Weekly Market Roundup
The U.S. Dollar continued to hold its bullish signal, making higher highs through the week as the trend that reversed the prior month's bearish regime extended further. The dollar's rise weighed on gold and other inverse-correlated assets. On the rates side, after bond yields reached new inflation cycle highs the week prior, the 10-year Treasury reversed course, rolling back toward the low end of its risk range and settling the week at 4.45%. The pattern of lower highs in the 10-year through the week is an early signal worth watching as a potential indicator of a yield peak.
Equities broadly advanced, with the Nasdaq leading at +2.39%, driven in meaningful part by artificial intelligence-oriented technology names that continued to outperform. International developed markets posted a strong +2.03% gain as well. The VIX fell to a four-month low of 15.30, with the volatility of volatility declining to its lowest level of the year. Positive gamma positioning continues to support a low-volatility environment, and the combination of falling realized volatility and compressed implied volatility reflects a market that is not pricing near-term disruption.
Oil confirmed a trend signal breakdown during the week, prompting a reduction in energy and commodity exposure in line with disciplined signal-based positioning. The broader reflation complex maintained its positioning, and secular growth themes continued to lead domestically as the rotation from cyclical to secular growth extended.
The most important release of the week is Friday's jobs report, delivering nonfarm payrolls, average hourly earnings, and the unemployment rate simultaneously. The labor market has remained resilient through an extended period of elevated rates, and Friday's print will provide a direct read on whether that holds. A strong payrolls number alongside elevated wage growth would reinforce the higher-for-longer rate environment. Earlier in the week, ISM Manufacturing on Monday and ISM Non-Manufacturing on Wednesday offer a broader read on economic activity, while JOLTS on Tuesday and ADP on Wednesday provide additional labor market context ahead of Friday's headline numbers.
The dollar's continued strength and the early signs of a yield peak in the 10-year Treasury are the two macro dynamics most worth watching as we move into June. A bond market that has stopped making new highs on yields, even while the dollar remains firm, would represent a meaningful shift in the backdrop, one that could benefit both equity duration and fixed income selectively. Energy's reduction from the long side reflects the discipline of signal-based positioning, not a broader concern about growth. The artificial intelligence theme continues to be the primary driver of equity market returns, and that conviction remains intact. Friday's jobs report carries the most near-term weight. A labor market that remains strong in the face of elevated rates keeps the current growth and inflation regime intact. The macro environment continues to reward patience and precision over broad cyclical bets.
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Sincerely,
President
SBC Investment Management
P: (602) 641-5996 · M: (319) 520-2033 · E: bandrus@sbcinvestmentmanagement.com
Investment Analyst, Junior Portfolio Manager
SBC Investment Management
P: (435) 775-2950 · M: (435) 590-8317 · E: jrehkop@sbcinvestmentmanagement.com