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    Capital Markets | 4 min read

    Market Commentary: Week of August 17, 2020

    What Happened:

    Last week was what a typical slow August trading week once looked like, at least for stocks. COVID-19 continued to dominate the news as new cases slowed a bit in the Southwest and California, but picked up speed in the Midwest. The biggest battle now comes from the reopening of schools across the country. Right now, the outlook isn’t good for face-to-face reopening, which is a huge economic problem, as well as a social one. Meanwhile, in the rates markets, the Treasury auctioned a whopping $46 billion 3-year notes, $38 billion 10-year notes, and $26 billion 30-year bonds. As Gomer Pyle would have said, “Supply, supply, supply!” The yield curve responded by steepening 28 basis points between the 2-year note and the 30-year bond. Some think this is the beginning of a new steepening trend as the investor short-base for the long-end of the curve has increased substantially. We think it is just a bit of indigestion.

    • The S&P 500 was up .63% for the week. The average daily move for the week was .54%.

    • The NASDAQ was flat for the week. The average daily move for the week was .94%.  

    • The 2-year Treasury increased 1.6 basis points, closing at .146% on Friday.

    • The 10-year Treasury increased 14 basis points for the week, closing at .71% on Friday.

    • The VIX Index was flat for the week, closing at 22.05 on Friday. This week the VIX posted its lowest reading since the end of February of this year, on Friday.

    • The MOVE Index increased .6%, closing at 43.09 Friday. This marks the first time the index increased week-over-week since the June 5th

    • 5-year Investment Grade Corporates (as measured by Markit CDX) widened 3 basis points for the week, closing at 68 basis points on Friday (from March 1st; high 152 bps, low 65 bps). High-yield corporate debt (as measured by Markit CDX) widened 15 basis points, closing at 407 basis points (from March 1st; high 871, low 364).

    • US Dollar Index decreased .4%, closing at 93.10 on Friday.

    • WTI Crude increased 1.9% for the week using the September WTI Futures contract, closing at 42.01.

    • Gold, as measured by the December 2020 futures contract, decreased 3.9% closing at 1,949 on Friday.

    What’s Going to Happen?

    This week is a very light data week, with the highlight being Jobless Claims on Thursday. Last week, they came in under a million for the first time since March. Politics can dominate the landscape with the Democratic Convention this week, along with the House fight to get to the bottom of the U.S. Post Office situation. The uneasiness over how the 2020 presidential election will play out is becoming palpable. We don’t think markets are going to wait until October or November to start stressing over the possible nightmare of a contested election that would make Bush versus Gore look like a tea party. The U.S. Dollar has been weakening over the last few weeks and has a lot of room to weaken more if the world sees the United States as “unstable.” As crazy as things have been, the U.S. is still seen as the bastion of stability. An ugly November-to-whenever will really change that perception. So much of our massive deficit spending has been built on the belief that, when it comes to rate duration and safety, we are by far the biggest game in town. A change in that perception will cause very long-lasting damage to our rate and risk markets. As per usual, stocks and other credit risk assets are taking none of that into account. Good times.



    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.

    © 2020 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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    John Tuohy

    John Tuohy is CEO of SWBC Investment Services, LLC, a Broker/Dealer and SWBC Investment Company, an SEC Registered Investment Advisor (RIA). In his role, John is responsible for identifying, developing, and executing the division's strategic plan and all business development, sales, and marketing activities.

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