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    Capital Markets | 4 min read

    Market Commentary: Week of November 2, 2020

    Last Week

    It was a rough week for risk assets as the combination of COVID-19 closing Europe and cases surging across the U.S. took a toll. Additionally, markets seem to have begun to take a fresh look at what will transpire on Election Day (Election Week? Election Month?), and pricing in a risk premium for potential chaos. With COVID-19 unleashing its fury, things are looking very grim for the global economy again.

    Oil has reacted with a sharp sell-off, breaking through $40 and down to $35 on the current WTI contract. This reality hit home as Exxon announced another miserable quarter and 14,000 global layoffs—about half in the United States. It is important, though, to keep in mind that we are dropping from a very high altitude. For those fortunate enough to ride the waves of equity markets up from March, now might have been time to take some chips off the table.

    Meanwhile, the Treasury Yield curve continued to steepen in the face of a strong rally in European Government bonds—such as the 10-year German Bund—which rallied about a point with yields declining six basis points. This seemed to point not only to a dismal outlook for Europe reentering lockdowns, but also to the angst over what will be a continued supply boom in Treasury notes and bonds. To some extent, the bond market is looking past Election Day to the Thursday when the Fed’s FOMC November meeting statement and subsequent press conference occurs. Will the Fed “do their bit” and ramp up purchases of Treasury supply to “assist” with renewed fiscal stimulus? We think so.

    • The S&P 500 declined 5.6% for the week. The average daily move for the week was 1.62%.

    • The NASDAQ lost 5.5% for the week. The average daily move for the week was two percent.

    • The two-year Treasury was flat for the week, closing at .16% on Friday.

    • The 10-year Treasury increased three basis points for the week, closing at .87% on Friday.

    • The VIX Index increased 38% for the week, closing at 38.02 on Friday.

    • The MOVE Index increased six percent for the week, closing at 61.91 on Friday. It should be noted, after hitting an all-time low of 36.62 at the end of September, the index is up 69%.

    • Five-year Investment Grade Corporates (as measured by Markit CDX) widened five basis points for the week, closing at 65 basis points on Friday. High-yield corporate debt (as measured by Markit CDX) widened 46 basis points, closing at 421 basis points on Friday.

    • U.S. Dollar Index increased 1.4%, closing at 94.04 on Friday.

    • WTI Crude decreased 10% the week, using the December WTI Futures contract, closing at 35.79.

    • Gold, as measured by the December 2020 futures contract, declined 1.3% for the week—closing at 1,879 on Friday.

    The Week Ahead

    Stocks across the globe are taking back some of last week’s losses this morning. It is hard to tell why, exactly, as nothing that drove the markets down last week has changed. Moreover, crude is being punished again with WTI December contract breaking through $35. We recommend saving yourself the trouble trying to figure it out—it just is

    What a week in store. We have the big election on Tuesday, which may not be decided for a few days after Tuesday. Both sides have legal teams the size of battalions in all the hotly contested swing states ready to swoop in and challenge votes. As the President likes to say, “We’ll see what happens.” We also have the Fed FOMC that will be out Thursday instead of the usual Wednesday in deference to Election Day. The Fed usually does not take action in November meetings, as they do not want to ever be seen interfering in the election process. Still, they should give us some good clues on what they plan on doing in December. Treasury market is looking for assurance that the Fed will continue to be aggressive in bond purchases to sop up fiscal stimulus/relief supply. Then, we have the October Jobs numbers coming on Friday. We may get a peek into any damage caused by the summer COVID-19 surge. Buckle in!



    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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