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    Capital Markets | 4 min read

    Market Commentary: Week of February 8, 2021

    GameStop mania retreated last week and major stock indices roared back to life, setting new all-time highs. The plunge, in what is referred to as “meme” stocks like AMC, GME, and KOSS, and the sharp reversals in household name stocks—especially big-tech stocks—highlighted the dynamic of how many liquid and relevant names were liquidated the prior week to raise cash for short-seller redemptions.

    In rates, the Treasury yield curve steepened considerably (ten basis points 2-10s) as it became more evident that President Biden and congressional Democrats will push the $1.9 trillion COVID-19 relief bill through without any Republican votes. 

    Meanwhile, in the front-end of the yield curve the two-year Treasury set an all-time low in yield at ten basis points. As long as short duration risk-free rates remain near zero, and the Fed continues to give every indication that they will stay there for some time, equity, and other risk assets should remain “elevated.”  

    Friday’s employment report was poor. However, there has been some encouraging news on the COVID-19 front, as for the first time last week we saw more vaccinations than newly reported cases nationwide.

    • The S&P 500 advanced 4.7% for the week, setting a new all-time high on Friday. The average daily move for the week was .92%.

    • The NASDAQ surged 6% for the week, setting a new all-time high on Friday. The average daily move for the week was 1.19%.

    • The two-year Treasury yield fell one basis point for the week, closing at .10% on Friday—a new all-time low.

    • The 10-year Treasury yield increased 10 basis point for the week, closing at 1.17% on Friday.

    • The VIX Index dropped 37%for the week, closing at 20.87 on Friday.

    • The MOVE Index was unchanged for the week, closing at 47.20 on Friday.

    • Five-year Investment Grade Corporates (as measured by Markit CDX) tightened six basis points for the week, closing at 51 basis points on Friday.

    • High-yield corporate debt (as measured my Markit CDX) tightened 38 basis point for the week, closing at 288 basis points on Friday.

    • US Dollar Index rose .5% for the week, closing at 91.04 on Friday.

    • WTI Crude advanced 9% for the week, using the March WTI Futures contract, and closing at 56.85 on Friday.

    • Gold, as measured by the April 2021 futures contract, dropped 2% for the week closing at 1,813 on Friday.

    • Bitcoin was mostly unchanged for the week, closing at 38,346 on Friday.


    The Week Ahead:

    Equities are higher across the globe this morning and cryptocurrency Bitcoin is surging as Tesla revealed it has invested $1.5 billion in the asset and will begin to accept payment in crypto for its vehicles. Go figure. 

    We could hit a bit of turbulence this week as the impeachment trial of former President Trump begins. Meanwhile, the yield curve continues to steepen with the 30-year Treasury touching the symbolic two percent yield level. The major economic data this week will be CPI on Wednesday and initial jobless claims on Thursday.

     

    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 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.

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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.

    © 2021 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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