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    The threat of a government shutdown materialized last week, with its most immediate market impact stemming from the absence of Bureau of Labor Statistics data - specifically, the Nonfarm Payrolls (NFP) report scheduled for Friday. While alternative employment indicators such as the ADP Employment Change (released Wednesday) and ISM Employment data (released Friday) typically garner less attention, the missing NFP report likely elevated their significance for market participants.

    Notably, the ADP report came in sharply below expectations, showing a decline of 32,000 jobs versus a forecasted gain of 51,000. This unexpected weakness triggered a sharp rally in rates, as traders priced in a more pessimistic outlook for the economy. However, it’s important to recognize that ADP data represents only about 20% of the U.S. employment landscape, focuses exclusively on private sector jobs, and differs in both timing and methodology from the official BLS figures—making it a relatively weak proxy. As a result, the bond market may be vulnerable to a reversal once the delayed NFP data is released, especially if it contradicts the ADP signal.

    Equity markets continued their relentless climb last week, with the S&P 500 reaching an intraday high of 6,750 on Friday. The prevailing “bad news is good news” narrative remains intact, as weaker economic data has fueled optimism around potential rate cuts. Market participants increasingly expect the Federal Reserve to maintain a stimulative stance, using monetary easing to counteract signs of economic slowdown and labor market softening.

    In discussions with clients, I’ve reiterated that equity markets do not always reflect the broader economy. Large-cap indices are often insulated from domestic economic weakness due to their global exposure and sector composition.

    In recent commentaries, I’ve highlighted the potential for small-cap stocks to outperform in a rate-cutting environment. Smaller companies tend to benefit more directly from lower borrowing costs, which can support operational expansion and growth. This view has played out notably since August, with the Russell 2000 Index outperforming the S&P 500 by nearly 1.5x, following a shift in Fed expectations signaled by Chair Powell’s remarks at Jackson Hole. While valuation concerns persist, I anticipate any pullback to be modest, with equities likely to resume their upward trajectory as monetary policy remains accommodative.

    From the Municipal Desk (with contributions from Ryan Riffe):

    The bid in Treasuries following the weaker-than-expected ADP data helped the municipal market maintain a firm tone last week. Consistent with the week prior, the front end of the curve continues to recalibrate. This was evidenced by its inability to keep pace with the Treasury rally on Wednesday for maturities out to five years. Ratios for two- and three-year maturities have rebounded off their lows of 55% and currently stand at 65%. Other than spotty weakness for shorter maturities, the new issue market not only absorbed an increased calendar of $10 billion but did so with heavy oversubscriptions for many deals. A sudden increase in new issue supply is the fearful thought on the minds of market participants as we try and navigate through a murky market challenged with both seasonality and minimal economic data...but until then, carry on.

    30-Day Visible Supply @ $17.2 Billion

    Weekly Calendar expected @ $14-19 Billion

     

    2-YR Ratio @ 65%

    3-YR Ratio @ 64%

    5-YR Ratio @ 63%

    10-YR Ratio @ 71%

    30-YR Ratio @ 89%

     

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    An 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.

    © 2025 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.

    Christopher Brigati, Chief Investment Officer — Managing Director

    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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