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Archive for March, 2018

Weekly Market Update for March 29, 2018

by JM Hanley

The Dow was up on Thursday, rising 255 points to close at 24,103. For the week, the Dow rose 2.4% (SP500 +2.0%) and year-to-date is now off 2.6% (SP500 -1.2%). The yield on the 10-year Treasury, an important interest-rate indicator, fell five basis points, closing at 2.78%.  Stock-market volatility may be driving the risk-averse towards the relative safety of US government bonds. That would depress yields.

It was an odd week.  After last week’s sharp downturn, major indexes swung back and forth, yet there was little news of substance. Word that the US and China were negotiating on trade issues soothed fears of a trade war between the world’s largest economies.  However, concern persisted that more regulation is in the cards for big tech companies.  Facebook’s stock actually recovered some of the ground it lost last week.  Instead, it was Amazon who suffered most from bad headlines.  Comments from the White House suggested heightened scrutiny of the ecommerce giant’s taxes and market share.

The jury is still out on whether more cumbersome tech regulations will materialize. Yet the largest tech companies are quite big; alone, they make up 11% of the SP500. Volatility in the sector has an outsized impact on the market.

The economy remains in (apparently) robust health. Economists now estimate that it grew nearly 3% in the fourth quarter.  Personal incomes are up. Consumers report feeling better about the economy than they have since 2004. As a result, they’re spending more – 0.2% more this month, specifically – and inflation is on the rise. The PCE, the Fed’s favorite inflation indicator, has reached a twelve-month high.

The price of crude oil fell 1% this week to $65 a barrel – up 7% YTD. US crude stockpiles showed a smaller-than-feared build this week – of 1.6m barrels – while product inventories of gasoline (-3.5m bls) and diesel (-2.1m bls) saw large draws. Saudi Arabia suggests that the Aramco IPO is once again slated for later in 2018, while OPEC members are looking to keep their output deal in place through year end. A rise in geopolitical risk (i.e. Iran) is also increasingly being priced in to oil lately.

E&P performance was a bit bifurcated this week following announcement of the largest upstream M&A transaction since 2012.  In the Permian, Concho Resources (a larger-cap) proposed to buy RSP Permian (a small/mid-cap) in an all-stock transaction.  This pressured our large-cap positions (APC & DVN) while boosting our small-cap position (CPE) as investors speculated more industry transactions would follow.

The market, and our offices, will be closed tomorrow in observance of Good Friday.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss.

Weekly Market Update for March 23, 2018

by JM Hanley

The Dow was down on Friday, falling 425 points to close at 23,533. For the week, the Dow fell 5.7% (SP500 -6.0%) and year-to-date is now off 4.8% (SP500 -3.2%). The yield on the 10-year Treasury, an important interest-rate indicator, rose one basis point, closing at 2.83%.

From investors’ perspective, this week’s Federal Reserve meeting could have gone worse. The Fed did raise interest rates by a quarter of a percentage point. But the central bank left unchanged its projection to raise rates just twice more in 2018. An additional rate hike is instead forecast to come next year. The Fed also noted that the economy’s momentum had slowed. On the other hand, the Fed expects the already-tight labor market will keep adding jobs. Inflation could quicken. If one Fed “dove” were to change his mind, the Committee could probably pass a fourth rate-rise this year.

Washington policymakers weighed on markets this week.  The Administration introduced tariffs on sixty billion dollars’ worth of technology, aerospace, and machinery imports from China. Separately, China’s Commerce Ministry responded to America’s previously-announced tariffs on steel with duties on a relatively modest three billion dollars in US imports. While America has adopted a more aggressive posture towards China, analysts doubt that a broad trade war will ensue. The government has exempted the European Union and major Asian and Latin American economies from its new trade duties. US negotiators revising the North American Free Trade Agreement have also proven accommodating.

Concerns about Facebook preoccupied the market this week. The New York Times reported last Sunday that the social networking site had given data firm Cambridge Analytica information on fifty million users without their permission. Intense media scrutiny and criticism in Congress again stirred worries that Facebook and its big tech peers will soon contend with more aggressive regulation. Shares of the company fell fourteen percent this week. Yet Facebook’s advertising customers (the source of its revenues) are unlikely to leave, and the company continues to develop lucrative ways to target users.

Sales of existing homes rose in February, ending a two-month decline. The supply of homes for sale remains low, and prices continue to climb. Orders of durable goods, an important indicator of economic growth, outpaced expectations last month. Finally, the Markit PMI survey of business owners found that manufacturing remains strong, offset by weakness in the service sector.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss.

Weekly Market Update for March 16, 2018

by JM Hanley

The Dow was up on Friday, rising 73 points to close at 24,946. For the week, the Dow fell 1.5% (SP500 -1.2%) and year-to-date is now up 0.9% (SP500 +2.9%). Healthcare providers, tech firms, and energy companies performed relatively well. Banks and industrial firms did poorly. The yield on the 10-year Treasury, an important interest-rate indicator, fell five basis points, closing at 2.82%.

Economic indicators proved mostly positive this week. Inflation accelerated in January, and investors were concerned that the trend would continue.  But prices rose only 0.2% last month. Middling inflation likely won’t dissuade members of the Federal Reserve from raising interest rates at their meeting next week. Meanwhile, retailers’ woes continue.  Sales in February fell for the third straight month. Construction of new houses also slowed. However, industrial firms again increased production to keep pace with strong demand.  That may be a product of optimism about the economy. Consumers report feeling better than they have in fourteen years. Small-business owners’ optimism is near all-time highs.

The Federal Reserve’s Open Market Committee will have Wall Street’s full attention when it meets next Wednesday.  Most expect an interest rate hike; futures markets put the odds at 94%.  More uncertainty surrounds the new “dot plot” of anticipated rate increases. A booming economy and higher government spending have increased the chances of an extra hike.  If the Fed concurs, investors would prefer it come next year.

The price of crude oil was flat this week at $62 a barrel – up 3% YTD. US crude stockpiles showed a larger-than-expected build this week – of 5.0m barrels – while product inventories of gasoline (-6.3m bls) and diesel (-4.4m bls) saw large draws. Oil prices were down most of the week following headlines that OPEC members have differing price targets; however, prices spiked higher on Friday possibly on the belief that harsher sanctions would be imposed on Venezuela. Monthly reports from both the IEA and OPEC were also favorable, as demand continues to track above expectations. US oil producers largely followed the price of crude, roughly flat versus the prior week.

Highlights on next week’s economic calendar include existing home sales on 3/21, Markit’s survey of manufacturers on 3/22, durable goods on 3/23, and new home sales on 3/23.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss.

Weekly Market Update for March 9, 2018

by JM Hanley

The Dow was down up 1.8% Friday, rising 441 points to close at 25,336. For the week, the Dow rose 3.25% (SP500 +3.54%) and year-to-date is now up 2.49%% (SP500 +4.22%). Tech companies, banks, and industrial firms all performed well. Utility stocks did poorly. The yield on the 10-year Treasury, an important interest-rate indicator, rose seven basis points, closing at 2.87%.

The President signed a 25% tariff on imported steel and a 10% tariff on imported aluminum into law on Thursday. Investors had been concerned that these duties could provoke retaliatory tariffs. Yet the measures won’t apply to Canada and Mexico, and could permit further exemptions. Moreover, steel and aluminum account for only 1.6% of American imports.

Domestic economic indicators this week proved mixed. Markets were most interested in today’s jobs report. Payrolls increased by 313,000 last month. Analysts had expected job growth to maintain a healthy pace, and were most concerned about wage growth. Bigger paychecks are good for Main Street but increase inflation. Interest-rate hikes often follow. Yet wages barely increased from January. The unemployment rate was unchanged. However, more Americans started looking for work, and those with jobs worked longer hours. More of the population is now employed than at any point since the Recession.

The price of crude oil rose 1% this week to $62 a barrel – up 3% YTD. US crude stockpiles showed a larger-than-expected build this week – of 2.6m barrels – while product inventories of gasoline (-0.8m bls) and diesel (-0.6m bls) both fell. Oil prices were down through Thursday as news that the largest refinery in the US (Motiva Port Arthur) was delaying the restart of its major crude distillation unit. Then prices spiked $2 per barrel higher on Friday as the refinery solved the problem and resumed processing crude oil, a positive for the crude oil demand picture. Our equity position in Devon performed well this week after the company announced an increased dividend, a share buyback program, and a targeted debt paydown.

Almost all companies have now reported their fourth-quarter earnings. Shares of Nutanix rose after analysts at the investment banks Stifel and JMP Group increased their estimates of the company’s future growth.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss.

 

Ulland Investment Advisors

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