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    Capital Markets | 4 min read

    Market Commentary: Week of August 31, 2020

    What Happened

    Another week, another great week for stocks and corporate bonds. Sure, there was a noticeable amount of hand-wringing from “the experts” that the rally in equities is getting narrower and narrower, and the prospects for many major economic sectors such as banks, airlines, energy, retail, and leisure (to name a few) were pretty grim. That didn’t stop another round of healthy gains for major indices. Big Tech has our back, and if something fails there, then the Fed has our back. Meanwhile, in the rates markets the big news was Fed Chairman Powell’s address at the annual Jackson Hole Symposium. The Chairman unveiled a new approach toward inflation targeting that would allow “overshooting” the 2% goal for a period of time to make up for “undershooting.” The reaction from the market was a sharp steepening of the yield curve and weakening the dollar. We believe that the long-end of the curve should stabilize in the coming weeks as we are very far away from any kind of demand-pull inflation. However, we do foresee further weakness in the USD, which could begin pushing Treasury yields higher.

    • The S&P 500 was up 3.3% for the week. The average daily move for the week was .64%. The index set another new all-time high on Friday and posted gains every day of the week.

    • The NASDAQ was up 3.4% for the week. The average daily move for the week was .81%. The index set another new all-time high Friday. The index is now up 30.35% for the year.

    • The 2-year Treasury declined 1.6 basis points for the week, closing .128% on Friday.

    • The 10-year Treasury increased 9 basis points for the week, closing at .72% on Friday.

    • The VIX Index increased slightly for the week, closing at 22.96 Friday.

    • The MOVE Index increased 7%, closing at 48.19 Friday.

    • 5-year Investment Grade Corporates (as measured by Markit CDX) tightened 2 basis points for the week closing at 66.52 basis points on Friday (from March 1st; high 152 bps, low 65 bps). High-yield corporate debt (as measured by Markit CDX) tightened 29 basis points, closing at 368 basis points (from March 1st; high 871, low 364).

    • US Dollar Index declined 1% for the week, closing at 92.37 on Friday.

    • WTI Crude increased 1.5% for the week, using the October WTI Futures contract, closing at 42.97.

    • Gold, as measured by the December 2020 futures contract, increased 1.4% closing at 1,975 on Friday.

    What’s Going to Happen

    Lots of August economic data this week with the grand finale the BLS Employment Report on Friday. Economists polled by Bloomberg expect a job add of 1.4 million and a slight lowering of the unemployment rate. This report will be thoroughly analyzed, as August was a month where COVID-19 wreaked havoc in many states. Unlike last month’s July report, this report can be a real market mover. Meanwhile, both the Democratic and Republican conventions are now in the rear-view mirror and there’s only 63 days until Election Day. The run-up to the big day should bring volatility as the markets press bets on whether there will be a change in the White House as well as Congress. We believe that the U.S. Dollar will continue to weaken, which could put pressure on USD assets, most notably Treasury notes and bonds. As far as risk assets go, they probably have more room to run because that just seems to be what they do! Momentum still rules the roost.



    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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