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    Capital Markets | 4 min read

    Market Commentary: Week of December 14, 2020

    Last Week:

    It was a strange week in the markets, as there were plenty of what we would call “first tier” headlines, which in turn caused lots of intra-day volatility in both equites and treasuries. However, seemingly at each day’s end, the markets more or less finished with relatively small day-over-day moves. Most of the news centered around COVID-19, with positive news of vaccine rollouts and potential passing of some sort of a federal stimulus package, and negative news of near parabolic increases in COVID-19 cases, hospitalizations, and deaths, and a stalemate on the stimulus package.

    Last week, markets had to begin to digest the meaning of a new anti-trust suit brought by the Federal Trade Commission against Facebook. The goal seems to be to have Facebook divest itself of two of its crown jewels, Instagram and WhatsApp. While that probably won’t happen, the risk to the tech giants such as Google and Facebook going forward seems to be clear—they have powerful enemies in the halls of government power and those powers aim to bring them down a peg or two. Additionally, last week saw weekly jobless claims post significantly higher than expected, showing renewed deterioration of the labor markets.

    • The S&P 500 declined .97 % for the week. The average daily move for the week was .3%.

    • The NASDAQ fell .6% for the week. The average daily move for the week was .73%.

    • The two-year Treasury yield fell three basis points for the week, closing at .12% on Friday.

    • The 10-year Treasury yield declined seven basis point for the week, closing at .90% on Friday.

    • The VIX Index rose 12% for the week, closing at 23.31 on Friday.

    • The MOVE Index increased eight percent for the week, closing at 47.52 on Friday.

    • Five-year Investment Grade Corporates (as measured by Markit CDX) widened 4.5 basis points for the week, closing at 54.5 basis points on Friday.

    • High-yield corporate debt (as measured by Markit CDX) widened 10 basis points, closing at 307 basis points on Friday.

    • US Dollar Index nearly flat for the week, closing at 90.98 on Friday.

    • WTI Crude increased 0.6% the week, using the January WTI Futures contract, closing at 46.57 on Friday.

    • Gold, as measured by the February 2021 futures contract, was mostly unchanged for the week closing at 1,843 on Friday.


    The Week Ahead:

    Stocks are starting the week up sharply off optimism on vaccines, stimulus deals, and Brexit deals. As far as vaccines—yes. As far as the other two, who knows! Over the weekend, Germany announced that they are essentially shutting the country down for the holidays as the pandemic continues to ramp up in most of the world. Additionally, reports are coming in that Russia has committed cyberattacks against numerous U.S. Government agencies, and Google is reporting widespread outages to many of its services. No YouTube for you today!

    This week may end up being similar to last week, in which good news on vaccine rollout balances against the current horror of COVID-19 cases, hospitalizations, and deaths. In many areas of the country, it has been reported that the healthcare system is at a tipping point. At the current rate, the system will not be able to treat all patients sickened with COVID-19 (or anything else for that matter) in large parts of the country. It will be a heavy data week with retail sales, manufacturing, and service sector monthly reports. Additionally, we have the FOMC on Wednesday.

     

    Definitions:

    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 Mar

      kit 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.

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    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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