Capital Markets | 4 min read

    Market Commentary: Week of July 8, 2024

    Along with the 4th of July fireworks breaking up the trading week, the market found its own reason to celebrate with a strong bid underlying interest rate markets. Recent economic data suggests a continued cooling of the US economy and that the Fed has edged slightly closer to finally needing to undertake its first rate cut. Notably, ISM Manufacturing and Services data came in below expectations and, more importantly, below the key level of 50. Additionally, JOLTS Job Openings data for May was significantly higher than survey results. Finally, Friday’s Nonfarm Payroll and Unemployment data added fuel to the fire involving market expectations for a cut by the Fed at the September meeting. As of this writing, the market is pricing in a 76% chance for the Fed to cut the target Fed Funds rate at the September 18th meeting.

    This week, all eyes and ears will focus on Powell’s address to Congress and any hints regarding the Fed’s policy path. Then, on Thursday, the always-important CPI data will be released, with expectations for a 0.1% increase in June, but a continued move lower to 3.1% on a YOY basis. The uncertainty overhanging the US political process regarding President Biden and louder calls for him to step down from his election campaign may add another layer of complexity to the broader markets. Following his poor performance on the debate stage, the Treasury market sold off significantly - pricing in an increased likelihood for a Trump election win and the higher growth prospects for the economy because of his anticipated policies.

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    The above chart highlights the recent volatility to the rates market as conflicting forces have pushed and pulled yields in different directions. Despite this, rates remain contained within their recent channel, and the bias remains toward lower rates. We continue to call for opportunistically putting cash to work on pullbacks in rates based upon the expectation that the high for the current cycle is already in place and lower rates are on the horizon.

    Last week, SWBC clients were fairly active despite the holiday-interrupted trading days. The combination of the aforementioned spike in rates following the Presidential Debate and heavy reinvestment cash hitting client accounts provided a reasonable incentive for investors to buy bonds. Last week, the limited new issue supply led to a focus on secondary positions and a decline in dealer balance sheets. This week, with over $9 billion in deals slated for pricing, we are back to an above-average supply environment. Still, expectations for continued strength in demand should maintain a solid bid underlying the market.

    ImageAn index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.

    The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays Global Aggregate Index that measures the aggregate value of global debt with a negative yield. • The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. • The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.• The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.• The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.• The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September. • The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September. • The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.

    Investing involves certain risks, including possible loss of principal. You should understand and carefully consider a strategy’s objectives, risks, fees, expenses, and other information before investing. The views expressed in this commentary are subject to change and are not intended to be a recommendation or investment advice. Such views do not take into account the individual financial circumstances or objectives of any investor that receives them. All indices are unmanaged and are not available for direct investment. Indices do not incur costs including the payment of transaction costs, fees, and other expenses. This information should not be considered a solicitation or an offer to provide any service in any jurisdiction where it would be unlawful to do so under the laws of that jurisdiction. Past performance is no guarantee of future results.

    © 2021 SWBC. All rights reserved. Securities offered through SWBC Investment Services, LLC, a registered broker/dealer. Member FINRA & SIPC. Advisory services offered through SWBC Investment Company, a Registered Investment Advisor, registered as such with the US Securities & Exchange Commission. SWBC Investment Services, LLC is under separate ownership from any other named entity. SWBC Investment Services, LLC a division of SWBC, is a nationwide partnership of advisor.


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    Christopher Brigati

    Prior to joining SWBC, Brigati was Senior Vice President, Managing Director of Municipal Investments at Valley National Bank. With over 25 years of experience primarily in the municipal market, he is a recognized thought leader in the fixed-income markets and is a regular contributor with appearances on Bloomberg Television and Radio. He has authored numerous economic commentaries and his insights have been featured in leading financial media publications, including The Bond Buyer, The Wall Street Journal, and Bloomberg. Brigati has also been an active participant with the Bond Dealers of America (BDA) trade association, advocating regulators and legislators on Capitol Hill on behalf of the broker-dealer community. Before joining Valley National Bank, he served as Managing Director and Head of Municipal Trading at Advisors Asset Management, Inc. (AAM). Before that, he had a long career at Morgan Stanley where he served as Managing Director and Head of Wealth Management Municipal Trading for eight years. Brigati holds a bachelor’s degree from The State University of New York at Albany School of Business. He is registered for Series 3, 4, 7, 24, 53, and 63.

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