Macro Commentary:
By: Ariel Segal
Speaker Pelosi’s Tuesday deadline came and went last week and talks continue, but most investors have lost hope for a deal to happen before the Nov. 3 election.
The U.S. Department of Justice opened an anti-trust case against Google on Tuesday, alleging that the search engine engaged in anticompetitive abuses of power. Exclusive agreements with Apple Inc. and Verizon help give Google a 90% share of the online search market.
According to economists surveyed by Bloomberg, Thursday’s upcoming GDP report is expected to break the previous record with +30% increase. The reopening of states’ economies and apt fiscal stimulus have helped the economy recover in this manner.
New single day covid-19 infections hit an all-time high in the US on Friday and Saturday, reaching above 80,000 on each day. NYC will be beginning a blended learning program of remote and in-person classes beginning Nov. 2.
Fixed Income Market:
By: Joseph Colleran
The “risk off” trade continued through last week and has accelerated this morning. The result has been further softening in Corporate spreads with IG wider by 2-3bps and HY bonds out approx. 10bps WoW. Like other markets, corporates are tightly focused on both the election and the fate of the second stimulus package that now looks to be pushed to post-election. Overall investor activity (volumes) was somewhat lighter; however, new issuance continues at a steady pace. Client demand in the Structured Note sector remains strong as volatility remains high and supportive of attractive new deal term.
Lipper Fund flow data for the week showed:
Domestic Equity Funds down $4.7 BLN
IG Bond Funds up $6.7 BLN
HY Bond Funds up $0.16 BLN
Municipal Bond Funds up $0.73 BLN
MMKT Funds down $9.1 BLN
Prior Week:
Domestic Equity Funds down $8.6 BLN
IG Bond Funds up $6.8 BLN
HY Bond Funds up $1.8 BLN
Municipal Bond Funds up $0.4 BLN
MMKT Funds down $18.9 BLN
U.S Equities:
By: James Zurovchak
Equity markets spent last week trading mostly sideways ending the week modestly lower with NASDAQ down 1.06%, and DJI and S&P lower by 0.91% and 0.51% respectively. 4 GICS sectors out of 11 were up, led by Utilities (1.17%) and Financials (1.04%). The declines were modest again last week with Technology leading the underperformers lower (-1.33%). Value outperformed Growth on the week 0.21% vs -1.14%.
Major concerns continue to be Covid-19 (both Europe and the US are experiencing their greatest surge in cases since early summer) and the passing of a stimulus package (whose outlook seems to change daily if not hourly). As we hit the last week of campaigning before the election, pundits seem to be getting more comfortable with the idea that there is not an outcome that the markets won’t like.
Foreign Exchange:
By: Anthony Minardo
The hopes of a fiscal stimulus plan prior to next week’s presidential election looks bleak, as a result the week begins with a stronger U.S. dollar and “risk-off” sentiment.
The market continues to price in an eventual stimulus package, albeit, uncertain of the timing or the size. The result of U.S. elections will most likely give us a better perspective on the magnitude of the financial relief. A second way of COVID-19 continues to gain momentum in Europe, which is proving to be a road block in the recovery of the economies. The Euro along with other European currencies have weakened with
the potential of continued easing of policy in the near future. We are also seeing a steady sell-off in oil as growing concerns of future lockdowns due to the COVID-19 virus.
Although COVID-19 cases have risen in the U.S. due to aggressive testing, the data this week should continue to show the recovery process with increases in new home sales (+4.0%) and durable goods (0.6%) and a decline in the initial jobless claims(765k).
Financial Planning:
By: Brian Stigliano
Joe Biden’s Proposed 401(k) Plan Changes
Should we see a “blue wave” in the upcoming elections, it is very likely that we will see changes to how long-term capital gains and qualified dividends are taxed for households earning $1 million or more. Under current rules, that income is taxed at 23.8% (20% tax rate plus 3.8% Medicare surtax). If Biden’s proposal were to go into effect, the new tax rate would be 39.6% which is the same as the highest proposed marginal ordinary income rate. According to Bloomberg, this would represent the largest hike in capital gains tax rate history.
The anticipated effect is that some households may choose to take advantage of the lower current rates and take gains sooner rather than later. On the opposite end of the spectrum, some households may choose to hold positions for an even longer period of time than planned.
Last Week's Economic Data for 10/26
| Last Week's Economic Data | Actual | Survey |
|---|---|---|
| Housing Starts | 1415k | 1460k |
| Initial Jobless Claims | 787k | 870k |
| Existing Home Sales | 6.54m | 6.30m |
This Week's Economic Data for 10/26
| This Week's Economic Data | Release Date | Survey |
|---|---|---|
| Durable Goods Orders | 10/27/20 | 0.5% |
| Wholesale Inventories MoM | 10/28/20 | 0.4% |
| Initial Jobless Claims | 10/29/20 | 775k |
| GDP Annualized QoQ | 10/29/20 | 31.9% |
| Personal Income | 10/30/20 | 0.3% |
Market Data for 10/26
| Interest Rates | Current | WoW | MoM | YoY |
|---|---|---|---|---|
| 1 Month Libor | 0.15% | +0.8 bp | +0.5 bp | (165.3 bp) |
| 3 Month Libor | 0.22% | +1.4 bp | +0.4 bp | (170.6 bp) |
| 6 Month Libor | 0.25% | (0.8 bp) | (2.5 bp) | (168.7 bp) |
| 12 Month Libor | 0.33% | (0.8 bp) | (3.7 bp) | (162.4 bp) |
| Fed Funds Effective | 0.09% | (176.0 bp) | ||
| SOFR | 0.08% | (0.0 bp) | +2.0 bp | (179.0 bp) |
| US Treasury Yields | Current | WoW | MoM | YoY |
|---|---|---|---|---|
| 12-Month | 0.12% | (0.3 bp) | +0.5 bp | (146.9 bp) |
| 2-Year | 0.15% | +0.4 bp | +2.1 bp | (146.8 bp) |
| 3-Year | 0.19% | +0.0 bp | +4.2 bp | (142.2 bp) |
| 5-Year | 0.35% | +1.6 bp | +8.4 bp | (126.8 bp) |
| 7-Year | 0.57% | +2.6 bp | +11.9 bp | (113.3 bp) |
| 10-Year | 0.80% | +0.4 bp | +2.1 bp | (146.8 bp) |
| 30-Year | 1.59% | +0.4 bp | +2.1 bp | (146.8 bp) |
| US Swap Rates vs 3ML | Current | WoW | MoM | YoY |
|---|---|---|---|---|
| 12-Month | 0.21% | +0.6 bp | (1.1 bp) | (156.1 bp) |
| 2-Year | 0.23% | +0.2 bp | +1.1 bp | (143.8 bp) |
| 3-Year | 0.27% | +0.1 bp | +3.2 bp | (136.6 bp) |
| 5-Year | 0.42% | +0.8 bp | +8.5 bp | (121.2 bp) |
| 7-Year | 0.60% | +2.2 bp | +11.6 bp | (107.3 bp) |
| 10-Year | 0.83% | +3.1 bp | +14.1 bp | (92.9 bp) |
| 30-Year | 1.26% | +4.5 bp | +16.7 bp | (69.7 bp) |
| US Swap Spreads | Current | WoW | MoM | YoY |
|---|---|---|---|---|
| 12-Month | +10 bp | +0.9 bp | (1.6 bp) | (9.2 bp) |
| 2-Year | +8 bp | (0.2 bp) | (1.0 bp) | +3.0 bp |
| 3-Year | +8 bp | +0.0 bp | (1.0 bp) | +5.7 bp |
| 5-Year | +7 bp | (0.9 bp) | +0.1 bp | +5.7 bp |
| 7-Year | +3 bp | (0.4 bp) | (0.3 bp) | +6.0 bp |
| 10-Year | +3 bp | +2.6 bp | +12.0 bp | +53.9 bp |
| 30-Year | (34 bp) | +4.0 bp | +14.7 bp | +77.2 bp |
| Equity Markets | Current | WoW | MoM | YoY |
|---|---|---|---|---|
| Dow Jones | 27,685 | (2.3 %) | +1.9% | +2.7% |
| S&P 500 | 3,388 | (2.2 %) | +2.7% | +12.1% |
| NASDAQ | 11,359 | (1.6 %) | +4.1% | +37.8% |
| Currencies | Current | WoW | MoM | YoY |
|---|---|---|---|---|
| Euro | 1.1809 | +0.3% | +1.2% | +6.4% |
| Japanese Yen | 104.8500 | +0.6% | +0.6% | +3.9% |
| British Pound | 1.3021 | +0.6% | +1.5% | +1.2% |
| Canadian Dollar | 1.3196 | (0.0 %) | +1.3% | (1.1 %) |
| Australian Dollar | 0.7127 | +0.7% | +0.8% | +4.2% |
| Swiss Franc | 0.9078 | +0.2% | +1.9% | +9.6% |
| Israeli Shekel | 3.3938 | (0.2 %) | +2.3% | +4.1% |
| Bitcoin | 13,031 | +11.0% | +19.9% | +37.8% |
| Commodities | Current | WoW | MoM | YoY |
|---|---|---|---|---|
| Gold | 1,903 | (0.1 %) | +2.2% | +26.5% |
| Silver | 24 | (0.2 %) | +6.3% | +34.9% |
| Copper | 309 | +0.1% | +4.0% | +15.5% |
| Crude Oil | 39 | (5.6 %) | (4.2 %) | (32.0 %) |
Source: Bloomberg L.P.
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