Weekly Market Roundup
The week brought a sharp divergence in market performance. The Nasdaq fell -4.36% as large-cap technology names sold off broadly, while the Dow Jones gained +1.18% and the Russell 2000 added +0.95%. Bonds had a strong week as well, with the Bloomberg U.S. Aggregate gaining +0.40% and long-end Treasury yields moving lower. The rotation from growth and technology into defensive sectors and fixed income was the defining theme of the week.
The bond market's message was clear. Long-end yields continued to fall, with the 10-year and 30-year both declining as the market builds a case that the cycle high for inflation is in. The yield curve flattened as the long end led the move lower rather than the short end, which is a meaningful distinction. It tells us the bond market is pricing in decelerating inflation, not an imminent Fed rate cut. Crude oil extended its significant decline from spring highs, reinforcing the developing disinflation picture.
The VIX closed at 18.41, still within the lower-volatility investable range but notably higher than recent weeks. Options market positioning currently suggests that sharp moves in either direction could be amplified rather than cushioned in the near term, so we are watching that level closely.
Thursday is the most important day of the week. The June nonfarm payrolls report, unemployment rate, average hourly earnings, and initial jobless claims all land on the same morning. It is also worth noting that markets close Friday for Independence Day, which means Thursday's jobs data will be the last major print before the holiday weekend and will carry extra weight. ADP employment and ISM manufacturing PMI on Wednesday offer a preview of labor market conditions heading into the report. Tuesday brings JOLTS job openings and CB Consumer Confidence for a read on labor demand and the health of the consumer.
The rotation we saw last week is worth paying attention to. When technology and growth names sell off as defensive sectors and bonds rally together, it is typically a signal that investors are repositioning for a more cautious macro environment. We have been writing about this shift for several weeks now, gradually adding to Healthcare, Real Estate, and long-term Treasuries as the data pointed toward a more defensive posture heading into the second half of the year. Last week's price action is consistent with that view. Thursday's jobs report will be the next key data point, and how the market responds heading into a holiday weekend will tell us something about near-term conviction. We remain disciplined and continue to monitor the data closely as we move into July.
If you have any questions about the above, please reach out to us to set up a one-to-one meeting so we can review your situation.
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