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    Capital Markets | 5 min read

    Market Commentary: Week of December 20, 2021

    Last Week

    Last week was mostly about the Fed’s FOMC December meeting, until it was not! The week started with November PPI coming in red-hot. The narrative was set for a more hawkish Fed in 2022 as the realization set in that inflation was not transitory and stronger medicine was needed. On Wednesday, Chairman Powell did not disappoint as he announced that the Fed would go “Turbo-Taper” and double the amount of tapering on a monthly basis with the result being zero new purchases of Treasury notes and MBS by March. The Fed also showed a strong consensus for hiking their policy rate three times in 2022 as opposed to one or two times. Upon the more aggressive hiking pace yields on the front end of the yield curve spiked up with the 2-year Treasury posting a yield of 70 basis points. Stocks staged a puzzling and strong rally post-FOMC on Wednesday. However, by Thursday the markets began to doubt that the Fed would be able to aggressively hike in 2022 as the narrative was hijacked by the rapid spread of the new Covid variant, Omicron. By the close on Friday, stocks and Treasuries settled as though FOMC Wednesday never happened.

    • S&P 500 fell 1.96% hitting a new all-time high Friday. The average daily move was 1.04%.
    • The NASDQ dropped 2.95%. The average daily move for the week was 1.44%.
    • The 2-year Treasury yield fell 2 basis points for the week closing .64% on Friday. Year to date high yield .64%, low yield .10%
    • The 10-year Treasury yield fell 9 basis points for the week, closing at 1.40% Friday. Year to date high yield 1.74%, low yield .91%.
    • The VIX Index jumped 15% for the week, closing at 21.57 Friday. Year to date high 37.21 and low 15.07.
    • The MOVE Index fell 2.6% for the week, closing at 72.46 on Friday. Year to date high 89.45 and low 42.53.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) spreads were flat for the week closing at 53 basis points Friday. High spread Year to date 58.07 and low of 46.56. High Yield corporate debt (as measured by Markit CDX) widened 3 basis points, closing at 308 basis points on Friday, a new year to date high. High spread year to date 330, low 269.
    • US Dollar Index rose 0.5% at 96.57 on Friday. High reading Year to date 96.88 low 89.44.
    • WTI Crude fell 1% for the week using the February WTI Futures contract, closing at 70.72. Friday. High price for the front contract year to date 83.76, low 47.62.
    • Gold, as measured by the February 2022 futures contract rose 1.1% for the week closing at 1,805 on Friday. High price for the front contract year to date 1,954, low 1,678.
    • Bitcoin fell 2.2%, closing at 46,873 Friday. High price year to date 67,734, low 29,865.

    The Week Ahead

    We come in this week with equities off sharply and the Treasuries continuing the Friday rally. The news about the new variant over the weekend has gone from bad to worse. It was a good to great year for U.S. equities and it feels like the market wants to preserve gains by reducing exposure. Additionally, on Sunday West Virginia Senator Joe Manchin surprised the White House on a morning talk show by stating that he cannot support President Biden’s signature spending bill. As the bill was viewed as stimulative, the squashing is hurting risk assets and putting a bid to Treasuries. It is a short week, and we expect choppy and illiquid trading, especially in bonds.

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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.

    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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