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    Capital Markets | 4 min read

    Market Commentary: Week of July 20, 2020

    What Happened:

    Equities were mixed this week as tech stocks seemed to take a breather from their furious multi-week rally. Earnings season is upon us and we had major banks reporting. The crazy volatility in equity and fixed income markets, combined with the fee income associated with historic bond underwriting pumped up trading and underwriting earnings for the banks. However, large consumer banks like Bank of America and JP Morgan Chase put aside billions for expected consumer and commercial loan losses. Therefore, looking forward, with the Fed having clamped down on market volatility, the banks are not expecting another blow-out trading and underwriting quarter, so there could be weakness going forward, especially for regional banks who do not have large market making and underwriting platforms. Economic data for June, such as retail sales, told a story of the economy coming back to life.

    Unfortunately, COVID-19 continues to rampage. This week we had three days of 70,000 or more daily new cases and fatality rates are increasing. This, combined with another stubbornly high new jobless claims figure of 1.3 million, brought the two-year Treasury down under 15 basis points and flattened the yield curve.

    • The S&P 500 increased 1.3% the week. The average daily move for the week was .76%.

    • The NASDAQ decreased 1.1% for the week. Friday, the index printed another all-time high. The average daily move for the week was .93%.

    • The 2-year Treasury declined 1 basis point for the week, closing .146% Friday.

    • The 10-year Treasury decreased 2 basis points for the week, closing at .627% Friday.

    • The VIX Index declined 6% for the week closing at 25.68 Friday.

    • The MOVE Index fell 19%, closing at 45.68 Friday. The Friday reading was the lowest in over 1 year.

    • 5-year Investment-Grade Corporates (as measured by Markit CDX) tightened 3 basis points for the week, closing at 71 basis points Friday (from March 1st; high 152 bps, low 65 bps). High-yield corporate debt (as measured by Markit CDX) tightened 28 basis points, closing at 471 basis points (from March 1st; high 871, low 364).

    • US Dollar Index lowered by .73%, closing at 95.94 on Friday (the high for 2020 is 102.82, while the low is 94.99).

    • WTI Crude was flat for the week using the August WTI Futures contract, closing at 40.59.

    What’s Going to Happen?

    The data calendar is pretty light this week. Once again, as the virus has begun to surge, June data becomes less important. We are getting near the July 31st expiry for the $600 per week unemployment bonus and there’s serious concern that the loss of that bonus is going to push millions of Americans over the edge, especially with the employment outlook becoming shaky again. The White House and the Senate appear to be ready to dig in on letting that bonus expire. Their thought is that the bonus has people making more on unemployment than if they returned to work, so they don’t return. If the virus continues to surge that argument may fall flat as there may be no jobs to return to. Corporate earnings and outlooks, stimulus discussions and proposals and COVID statistics should dominate trading and risk appetite this coming week.



    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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