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    Capital Markets | 3 min read

    Market Commentary: Week of July 6, 2021

    Last Week:

    Equities continued to grind higher with the S&P 500 managing to set new all-time highs every day of the week. Impervious to bad news, such as the spread of the “Delta Variant,” further Fed speak on tapering, warnings of impending doom from market sages, and continued signs of inflation, the stocks party on. The rally in stocks has become broad and volatility is getting crushed. In Treasuries, the rally in the long-end continued despite another strong employment report on Friday, continued signs of inflation and shortages, Fed “Taper Talk,” and ever-increasing supply of Treasury and corporate debt. It seems that investors cannot get enough of just about any asset denominated in U.S. Dollars. Get them while they’re hot—don’t worry, we’ll make more!

    • The S&P 500 advanced 1.68%, ending Friday at a new all-time high. The index set new highs every day of the week. The average daily move was 0.33%.
    • The NASDAQ increased 1.94%, ending Friday at yet another all-time high. The average daily move for the week was 0.46%.
    • The two-year Treasury yield declined three basis points for the week closing at .235% on Friday.
    • The 10-year Treasury yield fell 10 basis points for the week, closing at 1.43% on Friday.
    • The VIX Index dropped 3.5% for the week, closing at 15.07 Friday.
    • The MOVE Index declined 5.7% for the week, closing at 52.41 on Friday.
    • Five-year Investment Grade Corporates (as measured by Markit CDX) tightened one basis point for the week, closing at 47 basis points Friday.
    • High-yield corporate debt (as measured by Markit CDX) tightened two basis points for the week, closing at 271 basis points on Friday.
    • U.S. Dollar Index strengthened 0.4% for the week, closing at 92.23 on Friday.
    • WTI Crude rose 1.4% for the week, using the September WTI Futures contract, closing at 74.36 Friday. Crude has now closed higher for seven consecutive weeks.
    • Gold, as measured by the August 2021 futures contract, rose .33% for the week closing at 1,783 on Friday.
    • Bitcoin fell 4.3% for the week, closing at 33,971 on Friday.

    The Week Ahead:

    Coming in from the long weekend, Treasury yields are roughly flat this morning. Stocks are relatively unchanged in the U.S. and off a bit across the pond. Repeating our theme from last week, despite worsening news on vaccination rates in relatively large pockets of the country, and the advanced view of the “Delta Variant” in Europe, our financial markets have yet to show concern. At this point, it is somewhat of a fool’s errand to get in front of this U.S. financial asset freight train. As far as data is concerned, it is a light week. The big event will be tomorrow’s release of the Fed’s June FOMC meeting minutes.

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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.

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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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