Capital Markets Weekly Update - Leumi USA

Capital Markets Weekly Update

Macro Commentary:

By: Ariel Segal

The first Nonfarm payrolls decrease since April was reported last week on Friday. The restaurants and hospitality industry took on the majority of the job losses, while retail, construction/manufacturing, and professional services all posted solid gains.

After the payrolls report, President-elect Joe Biden called for trillions of dollars in immediate further support. Biden’s goals for this package include increasing direct payments to $2,000 and support for state and local authorities.

House Speaker Nancy Pelosi said that the House would take up a resolution to impeach Trump unless VP Mike Pence would remove Trump from office through the use of the 25th Amendment. However, a trial would delay Biden’s agenda as he takes office.

There has been an average of about 255k new cases per day of Covid-19 in the U.S during the past week. Pfizer and BioNTech raised their vaccine production target to 2 billion shots this year. The previous 2021 target was 1.3 billion doses. There have been more than 25 million shots given worldwide thus far.

Fixed Income Market:

By Joseph Colleran

After taking a week off for the holidays, the bond credit markets have resumed tightening.  IG spreads have tightened by an average of 5 basis points versus USTs and HY levels are about a point higher in price.   This is in line with the overall “risk on” trade that has been embraced by almost all asset classes in the wake of the Democrat’s sweep of the Georgia Senate runoff races. This is a broad based rally as volumes in both HG and HY have jumped from the anemic levels we saw over the holidays.   Specific to LISI retail clients, we are also seeing continued strong interest in new issue Structured Notes – that interest has been equally split between single name equities and index linked securities.  In municipal bonds we are not seeing much retail participation; however, those spreads are also grinding tighter.

   Lipper Fund flow data for the week showed:    

      Domestic Equity Funds    down    $4.9.0 BLN

      IG Bond Funds                     up       $5.3 BLN

      HY Bond Funds                   down $0.2BLN

      Municipal Bond Funds        up      $0.9 BLN  

Prior Week:

      Domestic Equity Funds    down    $2.0 BLN

      IG Bond Funds                     up       $5.9 BLN

      HY Bond Funds                     up       $1.7 BLN

      Municipal Bond Funds        up      $1.5 BLN

U.S Equities:

By: James Zurovchak

Markets started the year off with solid gains for the first week.  All three major indices finished in the green with NASDAQ up 2.5%, S&P up 1.9% and DJI gaining 1.7%.   The move was fairly broad with 8 of 11 GICS sectors up on the week.  Energy was again the leader with a gain 9.3%.  Materials (+5.7%), Technology (+5.5%), Consumer Discretionary (+5.0%) and Financials (+4.9%) outperformed as well. Real Estate (-2.5%), Consumer Staples (-0.8%) and Utilities (-0.6%) were the worst performers.  Last week Value Outpaced Growth +2.9% vs +1.2%.  Small Caps continued their march higher, up +5.9% on the week.    The action in the markets was driven mostly by the GA senate races going to the Democrats giving them a majority in the Senate.   Consensus seems to be that the result is more stimulus and higher inflation causing a steepening of the yield curve and a quicker economic recovery.   It remains to be seen whether this is a short move up in energy and financials or whether a more pronounced rotation into these sectors will occur.

Foreign Exchange:

By Anthony Minardo

Has the weak dollar trend finally run out of steam?  Is this the start of a major reversal in the dollar?  These are the questions the markets are asking themselves as we begin the second week of trading in 2021.  The market continues to digest an abundance of market news which has temporarily boosted the US dollar.  The possibility of another round of meaningful stimulus is likely after the democrats claimed victory in the Georgia state runoffs. This could very well ignite inflation and growth and allow the Fed to come into the picture sooner than later. We are seeing a reaction to this scenario through the 10-year treasury, as it has now pushed through 1%.  The current dollar strength could be a correction, as we have been trending lower for 9 months, or will it be the start of the new 2021 trend.  We will have to wait and see.  Have a great week trading.

Financial Planning:

By Brian Stigliano

Estate Planning Strategies

With the Georgia runoff elections resulting in Democrats holding two more Senate seats, there is a much clearer path to significant estate tax changes for high-net-worth and ultra-high-net-worth families.  Therefore, it may be a great time to take advantage of low interest rates, volatile markets, and a high federal estate tax exemption to more efficiently transfer wealth to future generations. A few common strategies to consider are below, but best practice is to engage with a CFP® professional and an estate planning attorney.

Use of irrevocable trusts:

  • Grantor Retained Annuity Trust – used to gift an asset to the trust but maintain an income stream from it
  • Intentionally Defective Grantor Trust – used to freeze the value of certain assets to potentially reduce the size of an estate
  • Qualified Personal Residence Trust – used to remove the value of a residence from an estate while maintaining use of the residence
  • Charitable Remainder Trust – used to gift an asset to a charity but maintain an income stream from it
  • Irrevocable Life Insurance Trust – used to remove the death benefit proceeds from the value of an estate

You can create a Family Limited Partnership (FLP) to maintain control of the business interests

You can gift $15,000 per year to as many people as you like without paying a gift tax or using your lifetime exclusion

You can pay an unlimited amount of one’s education or medical expense in any given year as long as the institution is paid directly.

Last Week's Economic Data for 11/11

Last Week's Economic DataActualSurvey
ADP Employment Change-123k75k
Factory Orders1.0%0.7%
Durable Goods Orders1.0%0.9%
Initial Jobless Claims787k800k
Trade Balance-$68.1b-$67.3b
Change in Nonfarm Payrolls-140k50k
Unemployment Rate6.7%6.8%
Wholesale Inventories MoM0.0%-0.1%

This Week's Economic Data for 1/11

This Week's Economic DataRelease DateSurvey
CPI MoM1/13/210.4%
Initial Jobless Claims1/14/21790k
PPI Final Demand MoM1/15/210.4%
Retail Sales Advance MoM1/15/210.0%

Market Data for 1/11

Interest RatesCurrentWoWMoMYoY
1 Month Libor0.13%(1.4 bp)(3.3 bp)(155.1 bp)
3 Month Libor0.22%(1.3 bp)+0.8 bp(161.3 bp)
6 Month Libor0.25%(0.6 bp)+0.2 bp(162.2 bp)
12 Month Libor0.33%(1.4 bp)(0.9 bp)(164.0 bp)
Fed Funds Effective0.09%(146.0 bp)
SOFR0.09%+0.0 bp+2.0 bp(146.0 bp)

US Treasury YieldsCurrentWoWMoMYoY
12-Month0.10%+0.3 bp+1.8 bp(142.0 bp)
2-Year0.14%+3.2 bp+3.0 bp(142.5 bp)
3-Year0.22%+6.7 bp+5.0 bp(135.9 bp)
5-Year0.51%+15.6 bp+14.0 bp(112.6 bp)
7-Year0.84%+21.1 bp+21.5 bp(89.8 bp)
10-Year1.15%+3.2 bp+3.0 bp(142.5 bp)
30-Year1.88%+3.2 bp+3.0 bp(142.5 bp)

US Swap Rates vs 3MLCurrentWoWMoMYoY
12-Month0.20%+1.1 bp+1.3 bp(153.3 bp)
2-Year0.22%+2.5 bp+2.2 bp(142.5 bp)
3-Year0.30%+5.7 bp+5.8 bp(132.4 bp)
5-Year0.58%+13.6 bp+15.6 bp(106.8 bp)
7-Year0.85%+17.9 bp+21.8 bp(84.7 bp)
10-Year1.15%+20.0 bp+25.4 bp(64.2 bp)
30-Year1.63%+17.9 bp+26.8 bp(35.7 bp)

US Swap SpreadsCurrentWoWMoMYoY
12-Month+10 bp+0.8 bp(0.4 bp)(11.3 bp)
2-Year+7 bp(0.7 bp)(0.8 bp)
3-Year+7 bp(1.0 bp)+0.8 bp+3.4 bp
5-Year+7 bp(2.0 bp)+1.6 bp+5.8 bp
7-Year+1 bp(3.2 bp)+0.3 bp+5.1 bp
10-Year+1 bp+16.8 bp+22.4 bp+78.3 bp
30-Year(26 bp)+14.7 bp+23.8 bp+106.8 bp

Equity MarketsCurrentWoWMoMYoY
Dow Jones 31,009 (0.3 %)+3.2%+7.6%
S&P 500 3,800 (0.7 %)+3.7%+16.4%
NASDAQ 13,036 (1.3 %)+5.3%+42.0%

CurrenciesCurrentWoWMoMYoY
Euro1.2151(1.2 %)+0.1%+9.1%
Japanese Yen104.2300(1.4 %)(0.2 %)+5.5%
British Pound1.3513(0.8 %)+1.4%+4.0%
Canadian Dollar1.2784(0.9 %)(0.2 %)+2.1%
Australian Dollar0.7697(0.8 %)+2.2%+11.5%
Swiss Franc0.8906(1.4 %)(0.4 %)+9.0%
Israeli Shekel3.1721+1.3%+2.7%+9.2%
Bitcoin 33,853 +0.2%+76.3%+316.3%

CommoditiesCurrentWoWMoMYoY
Gold 1,843 (5.5 %)+0.2%+18.0%
Silver25(9.6 %)+4.0%+37.5%
Copper356+0.0%+0.9%+26.4%
Crude Oil52+9.6%+12.0%(11.6 %)

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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