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After Wild Ride Last Week, Equities Sink on Oil Shock

Last week, global equities ended roughly flat at 0.5% (MXWD) — the smallest week-over-week return since the start of 2020. It sure didn’t feel that way though, with 2-week volatility now in the 50s for the S&P 500 versus mid-single digits at the start of the year. The VIX at 42, Friday’s closing level, seems cheap! Emerging equities (MXEF) led, while International Developed markets (MXEA) trailed, though all three major geographies had roughly the same weekly return. Chinese equities continued their run, up 5.0% last week, but as of Monday’s opening were no longer positive on the year.

Change in 10-Year yield by trading session

The number of the week? 68 bps is the cumulative change in the 10yr U.S. Treasury yield over the past 10 trading days, or since the close of trading on February 21st. During this time, we noticed a pattern: Yields tended to fall during non-U.S. market hours and were flat-to-up during U.S. market hours. In the overnight sessions during this 10-day period, yields fell 73 basis points (bps) and actually rose 5 bps during U.S. hours. As of this writing, it’s worth noting that the 10yr yield fell another 36 bps overnight.

Equities Plummet Amid Whippy Trading as Fed Rate Cut Near Certain

The Big Number: 100% Odds of Fed Rate Cut

100% — that’s the probability of an interest rate cut at the next scheduled Federal Reserve Open Market Committee Meeting on March 17-18, 2019, according to the current market implied rates in Fed Funds futures. As of the close on Friday, there were 1.5 cuts priced into that meeting (about 35 basis points).