Capital Markets Weekly Update - Leumi USA

Capital Markets Weekly Update

Things That Make You Go Hmmm…

By: George Boyan

Leumi USA Capital Markets is ready and able to facilitate any client transactions ahead of Election Day, but the most likely scenario is that we will not know the outcome for several more days.  The Supreme Court of the United States has granted several states, including the swing state of Pennsylvania, additional time to count mail-in ballots.  There is now no question that additional stimulus will wait until after the election, and the side who wins the Presidency will likely also dictate the terms of that deal as well.  Until then, its business as usual—watching the evolution of the coronavirus disease and final polling projections.

Macro Commentary:

By: Ariel Segal

GDP surged a record annualized rate of 33.1% in the third quarter, as reported on Thursday last week. Personal consumption was the most significant factor to growth, increasing by over 25%. Most of the gains in the economy were achieved at the beginning of Q3.

New and existing home sales combined have reached levels not seen since 2006. Record-low mortgage rates and desire for more space in the suburbs initiated a housing boom this year.

Tomorrow is election day and although the Presidential race is the headliner, whether the democrats take control of the Senate or not will be an important factor in determining the nature and size of the stimulus bill that will eventually be passed. Republicans are defending 23 of 35 Senate seats. If Biden was to win, democrats would need a net gain of 3 seats to secure Congress and the presidency as Kamala Harris would be the one to break 50-50 ties.

Fixed Income Market:

By: Joseph Colleran

In front of tomorrow’s elections, the corporate market remains in “risk off” mode as spreads widened for the third consecutive week.   Investment Grade spreads were out another 5 basis points and are now at their widest spreads to USTs since early July.  Meanwhile, HY spreads were wider by 30 bps as HY funds mirrored the selloff in equities and saw $3.3 BLN in outflows on the week overall trade volumes remain light as many investors have stepped to the sidelines in front of the election.

   Lipper Fund flow data for the week showed:    

      Domestic Equity Funds    down    $5.1 BLN

      IG Bond Funds                     up       $3.3 BLN

      HY Bond Funds                  down   $2.5 BLN

      Municipal Bond Funds        up      $0.54 BLN

      MMKT Funds                      down   $6.4 BLN

  Prior Week:

    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

U.S Equities:

By: James Zurovchak

Last week the markets suffered their biggest weekly loss since the Covid-Crash back in March.  DJI led the way lower, down 6.47%, with S&P and NASDAQ down 5.62% and 5.5% respectively.   Among the reasons for the selloff is the resurgence of Covid-19 causing Great Britain to lockdown and Europe to consider the same.  In the US, New York has instituted testing and quarantine restrictions for those entering from out of the tri-state area.   Other pundits point to a risk off mentality as we head to election day.  While still others point to a continued pullback from the early September all-time high.   Whatever the reason, fear and uncertainty may be creeping back into the market as evidenced by the VIX briefly hitting 40.  No surprise then that all 11 GICS sectors were down substantially with Consumer Discretionary (-6.55%) and Industrials (-6.53%) leading the way lower and Utilities declining the least at   -3.66%.    Neither Value nor Growth was a place to hide as they were down 5.48% and 5.6% respectively.   This week the three main areas of focus will continue to be the Covid resurgence, the economic recovery and the US elections, not necessarily in that order.   The phrase used the most entering the week will likely be “Buckle Up”.

Foreign Exchange:

By: Anthony Minardo

The trading week begins with an increase in volatility and a reduction of risk with the US election just one day away, and increasing COVID-19 cases in Europe and the U.S.

The U.K. has become the latest European country to announce a nationwide lockdown to Join Germany and France. The FOMC will meet on Thursday for their November policy meeting where we expect rates to remain unchanged.  We will closely monitor the language of the Fed as the delay in a fiscal stimulus plan and increasing cases of COVID may bring a dovish tone to the meeting and hint additional easing in the near future.  Major data releases this week consist of unemployment (7.9% exp.) and non-farm payrolls (+775k exp. Oil begins the week down -1.5% trading at $35.30.  Large layoffs by Boeing and decreasing travel due to the virus continue to hinder traveling and the recent oil rally.

Financial Planning:

By: Brian Stigliano

Using a 529 Plan for Qualified Education Expenses

529 Plans are investment accounts that allow one’s money to grow tax-free if the proceeds are used for post-secondary (i.e. – college level and above) qualified education expenses including tuition, room and board, books, technology, etc.  As of 2018, the plans can also be used to pay for up to $10,000 per year in elementary or high school tuition expenses. 

Account owners can withdraw money from the plans at any time, but if the proceeds are not used for qualified education expenses then the investment gains will be subject to taxes and a 10% penalty.  If a child receives a scholarship, the 10% penalty would be waived up to the amount of the scholarship; however, taxes would still apply.  Unused balances can also be transferred to eligible family members (i.e. – siblings, cousins, nieces and nephews).

Lastly, 529 Plans are state run, but one is not required to use a plan in his or her home state.  Likewise, the balances can be used for expenses at a college in a separate state.  Some plans offer state income tax deductions, so it’s best to check with one’s tax advisor for guidance.  

Last Week's Economic Data for 11/2

Last Week's Economic DataActualSurvey
Durable Goods Orders1.9%0.5%
Wholesale Inventories MoM-0.1%0.4%
Initial Jobless Claims751k775k
GDP Annualized QoQ33.1%31.9%
Personal Income0.9%0.3%

This Week's Economic Data for 11/2

This Week's Economic DataRelease DateSurvey
Factory Orders11/03/201.0%
Durable Goods Orders11/03/201.9%
Initial Jobless Claims11/05/20735k
FOMC Rate Decision (Upper Bound)11/05/200.25%
Change in Nonfarm Payrolls11/06/20600k
Unemployment Rate11/06/207.6%

Market Data for 11/2

Interest RatesCurrentWoWMoMYoY
1 Month Libor0.14%(1.1 bp)+0.1 bp(163.4 bp)
3 Month Libor0.22%(0.2 bp)(1.3 bp)(167.0 bp)
6 Month Libor0.25%(0.0 bp)+0.1 bp(165.6 bp)
12 Month Libor0.33%+0.0 bp(2.5 bp)(159.3 bp)
Fed Funds Effective0.09%(173.0 bp)
SOFR0.09%+0.0 bp+1.0 bp(173.0 bp)

US Treasury YieldsCurrentWoWMoMYoY
12-Month0.12%(0.3 bp)+0.5 bp(140.1 bp)
2-Year0.15%+0.5 bp+2.6 bp(139.8 bp)
3-Year0.19%+0.3 bp+2.9 bp(135.0 bp)
5-Year0.37%+2.2 bp+8.7 bp(116.9 bp)
7-Year0.62%+4.8 bp+13.7 bp(100.9 bp)
10-Year0.84%+0.5 bp+2.6 bp(139.8 bp)
30-Year1.62%+0.5 bp+2.6 bp(139.8 bp)

US Swap Rates vs 3MLCurrentWoWMoMYoY
12-Month0.21%(0.4 bp)(0.7 bp)(153.5 bp)
2-Year0.24%(0.1 bp)+1.5 bp(139.7 bp)
3-Year0.28%+0.1 bp+3.2 bp(131.6 bp)
5-Year0.43%+1.0 bp+7.4 bp(114.2 bp)
7-Year0.62%+2.1 bp+10.9 bp(99.1 bp)
10-Year0.86%+2.5 bp+13.1 bp(84.3 bp)
30-Year1.26%+0.8 bp+13.5 bp(62.0 bp)

US Swap SpreadsCurrentWoWMoMYoY
12-Month+9 bp(0.1 bp)(1.2 bp)(13.3 bp)
2-Year+8 bp(0.6 bp)(1.0 bp)+0.0 bp
3-Year+8 bp(0.3 bp)+0.3 bp+3.4 bp
5-Year+6 bp(1.3 bp)(1.4 bp)+2.8 bp
7-Year+0 bp(2.7 bp)(2.8 bp)+1.8 bp
10-Year+1 bp+1.9 bp+10.5 bp+55.5 bp
30-Year(36 bp)+0.3 bp+10.9 bp+77.7 bp

Equity MarketsCurrentWoWMoMYoY
Dow Jones 26,835 +1.3%(3.1 %)(1.9 %)
S&P 500 3,299 +0.9%(1.5 %)+7.6%
NASDAQ 10,904 (0.1 %)(1.5 %)+30.0%

CurrenciesCurrentWoWMoMYoY
Euro1.1626(1.6 %)(0.8 %)+4.5%
Japanese Yen104.8600(0.0 %)+0.4%+3.5%
British Pound1.2903(0.9 %)(0.2 %)+0.1%
Canadian Dollar1.3256(0.3 %)+0.4%(0.8 %)
Australian Dollar0.7040(1.2 %)(1.7 %)+2.3%
Swiss Franc0.9204(1.4 %)+0.0%+7.3%
Israeli Shekel3.4106(0.5 %)+0.7%+3.0%
Bitcoin 13,511 +3.8%+28.1%+43.1%

CommoditiesCurrentWoWMoMYoY
Gold 1,893 (0.5 %)(0.4 %)+25.0%
Silver24(1.0 %)+1.3%+32.6%
Copper307(0.6 %)+3.2%+15.8%
Crude Oil37(5.3 %)(1.4 %)(35.0 %)

Source: Bloomberg L.P.    

IMPORTANT DISCLOSURES
The opinions voiced in this material, including without limitation the statistic information herein, are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. The economic or market analyses or forecasts in this material reflect the views of the individuals who prepared them and do not necessarily represent the position of Bank Leumi USA, Leumi Investment Services Inc. or of other units of the worldwide Leumi Group. The analyses and forecasts should not be construed as a recommendation to buy or sell, or the solicitation of an offer to buy or sell any securities, currencies, or financial instruments.

Bank Leumi USA, other units of the Leumi Group, or the individuals that prepared the analyses or forecasts may have positions in securities, currencies, or financial instruments that may be affected by action that is consistent with the analyses or forecasts. Any economic forecasts set forth in the presentation may not develop as predicted. The material is based in part on information from third-party sources that we believe to be reliable but which have not been independently verified by us, and for this reason we do not represent that the information is accurate or complete, and no liability is assumed for any direct or consequential losses arising from their use. Except where otherwise indicated herein, the information in this material is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available.

Investing involves risk. Past performance is not a guarantee or a reliable indicator of future results. You should obtain relevant and specific professional advice before making any investment decision. All investors must carefully consider the risks, charges, fees, and expenses, review the prospectus or other offering information if applicable, and consider their personal financial situation and tolerance for risk before making any investment.

Bank Leumi USA is an FDIC Insured, New York State chartered bank. In the U.S., banking products and services are provided through Bank Leumi USA and brokerage products and services are provided by Leumi Investment Services Inc. Leumi Investment Services Inc. is a member of FINRA (www.finra.org) and SIPC (www.sipc.org), and is a wholly-owned subsidiary of Bank Leumi USA.  Certain products and services are not available to U.S. residents and/or are offered through third party providers.

Non-deposit investment products offered through Bank Leumi USA and Leumi Investment Services Inc. are:

•             Not insured by the FDIC or any other federal or government entity

•             Not guaranteed by Bank Leumi USA, Bank Leumi le-Israel, B.M., or any other bank

•             Subject to investment risks, including possible loss of the principal amount invested

© 2019 Bank Leumi USA. Leumi, Leumi Investment Services Inc., and Bank Leumi USA are registered trademarks of Bank Leumi USA. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities.


Ariel Segal | Treasury Analyst
350 Madison Avenue, 4th floor | New York, NY 10017
Tel: 212.626.1199 | ariel.segal@leumiusa.com  

IMPORTANT DISCLOSURES

The opinions voiced in this material, including without limitation the statistic information herein, are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. The economic or market analyses or forecasts in this material reflect the views of the individuals who prepared them and do not necessarily represent the position of Bank Leumi USA, Leumi Investment Services Inc. or of other units of the worldwide Leumi Group. The analyses and forecasts should not be construed as a recommendation to buy or sell, or the solicitation of an offer to buy or sell any securities, currencies, or financial instruments.

Bank Leumi USA, other units of the Leumi Group, or the individuals that prepared the analyses or forecasts may have positions in securities, currencies, or financial instruments that may be affected by action that is consistent with the analyses or forecasts. Any economic forecasts set forth in the presentation may not develop as predicted. The material is based in part on information from third-party sources that we believe to be reliable but which have not been independently verified by us, and for this reason we do not represent that the information is accurate or complete, and no liability is assumed for any direct or consequential losses arising from their use. Except where otherwise indicated herein, the information in this material is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available.

Investing involves risk. Past performance is not a guarantee or a reliable indicator of future results. You should obtain relevant and specific professional advice before making any investment decision. All investors must carefully consider the risks, charges, fees, and expenses, review the prospectus or other offering information if applicable, and consider their personal financial situation and tolerance for risk before making any investment.

Bank Leumi USA is an FDIC Insured, New York State chartered bank. In the U.S., banking products and services are provided through Bank Leumi USA and brokerage products and services are provided by Leumi Investment Services Inc. Leumi Investment Services Inc. is a member of FINRA (www.finra.org) and SIPC (www.sipc.org), and is a wholly-owned subsidiary of Bank Leumi USA. Certain products and services are not available to U.S. residents and/or are offered through third party providers.

Non-deposit investment products offered through Bank Leumi USA and Leumi Investment Services Inc. are:

• Not insured by the FDIC or any other federal or government entity

• Not guaranteed by Bank Leumi USA, Bank Leumi le-Israel, B.M., or any other bank

• Subject to investment risks, including possible loss of the principal amount invested

© 2019 Bank Leumi USA. Leumi, Leumi Investment Services Inc., and Bank Leumi USA are registered trademarks of Bank Leumi USA. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities.

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