Market Commentary: Week of November 13, 2023

Last Week

Last week was the case of Powell strikes back. Once again, many market participants seemed to hear what they wanted to hear from the prior week’s FOMC meeting and priced in, yet another “Fed Pivot”. On Thursday, Chairman Powell spoke at the IMF conference and—in no uncertain terms—disabused the notion of quick easing of monetary policy. The Fed isn’t easing anytime soon as they are still very uneasy about inflation, and they very well could raise more if necessary. The implied (Fed Fund futures and OIS Swaps) four cuts in 2024 was shaved to three, taking out the prior weeks “Fed Pivot” inanity. Also, on Thursday the “What if they gave an auction and nobody showed up?” play was on. It wasn’t quite that bad as no one showing up, but it was pretty terrible. Thursday’s Long-Bond auction tailed over 5 basis points and carnage ensued. After the market closed Friday, Moody’s changed their outlook on U.S. Government debt from “Stable” to “Negative”. If the US Dollar wasn’t the world’s reserve currency it would be a lot worse. Good times.  

• The S&P 500 advanced 1.31% for the week. The average daily move was 0.59%.
• The NASDQ gained 2.23% for the week. The average daily move for the week was 0.85%. 
• The 2-year Treasury yield sprung 22 basis points higher, closing at 5.06% on Friday. High year-over-year 5.22%, low yield 3.77%.
• The 10-year Treasury yield increased 8 basis points for the week, closing at 4.65% on Friday. Year-over-year high yield 4.99%, low yield 3.31%.
• The VIX Index declined 4.96%, closing at 14.17 on Friday. Year-over-year high 29.82 and low 12.82.
• The MOVE Index declined 1.64% for the week, closing at 116.79 on Friday. Year-over-year high 198.71 and low 96.61.
• 5-year Investment Grade Corporates (as measured by Markit CDX) spreads tightened 2 basis points for the week, closing at 68 basis points on Friday. High spread Year-over-year high 111 and low of 62.
• 5-year High Yield corporate debt (as measured by Markit CDX) spreads gapped in 28 basis points closing at 436 basis points on Friday. Year-over-year high 534, and low 408.
• US Dollar Index weakened 0.80% for the week, closing at 105.86 on Friday. Year-over-year high 114.11 and low 99.77.
• WTI Crude dropped 4.15% for the week, using the December WTI Futures contract, closing at 77.17 on Friday. Year-over-year high 93.68, and low 66.74.  
• Gold, as measured by the December futures contract, declined 3.05% for the week, closing 1,999 on Friday. High price for the front contract year-over-year 2,056 and low 1,740.
• Bitcoin advanced 7.72% for the week closing at 37,293 on Friday, a new year-over-year high. High price year-over-year 37,293 and low 15,632.

The Week Ahead  

We start the week with rates markets selling off a bit and stocks down small. The economic calendar’s big event is October CPI on Tuesday. The expected month-over-month increase for Core CPI is 0.3%. The tone in the rates markets feels pretty bad and we could be in for a long slog back to 5% on 10s as the month rolls on. Credit spreads in such asset classes as High Yield corporates have screamed tighter the last few weeks and stocks have been resilient. However, if I am right about rates and geopolitical risks taking a turn even worse, risk assets could find quickly find themselves in no-man’s land.

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