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    Capital Markets | 4 min read

    Market Commentary: Week of June 28, 2021

    Last Week:

    Equities put in a very strong performance last week as the “value stock-reflation trade” was back on. Despite Federal Reserve Bank presidents such as Dallas Fed President Kaplan taking to the airwaves advocating an earlier start to QE tapering, stocks shrugged this off and set new, all-time highs. Treasury yields had a slight bit of indigestion, while MBS spreads showed no immediate fear of the taper by tightening all week. The Treasury conducted massive two-year, five-year, and seven-year auctions, which were received fairly well. It appears that real money buying and fast money short-covering of Treasuries has abated as supply continues to flood the market. On the economic data front, the closely watched PCE Deflator for May came in a bit lower than expected on Friday.

    • The S&P 500 advanced 2.74%, ending Friday at a new all-time high. The average daily move was 0.59%.
    • The NASDAQ increased 2.35%. The average daily move for the week was 0.50%.
    • The two-year Treasury yield rose one basis point for the week, closing .267% on Friday.
    • The 10-year Treasury yield increased nine basis points for the week, closing at 1.53% on Friday.
    • The VIX Index plunged 25% for the week, closing at 15.62 Friday.
    • The MOVE Index declined eight percent for the week, closing at 55.58 on Friday.
    • Five-year Investment Grade Corporates (as measured by Markit CDX) tightened three basis points for the week, closing at 48 basis points Friday.
    • High-yield corporate debt (as measured by Markit CDX) tightened 14 basis points for the week, closing at 273 basis points on Friday.
    • U.S. Dollar Index weakened 0.4% for the week, closing at 91.85 on Friday.
    • WTI Crude rose 3.9% for the week using the August WTI Futures contract, closing at 74.05 Friday. Crude has now closed higher six consecutive weeks.
    • Gold, as measured by the August 2021 futures contract, fell .51% for the week and closed at 1,777 on Friday.
    • Bitcoin fell seven percent for the week, closing at 35,498 on Friday.

    The Week Ahead:

    Treasury yields are down this morning with the belly of the curve leading the way. Stocks are relatively unchanged. 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. As far as data is concerned, it is a pretty full week. We get housing data and ISM Manufacturing reports and on Friday when we get May employment figures. Projections call for continued improvement payrolls.

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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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    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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