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    Capital Markets | 5 min read

    Market Commentary: Week of October 25, 2021

    Last Week

    It was a tale of two worlds last week. In the rates markets, more and more participants have begun to accept as fact that the inflationary pressures being experienced in all corners of the economy and most of the world aren’t going away anytime soon. Five-Year Treasury break-evens (nominal note yield minus TIP note yield) rose a stunning 15 basis points for the week, ending at 2.90%. If the market is pricing in an inflation rate of 2.9% for five years and we know that we are currently well above that rate near the end of 2021, then you must see that the market is now pricing in inflation rates over 5% for 2022 and perhaps 2023. Treasury auctioned Five-Year TIPs Thursday and it was a food fight trying to get the notes as the issue came way through its pre-auction yield. Stocks, on the other hand, ground higher with the S&P 500 hitting a new all-time high Thursday. The only inflation stocks paid attention to was the hyper-inflation of Donald Trump’s SPAC, DWAC. The vehicle rose an astounding 846% week over week. Not bad for a blank-check company.

    • The S&P 500 rose 1.7%. The index hit a new all-time high on Thursday. The average daily move was 0.37%.
    • The NASDAQ climbed 1.3%. The average daily move for the week was .61%.
    • The Two-year Treasury yield rose six basis points for the week closing .46% on Friday, a new high for the year. Year-to-date high yield .46%, low yield .10%.
    • The 10-year Treasury yield rose six basis points for the week, closing at 1.63% Friday. Year-to-date high yield 1.74%, low yield .91%.
    • The VIX Index fell 5% for the week, closing at 15.43 Friday. Year-to-date high 37.21 and low 15.07.
    • The MOVE Index increased 14% for the week, closing at 72.04 on Friday. Year-to-date high 75.66, and low 42.53.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) were unchanged for the week closing at 52 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 2 basis points, closing at 302 basis points on Friday. High spread year-to-date 319, low 269.
    • US Dollar Index ended mostly unchanged for the week, closing at 93.64 on Friday. High reading Year-to-date 94.52, low 89.44.
    • WTI Crude advanced 2.5% for the week using the December WTI Futures contract, closing at 83.76 Friday. Friday’s level represents the new high of the year. Crude has set new year highs 9 consecutive weeks. High price for the front contract year-to-date 83.76, low 47.62.
    • Gold, as measured by the December 2021 futures contract, increased 1.6% for the week closing at 1,796 on Friday. High price for the front contract year-to-date 1,954, low 1,678.
    • Bitcoin retreated 2.9% for the week, closing at 60,726 Friday. On Thursday Bitcoin hit a new all-time high of 65,996. High price year-to-date 65.996, low 29,865.

    The Week Ahead

    Corporate earnings season continues this week with the FAANGs (sans Netflix who reported last Thursday) reporting. As these companies make up over 20% of the S&P 500 weightings, expect them to dominate. Sorry for being Captain Obvious!

    So far, we have not seen much handwringing about global supply chain issues, with Intel being the major company exception. Perhaps Apple will send up a warning flare on Thursday. Otherwise, the doom and gloom may be put off another week.

    The sharp rise in Treasury yields, especially the belly of the curve, is showing little sign of relenting. Products like corporate and municipal credit that are spread to Treasury yields seem particularly vulnerable as their credit spreads continue to hover near or at all-time tights. Traders and investors may have to start googling “spread duration” soon.

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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.


    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.

    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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