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Archive for August, 2018

Weekly Market Update for August 31, 2018

by JM Hanley

The Dow was down on Friday, falling twenty-two points to close at 25,965. For the week, the Dow rose 0.7% (SP500 +0.9%) and year-to-date is now up 5.0% (SP500 +8.5%). The yield on the 10-year Treasury (an important interest-rate indicator) rose five basis points, closing at 2.86%. Technology, healthcare, and consumer discretionary stocks performed well. Banks, oil companies, and industrial firms underperformed.

It was another sleepy week in the dog days of summer. The major indexes drifted upward, buoyed by Fed Chair Jerome Powell’s reiterating his intent to raise interest rates gradually. China’s decision to stabilize the yuan in the face of a strengthening dollar also was encouraging.

High drama persists in the renegotiation of NAFTA. Negotiators for the US and Mexico apparently agreed to new terms on Monday, though the release was light on details. Talks with Canada broke up today with both sides still far apart on the most difficult issues. Discussions will resume on Wednesday. The current state of play suggests a deal with Mexico alone may result, but that could hit a procedural roadblock in Congress. Across the Pacific, the Administration reportedly will impose tariffs on an additional $200 billion in Chinese goods. These had first been proposed a few weeks ago.

Americans are as optimistic as ever about the economy. Consumer confidence reached its highest point since 2000 this month. More respondents said it was easy to find work, and most have high expectations for the future. The new numbers contrast with a report earlier this month from the University of Michigan. It found that confidence had fallen. But that report showed that poorer consumers had grown more pessimistic, which dragged down the whole group. Higher consumer confidence typically bodes well for discretionary spending.

The housing market continues to be the odd one out. With the rest of the economy booming, pending home sales fell last month. The price of oil rose minimally this week, to $69 a barrel.

Nutanix reported a fiscal fourth quarter on Thursday beating the Street’s estimates; however, the company’s revenue guidance for next quarter was a little soft due to a one-off item. Nutanix is launching a number of new products in the next 18 months that will help the company benefit from the convergence of the cloud and local IT architecture.

Our offices will be closed Monday in observance of Labor Day.

*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 August 24, 2018

by JM Hanley

The Dow was up on Friday, rising one hundred thirty-three points to close at a record high of 25,790. For the week, the Dow rose 0.5% (SP500 +0.9%) and year-to-date is now up 4.3% (SP500 +7.5%). The yield on the 10-year Treasury (an important interest-rate indicator) fell five basis points, closing at 2.81%.

The week brought another rash of dramatic episodes in Washington.  Over the past few years, similar headlines have induced turbulence in the markets temporarily.  Yet stocks and fixed income have gone back to trading on economic fundamentals, which recently have been positive. We continue to monitor the situation closely.

This week’s economic data reflects an economy that has cooled modestly after running red-hot in the first half of the year. Markit’s survey of manufacturers reported that the pace of new orders has slowed. Firms also have adopted a more cautious approach to hiring as their operating expenses have risen. It’s a similar story in the services sector. Clients are spending less.  But excluding aircraft and military supply, shipments of capital goods increased last month. Businesses are continuing to invest despite the ongoing trade skirmish.

Limited supply has made the housing market an exception to the rule. Prices are up about five percent from a year ago, but the number of homes for sale actually has fallen.

Fed Chair Jerome Powell stuck to the script in his annual speech at Jackson Hole, which tilted dovish. Powell indicated he was happy with the Fed’s slow-but-steady cadence of rate hikes. Inflation has nearly reached the Fed’s target of 2%, he said, but seemed unlikely to accelerate much beyond that. Minutes of the Fed’s July meeting, released Wednesday, revealed Fed governors are similarly ambivalent. Trade, oil prices, and emerging markets may continue to be a source of uncertainty. But most economic indicators still point upwards.

Fed governors were divided on the yield curve. If short-term interest rates are higher than long-term rates, the yield curve is termed “inverted.” A number thought a potential inversion warranted more attention, but others downplayed its predictive value.

The price of crude oil rose 4% this week to $69 a barrel – up 14% year-to-date.  US crude stockpiles were drawn down by 5.8 million barrels.  Wall Street had expected a draw of just 1.9 million. The US soon will re-impose sanctions on Iran’s oil exports, but on Monday, Tehran forbade other OPEC members from taking its share of the export quota. Additionally, China resumed imports of American oil.

The last week of August looks to be a sleepy one. All but a few firms have reported their third-quarter earnings. Highlights on next week’s economic calendar include PCE and GDP estimates, both on Thursday, 8/29.

*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 August 17, 2018

by JM Hanley

By and large, it was a sleepy late-summer week on Wall Street. The Dow was up on Friday, rising one hundred ten points to close at 25,669. For the week, the Dow rose 1.4% (SP500 +0.6%) and year-to-date is now up 3.8% (SP500 +6.6%). The yield on the 10-year Treasury (an important interest-rate indicator) fell one basis point, closing at 2.86%. The week saw some hints of a long-promised “rotation” from stocks that are attractive because of their prospects for future revenue growth to steadier but less-exciting businesses (value stocks). Telecom, consumer staples, and industrial stocks performed well. Energy, technology, and consumer discretionary firms performed worse.

With the exception of trade disputes, the global economy has been an afterthought for investors recently as America’s economy has boomed. That changed this week. Turkey’s currency, the lira, depreciated steeply once again. A much larger emerging market, China, also saw its currency tumble. Growth figures are coming in weak. The major Chinese stock index is off 20% this year. America and China’s decision to resume trade talks next week provided a rare bit of good news.

Stateside, confidence that large tech stocks will march steadily higher has eroded.  Big tech firms have grown at a remarkable pace over the past two and a half years. Investors have shown themselves willing to pay almost any price to own a piece of the business. Some poor earnings reports this quarter may have broken the spell, at least temporarily. Yet other macroeconomic trends may slow a full rotation into conventional stocks, which have been neglected of late. Firms with rapid earnings growth (like tech companies) suffer when interest rates rise. But central bank policy in Europe, Japan, and to a lesser extent the US, has slowed an increase in rates. Those factors, plus a strengthening dollar, have made for volatile equity markets.

The price of crude oil fell 3% this week to $66 a barrel – up 9% YTD. US crude stockpiles showed a surprise build – of 6.8m barrels – while product inventories of gasoline fell (-0.7m bls) and diesel rose (+3.6m bls). Oil prices took the leg lower this week amidst an anxious macro backdrop, including Turkey-driven emerging market concerns as well as falling industrials metals prices, stoking global demand concerns. This was further exasperated by another negative inventory report. Share prices of domestic oil producers felt the pain, dropping 5% this week.

Shares of the Chinese tech conglomerate TenCent suffered this week after the firm reported weak profits in its gaming segment.  Its e-commerce counterpart Alibaba will report earnings next week.

*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 August 10, 2018

The Dow finished down on Friday, falling 196 points to close at 25,313. Energy was the only positive sector on the day. For the week, the Dow fell 0.6% and year-to-date is now up 2.4%, while the S&P 500 posted its first weekly decline (-0.2%) in six weeks (+6.0% YTD). The yield on the 10-year Treasury (an important interest-rate indicator) dropped six basis points on Friday to 2.87%, and was down eight basis points for the week, further flattening the yield curve.

It was relatively quiet on the US economic data front this week other than some inflation readings. On Friday, July core CPI inflation rose 0.2% month over month, in line with estimates; however, the annualized gain of 2.4% was the largest reported since 2008. Despite this metric supporting the Fed’s plan for two more rate hikes this year, we saw a fall in the 10-year yield. The yield was likely pressured by a flight to safety in the midst of shakiness in emerging market currencies and announced US sanctions on Russia.

The price of crude oil fell 1% this week, crossing through $68 a barrel – up 12% YTD. US crude stockpiles showed a smaller-than-expected draw – of 1.4m barrels – while product inventories of gasoline (+2.9m bls) and diesel (+1.2m bls) both rose. Oil prices were holding up well before a sharp $3 move lower on Wednesday driven by China demand concerns. China crude oil imports have slowed dramatically since May while fear of a potential Chinese-proposed tariff on US gasoline and diesel stoked geopolitical demand risk. The inventory report added fuel to the fire.

In our busiest week of second-quarter earnings, we saw strong reports out of Hortonworks, CVS, NuStar, and Daseke.  Hortonworks, a relative new equity name in our portfolios, jumped over 25% following their big, beat & raise report driven by accelerated revenue growth and expanded partnerships with major cloud players. Axon Enterprise had a rougher week despite a very solid report as sentiment had gotten a bit ahead of the stock fundamentals in recent months. Next week, we will see quarterly results from a pair of our Chinese companies, Tencent and Alibaba. With the large majority of company earnings reports now in the books and few economic data points in the coming weeks, the balance of summer may feel quite slow.

 

*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

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