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    Capital Markets | 5 min read

    Market Commentary: Week of January 3, 2022

    Last Week

    The news during the holiday week centered squarely around Omicron as super-high infection rates played havoc in the U.S. and Europe. However, growing uncertainty around how to run an economy with a quarter of the workforce home in bed didn’t stop equities as the S&P 500 set its 70th all-time high for the year before retreating a bit at week’s end. Treasuries continued their holiday season sell-off due in part to funding operations (two-year, five-year, and seven-year Treasury auctions) in the middle of a very illiquid week. While the auctions went from so-so to poor, by week’s end, if you got filled in the auctions you ended up in positive territory.

    • S&P 500 fell .87% for the week. However, the index managed its 70th all-time high on Wednesday. The average daily move was .43%.
    • The NASDAQ ended nearly unchanged for the week. The average daily move for the week was .56%.
    • The 2-year Treasury yield rose 4 basis points for the week closing .73% on Friday. Year-to-date high yield .75%, low yield .10%.
    • The 10-year Treasury yield increased 2 basis points for the week, closing at 1.51% Friday. Year-to-date high yield 1.74%, low yield .91%.
    • The VIX Index declined 4% for the week, closing at 21.57 Friday. Year-to-date high 37.21 and low 15.07.
    • The MOVE Index was unchanged for the week, closing at 77.1 on Friday. Year-to-date high 89.45 and low 42.53.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) spreads widened 1 basis point for the week closing at 50 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 1 basis point, closing at 293 basis points on Friday, a new year-to-date high. High spread year-to-date 330, low 269.
    • U.S. Dollar Index weakened 0.3% at 95.67 on Friday. High reading Year-to-date 96.88 low 89.44.
    • WTI Crude rose 1.9% for the week using the February WTI Futures contract, closing at 75.21 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 .9% for the week closing at 1,828 on Friday. High price for the front contract year-to-date 1,954, low 1,678.
    • Bitcoin fell 9%, closing at 46,333 Friday. High price year-to-date 67,734, low 29,865.

    The Week Ahead

    We come in with equities up and Treasury yields higher led by the front-end as two-year yields are currently at 76 basis points, the highest since the pandemic started. The week ahead is chock full of economic data with the capper being the employment report for December on Friday. We also get the December FOMC minutes on Wednesday and one of the Fed’s favorite sets of data, the JOLT report for November.

    Despite many Wall Street equity analysts predicting that a bit of steam should come out of the furious, multi-year equity rally in 2022, based on past experience, we don’t see it yet. At the end of the day, the notorious TINA (There Is No Alternative) environment is still intact. Despite the disruptions that Omicron is causing it seems the consensus view is that this part of the pandemic has an endpoint of about a month and, while there will be more strains coming, they will continue on the historical virus epidemic course and be milder. Let’s hope so.

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    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.

    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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