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    Capital Markets | 5 min read

    Market Commentary: Week of November 29, 2021

    Last Week

    Another crazy week in a wild year. We spent the first three days of the week ratcheting up the odds of the potential of a faster Fed taper and earlier policy rate hikes, then we spent the day after the Thanksgiving holiday reversing those odds in near panic mode.

    Nowhere was the panic felt most than the oil market. Crude had been a bit wobbly coming into the week as the market waited to see if OPEC+ would blink at U.S. polite demands to increase production. In fact, when OPEC+ did not blink and President Biden released a symbolic 50 million barrels of crude from the Strategic Petroleum Reserve (the U.S. consumes about 20 million barrels a day), OPEC+ seemed to chuckle. However, as word spread of a new strain of COVID on the loose over Thanksgiving, oil panicked at the specter of potential returns to March 2020. This panic, coupled with low post-holiday liquidity, drove crude through key technical levels which in turn brought on algorithmic selling and ended up a complete down 13% mess.

    Stocks and corporate debt got beat up pretty good on Friday as the VIX surged 54%, the second-highest day-over-day move since the February 2018 “Volmageddon” event. Treasury yields gyrated as the 10-year saw a range of approximately 20 basis points for the week.

    • Last week the S&P 500 dropped 2.2% with most of the drop on Friday. The average daily move was 0.75%.
    • The NASDAQ fell 3.5%. The average daily move for the week was 1.1%.
    • The 2-year Treasury yield declined 1 basis point for the week closing .50% on Friday. However, volatility was extreme as the note hit a yield of .64% on Wednesday, a new year-to-date high. Year-to-date high yield .64%, low yield .10%.
    • The 10-year Treasury yield fell 7 basis points for the week, closing at 1.48% Friday. Volatility was extreme as the note got to a yield of 1.67% on Tuesday. Year-to-date high yield 1.74%, low yield .91%.
    • The VIX Index surged 60% for the week, closing at 28.62 Friday. The 54% on Friday was the second largest of all time, the largest being “Volmegeddon” February 5, 2018. Year-to-date high 37.21 and low 15.07.
    • The MOVE Index increased 22% for the week, closing at 89.45 on Friday setting a new year-to-date high. Year-to-date high 89.45 and low 42.53.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) widened 5 basis points for the week closing at 57 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 27 basis points, closing at 327 basis points on Friday, a new year-to-date high. High spread year to date 327, low 269.
    • U.S. Dollar Index closed the week nearly unchanged at 96.09 on Friday. On Wednesday, the index set a new year-to-date high of 96.88. High reading Year-to-date 96.88 low 89.44.
    • WTI Crude crashed 10. 26% for the week using the January WTI Futures contract, closing at 68.15 Friday. Crude fell approximately 13% on Friday. High price for the front contract year-to-date 83.76, low 47.62.
    • Gold, as measured by the December 2021 futures contract, declined 3.6% for the week closing at 1,785 on Friday. High price for the front contract year-to-date 1,954, low 1,678
    • Bitcoin dropped 6.6% for the week, closing at 54,020 Friday. High price year-to-date 67,734, low 29,865.

    The Week Ahead

    We come in this morning with a bit of reversal from Friday’s carnage. S&P futures are up about .75%, Treasury yields are up four to seven basis points (the belly of the curve leading the way), and crude is rebounding by about 5%.

    Markets will almost definitely be on a hair-trigger as we wait for more information on the Omicron variant. One question is, will this finally be the moment when the “buy the dip” in equities meets its match? We have always felt that it will take a catastrophic event to break that mentality and perhaps Omicron is it. Let’s hope it’s not. "Hope for the best and prepare for the worst," as dad used to say.

    We have a big week for data culminating with the November employment data on Friday.

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    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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