Weekly Market Commentary - July 14th, 2021

The Markets

There was a slowdown in financial markets last week as equity investors slowed to see what the bond market was up to. 

U.S. Treasury bonds rallied last week (Remember, bond prices are inversely related to yields, so when yields go down, prices go up). Yields on 10-year Treasuries dropped from 1.43 percent at the start of the week to 1.27 percent on Thursday. 10-year Government of Canada bonds also moved in the same direction, going from 1.30 percent on Monday down to a low of 1.17 percent on Thursday.  The rally was quite a surprise, as typically you’d see higher yields and lower prices with an economy that is growing and experiencing rising inflation.

As 10-year yields in both the U.S. and Canada reached the lowest level since February, stock investors took time to consider what might have caused yields to retreat. Lower yields often suggest slower growth ahead. There may be potential for global growth to slow if:

China’s banking system is in trouble. There was another surprise last week. “…China’s central bank announced a half a percentage point cut to banks’ reserve ratio requirements, potentially increasing the profitability of their loans but also stirring concerns about the health of their balance sheets following a debt-fueled property boom,” reported Naomi Rovnick, Thomas Hale, and Francesca Friday of Financial Times.

Economic growth falters as monetary and fiscal stimulus recede. “…the bond market is now adjusting to the prospect of more moderate growth in the second half, with reduced fiscal largess and, south of the border, no more $1,400 or $600 stimulus cheques. The market is now looking ahead to the eventual prospect of the U.S. Federal Reserve throttling back its securities purchases, which currently pump $120 billion a month into the financial system,” reported Barron’s.

Investors shook off the bond market’s signal and took advantage of buying opportunities created by the dip, reported Financial Times. Major U.S. stock indices finished the week at record highs. On Friday, yields bounced back somewhat, with 10-year U.S. Treasuries and Government of Canada bonds finishing the week at 1.36 percent and 1.23 percent yield respectively.

Source: Refinitiv

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When was the Euro 2020 Tournament played?

If you’re a soccer fan, you know the answer is last month. The tournament took place in 2021, although the name was not changed because the tournament was intended to celebrate the 60th anniversary of the European Football Championship, which occurred in 2020, reported Joe Sommerlad of The Independent. Also, the merchandise had already been produced with a 2020 logo.

The tournament final (England vs. Italy) had yet to be played when this was written, but it’s never too early for tournament trivia. See what you know about Euro 2020 by taking this brief quiz.

1. There were more ‘own goals’ in Euro 2020 than in all other European championships combined. How many were there before the final match?

1. a. 5
2. b. 6
3. c. 9
4. d. 11

2. What is the nickname of the Italian national team?

1. a. Il Nerazzurri (The Black and Blues)
2. b. Gli Azzurri (The Blues)
3. c. Le Rondinelle (The Little Swallows)
4. d. Il Toro (The Bull)

3. How many major tournaments had the English national team, nicknamed The Three Lions, won before the Euro 2020 final?

1. a. 1
2. b. 2
3. c. 3
4. d. 4

4. Euro 2020 prize money was about 10 percent higher than Euro 2016 prize money. Every team that participated in the tournament earned about £8 million (about $11 million). How much did the team that lifted the winning trophy earn?

1. a. About £12 million (about $17 million)
2. b. About £17 million (about $24 million)
3. c. About £24 million (about $33 million)
4. d. About £33 million (about $46 million)

The Economist explained the importance of European football like this, “On a continent where the facets of nationhood are disappearing, be they banal (customs arrangements), the everyday (currency) or the emotive (borders), football is a way of clinging on.”

Answers: (1) d; (2) b; (3) a; (4) c

Weekly Focus - Think About It

“Our reliance is in the love of liberty which God has planted in our bosoms. Our defense is in the preservation of the spirit which prizes liberty as the heritage of all men, in all lands, everywhere.”

–Abraham Lincoln, 16th President of the United States of America

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