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Archive for June, 2016

Weekly Market Update – June 24, 2016

The Dow finished 611 points lower on Friday as the market reacted to the “Brexit”, Britain’s vote to leave the European Union. For the week the Dow was down 1.56% and year-to-date the index is flat.

The Brexit referendum is this week’s focus. Britain’s surprise vote to leave European Union on Friday triggered significant volatilities, which drove the world’s equity market down and sent investors to gold and government bonds. The long-term concerns involve a potential disintegration of European Union which can increase inflation pressure as a result of renewed large government deficits and currency depreciation. Anti-EU politicians from Italy, France, and the Netherlands already have called for referendums. This continued economic uncertainty will keep global investment weak and slow overall growth, detrimental to equities but generally beneficial to fixed-income and safe-haven investment. This year, we have reduced our portfolio’s European exposure by 50% before the Brexit vote. The preferred securities in our portfolio held up very well today, only down 0.4% vs. 0.7% decline for the US Preferred stock index PFF. The U.S. 10 Year Treasury yield dropped by 17 bps to 1.57%.

Domestic economic data were mixed this week. Existing home sales increased 1.8% in the last month to 5,530,000 for the third straight monthly increase, but new home sales declined 6% to 551,000. Weekly jobless claims came in better than expected at 259,000, and Markit’s flash manufacturing Purchasing Manager Index rose to a three-month high of 51.4, indicating faster growth of new orders and stronger employment. Crude oil was down 5% on Friday. The Federal Reserve Chairwoman Yellen reiterated the Fed’s cautious stance on data-dependent interest rate hikes, citing uncertainties on economic growth outlook.

Next week’s economic calendar highlights include third estimate of Q1 GDP and June Consumer Confidence (June 28th), Crude Inventories (June 29th), Initial Jobless Claims (June 30th), and Auto and Truck Sales (July 1st). We expect less volatility and maybe a rebound next week.

Have a great weekend,

Yansong Pang (庞岩松)

Weekly Market Update – June 17, 2016

The Dow finished 58 points lower on Friday as the market focused on uncertainties surrounding the upcoming U.K. referendum on whether to remain in the European Union. For the week, the Dow was down 1.1% and year-to-date the index is up 1.4%.

The uncertainty surrounding the U.K. exiting the European Union, or “Brexit”, was the main driver of market volatility in the past week. The latest polls showed the “Leave” camp is in the lead. The UK’s Chancellor of the Exchequer warned that leaving the European Union could lead to reduced trade and investment, which would need to be compensated for by increased taxes or cuts to services. The vote is to take place next Thursday, June 23rd. However, the murder of British Labour Party Member of Parliament Jo Cox on Thursday could delay the referendum. Markets should remain volatile in the coming week in anticipation of the vote.

The Federal Reserve kept interest rates unchanged on Tuesday and reiterated future interest rate hikes’ dependence on inflation and other economic data. The Fed expects a stronger labor market, healthier household spending, and less negative impacts from net exports, but also noted “Brexit” uncertainties and productivity headwinds. Following the news, the 10-year Treasury yield dropped to 1.59%, the lowest level since December 2012. This interest rate weakness was favorable for our fixed income strategy.

Other economic data were mixed: May headline CPI inflation increased 0.2%, below consensus of 0.3%. Initial jobless claims were 277,000, continuing the long streak of readings below 300,000 despite the weak May payrolls report. Crude rallied to $48.09 as the dollar weakened and inventory data improved.

Next week’s economic calendar highlights include Initial Jobless Claims and New Home Sales (June 23rd), and Durable Orders Report (June 24th). The referendum on Britain exiting the European Union will be held on June 23rd.

Have a good weekend,

Natalie Do

Weekly Market Update – June 10, 2016

The Dow finished 120 points lower on Friday reflecting a more conservative sentiment as global bond yields declined further and concerns about low growth and inflation persisted. However, for the week the Dow was still up 0.3% and year-to-date the index is up 2.5%.

The economic calendar was fairly quiet during the week, with the bulk of released data being positive. Q1 productivity rose 0.7% from last year, in line with expectations, while Q1 unit labor cost and hourly compensation both accelerated from last quarter and beat estimates. Initial jobless claims fell to 264,000, job openings rate rose to a new post-recession high, and quits rate dropped to 2%, suggesting a continued strong market and alleviating concerns from last Friday’s disappointing May jobs report.

On Monday, the Federal Reserve Chairwoman Yellen gave no interest rate hike timing signal but remained optimistic about the economy and reaffirmed expectations of gradual rate increases. The Federal Reserve will hold its June meeting next week. For the week, 10-year Treasury interest rates declined 0.5% due to a lowered possibility of a June rate hike; however, the US Preferred stock index PFF failed to reflect the same trend, ending 0.5% lower.

Crude oil is up 0.7% for the week to $49, fueled by further supply disruptions. However, as current prices make drilling economical for some firms, the Friday U.S. rig count showed a small second week of increase. The strong dollar remained another headwind for crude oil prices.

Next week’s economic calendar highlights include Retail Sales Data (June 14th), the Fed Interest Rate Decision (June 15th), and Core CPI and Initial Jobless Claims (June 16th).

Have a good weekend,

Natalie Do

Weekly Market Update – June 3, 2016

The Dow finished 32 points lower on Friday after a disappointing May nonfarm payrolls report. For the week the Dow was largely unchanged and year-to-date the index is up 2.2%.

May nonfarm payrolls recorded a surprisingly low increase of 38,000 jobs on Friday, compared to the consensus expectation of 160,000.  The data recorded the poorest job creation level in five years, even though a strike at Verizon helped explain some of the weakness. Due to the soft jobs report and renewed concerns about England’s vote to stay in or leave the European Union, the Fed might delay its interest rate hike until at least the July meeting. Accordingly, 10 year Treasury bonds rallied, rising by 1.3% for the week. The US Preferred index PFF rose .4% for the week in reaction to the news. However, contrasting economic data throughout the week still portrayed a healthy economy: unemployment rate fell to a new low of 4.7%, April consumer spending rose the fastest since August 2009, and May’s manufacturing index marked a third month of expansion after five months’ consecutive contractions.

Crude oil was down 1.1% for the week, reaching $48.83 after OPEC failed to implement a production ceiling on Thursday. Iran was a key opponent, rejecting any cap on production, while Saudi Arabia’s oil minister was optimistic that oil prices would continue to recover. US inventory data showed an unexpected decline on Thursday, partially offsetting the negative headlines from the OPEC meeting.

Next week’s economic calendar highlights include productivity and unit labor costs (June 7), jobless claims (June 9) and wholesale inventories (June 9). The Fed meeting is June 14 & 15.

Have a good weekend,

Natalie Do

 

Ulland Investment Advisors

4550 IDS Center · Eighty South Eighth Street · Minneapolis MN 55402 · Telephone: 612-312-1400 · Facsimile: 612-204-3464