformed the benchmark, with a -3.83% return against a -2.11% of the latter. On the other hand, its daily volatility was lower (0.80%, against 1.31% of the S&P 500). Bond assets were the main drivers of this return.

109% 93% 18-Out 26-Out 06-Nov 15-Nov 26-Nov 05-Dec 14-Dec 25-Dec 03-Jan 14-Jan 23-Jan 01-Feb 12-Feb 21-Feb 04-Mar 13-Mar 22-Mar 02-Apr 11-Apr 22-Apr 01-May 10-May 21-May 06-Jun

Value back on top


This week, Value was reconstructed with a new set of five stocks. We begin this week with an addition of five new stocks to our value portfolio. The new portfolio has begun on an excellent note, outperforming the market by approximately 3.6%. Our portfolio recorded a return of 1.46% while the benchmark recorded a negative return of -2.11%. Furthermore, the daily volatility of our portfolio was lower, registering 1.21% compared to the 1.31% of the index. WellPoint Inc. (WLP) hit a new 52-week high this week with a price of $79.91, above its previous one of $79.78. The company was able to register positive returns despite the settlement of a health insurance lawsuit for $6m between the City of Los Angeles and one of its subsidiaries, Anthem Blue Cross. Moreover, it is still trading well below the healthcare plan subsector average multiples (P/E, Forward P/E, P/B and P/FCF). RGA also hit a 52-week high, trading at $67.57, above its previous one of $67.55, as the company's strengths, such as its revenue and net income growth, keep outweighing its low profit margins. Republic Airways Holdings Inc. (RJET) recorded a high positive daily return of 4% on Monday, but suffered a decrease of -1.75% on Thursday due to news that one of its airlines had a near collision on that day. The company was able to finish the week strong, with a return of 1.33%. On the other hand, Ingram Micro Inc. (IM) and Superior Energy Services (SPN) were unable to post positive returns, as they are significantly correlated with the market (1.02 and 1.68 beta, respectively). However, recent analyst coverage states that SPN is expected to outperform the market and has set a new price target on average between $33 and $35, an increase from the previous $26 - $28 range. Page 2/2 Page 2/2

Asset Contribution to Markowitz


GMF DBP DBE GTIP LEMB AFK ESR ILF SPY -2,5% -2,0% -1,5% -1,0% -0,5% 0,0% 0,5% 1,0%

Value Investment Strategy


Value S&P 500 115%

113%

WLP SPN RJET RGA

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29-Nov 10-Dec 19-Dec 28-Dec 08-Jan 17-Jan 28-Jan 06-Feb 15-Feb 26-Feb 07-Mar 18-Mar 27-Mar 05-Apr 16-Apr 25-Apr 06-May 15-May 24-May 04-Jun 13-Jun

Asset Contribution to Value

IM
-4,0% -2,0% 0,0% 2,0% 4,0% 6,0% 8,0% 10,0%

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