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Weekly Update Archives

Weekly Market Update for September 14, 2018

by JM Hanley

The Dow was up on Friday, rising nine points to close at 26,155. For the week, the Dow rose 0.9% (SP500 +1.2%) and year-to-date is now up 5.8% (SP500 +8.7%). The yield on the 10-year Treasury (an important interest-rate indicator) rose six basis points, closing at 3.00%.

Trade uncertainty has moved markets in ways that are often underappreciated. Equity investors enjoyed a banner year in 2017. Management teams soaked in a corporate tax cut and a lighter regulatory touch. After the market suffered a correction in January, major investment managers perceived that portions of the US equity market were fully valued. They began to shift funds abroad in search of returns. Then the trade wars began. Domestic markets looked like a safe harbor. Funds flowed back, raising stock prices. Now domestic valuations look full again.

Earnings growth, red-hot in the second quarter, may slow in the third. The dollar has gained value, so foreign profits are worth less since they are reported in dollars. The market typically reacts poorly to such a deceleration. Midterm elections in the US are also approaching. Equities are usually weakest in midterm years as investors fret about shifts in the political landscape. That hasn’t happened this year for the reasons described above. If control of the new Congress is divided between the two parties, additional fiscal stimulus (in the form of new spending or tax cuts) is unlikely to pass. Markets could face this headwind.

The price of crude oil rose 2% this week to $69 a barrel – up 14% YTD. US crude stockpiles showed a larger-than-expected draw – of 5.3m barrels – while product inventories of gasoline (+1.3m bls) and diesel (+6.2m bls) both rose. Oil prices moved upwards early in the week on global supply concerns, but faded later in the week following the mixed inventory report. In the IEA’s monthly oil report, the organization expressed more concern that we could see a price spike due to restricted exports out of Iran.  Venezuelan and possibly Libyan production is uncertain. They state, “The price range for Brent of $70-80/bbl in place since April could be tested. Things are tightening up.” Shares prices of domestic oil producers slightly outpaced the commodity, rising 3% this week.

The rate of inflation surprisingly declined to 2.7% (annualized) last month. Gasoline and other energy costs pushed the index higher. The costs of medical care, communication, and apparel all went down. Most still expect the Federal Reserve to raise interest rates twice more this year, at the end of September and December.

*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 September 7, 2018

by JM Hanley

The Dow was down on Friday, falling seventy-nine points to close at 25,917. For the week, the Dow fell 0.2% (SP500 -1.0%) and year-to-date is now up 4.8% (SP500 +7.4%). The yield on the 10-year Treasury (an important interest-rate indicator) rose eight basis points, closing at 2.94%.

Mega-cap tech stocks suffered significant declines this week. The nominal reason was a Senate hearing on election interference that went poorly for Facebook and Twitter. Additionally, the Department of Justice announced an inquiry into political bias on social media platforms. More to the point, Big Tech equities have ridden upwards for years uninterrupted.  Investors have still been willing to pay up to own these businesses, which are growing faster than almost any others. But steep multiples and ambitious growth estimates might have exhausted their optimism.

The week brought no reprieve in tensions across the Pacific. Plans to impose tariffs on an additional $200 billion in Chinese imports will likely come to pass. And today the Administration hinted it might impose duties on $267 billion more. Meanwhile, a deal with America’s northern neighbor remains elusive. Disagreements over dairy exports and intellectual property stand in the way of a NAFTA rewrite with Canada. A text of the agreement is due in Congress by the end of the month.

The labor market continues to surge unabated, political turmoil notwithstanding. Payrolls increased by over 200,000 last month. Wages are up about 3% from August of last year. But labor force participation (the percent of adults who are employed or looking for work) dropped a bit, and unemployment has settled around 4%. Only tariffs marred an otherwise rosy report: jobs in manufacturing and autos went down for the first time in a year. The rising cost of materials also bears some blame.

The price of crude oil fell 3% this week to $67 a barrel – up 12% YTD. US crude stockpiles showed a larger-than-expected draw – of 4.3m barrels – while product inventories of gasoline (+1.8m bls) and diesel (+3.1m bls) both rose. Oil prices briefly spiked Tuesday morning on rig evacuations in the Gulf of Mexico by Anadarko, Chevron, and Exxon in advance of Tropical Depression Gordon. But prices then fell throughout the middle of the week as refining operations on the Gulf Coast were largely unaffected, crude product inventories edged higher, and India suggested they would look to cut oil consumption and promote electric vehicles. Broader trade headlines also didn’t help the crude demand picture.

Highlights on next week’s economic calendar include PPI on 9/12 and CPI on 9/13 (both measures of inflation), retail sales on 9/14, and consumer sentiment on 9/14.

*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 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.

 

Ulland Investment Advisors

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