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Weekly Market Update for January 25, 2019

by JM Hanley

The Dow was up on Friday, rising 184 points to close at 24,737. For the week, the Dow was up 0.1% (SP500 -0.2%) and year-to-date is now up 6.0% (SP500 +6.3%). The yield on the 10-year Treasury (an important interest-rate indicator) fell two basis points, closing at 2.76%.

After a surge of optimism in the first three weeks of the year, markets entered something of a lull. With the government shut down and Commerce department bureaucrats furloughed, little economic data was released stateside. Fourth quarter growth in China was the slowest since the financial crisis – about what the markets had expected. And after some warning signs arose in the fourth quarter, the IMF slightly reduced its forecast for global economic growth this year, to 3.5%.

Trade talks with China won’t resume until next week.  The Fed was also quiet ahead of its meeting at the end of the month, though a news report held out the tantalizing possibility that the central bank could slow its sales of Treasury holdings.

Focus is instead on earnings. Comcast and IBM both surprised investors with good numbers.  Comcast’s sales of online content improved, a sign that consumers remain happy. The airlines, many of whom reported this week, also had good results. There’s no sign of fewer travelers, an indicator of consumer and business confidence.

Next week will be a different story. There are trade talks with China and the Fed meeting. Fourth quarter GDP will be released, along with end-of-month indicators like the December jobs report. So will all the data held up by the shutdown. And the earnings docket is a doozy: Caterpillar, 3M, Verizon, Apple, Alibaba, Facebook, Microsoft, Visa, GE, Amazon, and plenty more are scheduled to report. JP Morgan says it will be the biggest week of the quarter.

The price of crude oil fell 1% this week to $53 a barrel – up 18% YTD. US crude stockpiles showed a greater-than-expected build– of 7.9m barrels – while product inventories of gasoline rose (+4.0m bls) and diesel fell (-0.6m bls). Oil prices floundered most of the week, with no help from the inventory report or Davos (mixed views on energy), before catching a bid late-week on rising action in Venezuela. The US (& allies) formally recognized the opposition leader there as the legitimate president, a call on Nicolas Maduro to step down, which of course he refuses. We would not be surprised to see the US slap energy sanctions on Venezuela soon, with obvious global supply impacts. Venezuela could very well be on the precipice of a regime change. A drop in global waterborne crude inventories also helped improve supply-demand dynamics.

*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.

The Risks of Passive Investing – Trouble Ahead for PFF?

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