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Weekly Update Archives

Weekly Market Update for November 17, 2017

by JM Hanley

The Dow was down on Friday, falling 100 points to close at 23,358. For the week, the Dow fell 0.27% (S&P 500 -0.13%) and year-to-date is now up 18.2% (S&P 500 +15.2%). Major indexes retreated slightly after weeks of gains. The consumer goods and telecom sectors performed well. Energy and industrial firms were mixed. Progress on tax reform continued, albeit slowly. The yield on the 10-year Treasury fell six basis points, closing at 2.34%.

Economic data this week brought few surprises. Inflation rose 0.1% in October, which was about as expected. Prices climbed twice as fast excluding food and energy. Inflation moved up 1.8% from October of 2016 – the fastest pace since April. The producer price index, which also measures inflation, showed a similar gain. Pharmaceutical costs rose steeply, partially offset by lower gasoline prices.

In other news, retail sales rose more than expected in September. Vehicles, home furnishings, and electronics proved particularly strong. This augurs well for the Christmas shopping season. The National Association of Homebuilders’ housing index climbed again last month. Though it is now close to a post-recession high, a limited supply of housing lots and a shortage of construction labor continue to weigh on homebuilders. Finally, industrial production rose by a percent in October, nearly twice as fast as economists had expected.

The price of crude oil was flat this week above $56 a barrel – up 6% YTD. US crude stockpiles showed a surprise build – of 1.9m barrels – while product inventories of gasoline were relatively flat. Oil prices initially sold off this week given the disappointing US inventory data, a reduced demand forecast by one of the three leading prognosticators, and an about-face by Kurdistan in its quest for independence. Then on Friday, crude regained all its lost ground after Saudi Arabia soothed market concerns by saying that Russia should be onboard for further extensions of the output cut.

While it is likely we will experience heightened volatility heading into and out of the OPEC meeting at the end of November, the market has been working down excess barrels and we see a strong set-up for oil in the coming quarters.

*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 November 10, 2017

by JM Hanley

The Dow was up on Friday, rising 40 points to close at 23,422. For the week, the Dow fell 0.50% (S&P 500 -0.21%) and year-to-date is now up 18.52% (S&P 500 +15.3%). Major indexes marked their first weekly decline in eight weeks, though volumes were relatively light. Markets mulled new developments in the push for tax reform. Poor earnings reports in some financial and healthcare names also weighed on the indexes. The yield on the 10-year Treasury rose seven basis points, closing at 2.40%.

The Senate released its version of tax reform legislation this Thursday. It differs from the House bill in a few ways. Both would cut the corporate tax rate to 20%, but the Senate bill would delay the cut until 2019. The Senate’s legislation would also fully repeal the deduction for state and local taxes. It would maintain the current structure of seven individual income tax brackets. Further revisions to the bill are expected, since it cannot add to the deficit in the long term. Once passed, the House and Senate legislation would need to be reconciled with each other before being enacted into law.

In other policy news, William Dudley, president of the Federal Reserve in New York, announced that he would retire next summer. There was otherwise little change to the prevailing belief that that the Fed will raise rates at its meeting on December 13. Investors put the odds at 99%.

The price of crude oil rose 2% this week to over $56 a barrel – up 6% YTD. US crude stockpiles showed a surprise build of 1.5m barrels. However, product inventories of gasoline (-3.3m bls) and diesel (-3.3m bls) both declined more than expected. Upheaval of the status quo in Saudi Arabia over the weekend and throughout this week is injecting some newfound geopolitical risk into the price of oil, at a time when oil supply vs. demand balances are making steady improvement. According to media reports, the government of Saudi Arabia has arrested or detained over 200 princes, sitting ministers, and former ministers in an anti-corruption crackdown. The kingdom alleges over $100 billion was misused or embezzled over several decades.

Third-quarter earnings reports brought more good news. In Ulland portfolios, Playa Resorts rose after it reported strong revenues despite the impact of hurricane season. Shares of Air Lease were also up after the company reported better-than-expected expansion of their profit margins. Priceline did not perform as well. While the company showed strong results, its management noted they will need to spend more on advertising because the online travel business is growing more competitive. Earnings season will begin to wind down next week. Tencent, Viacom, and L Brands, among others, are expected to report.

*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 November 3, 2017

by JM Hanley

The Dow was up on Friday, rising 23 points to close at 23,539. For the week, the Dow rose 0.45% (S&P 500 +0.26%) and year-to-date is now up 19.11% (S&P 500 +15.6%). Large tech companies continued to report strong earnings, and energy companies benefitted as the price of oil moved higher. The yield on the 10-year Treasury fell ten basis points this week, closing at 2.33%.

Republican leaders in the House of Representatives released their tax reform legislation on Thursday. The bill largely conforms to the framework Congressional leaders laid out last month. The corporate tax rate is to be permanently cut from 35% to 20%. Firms with cash overseas could bring it home at a one-time rate of 12%. Individually-owned businesses, which currently pay personal income rates, would see their taxes reduced to 25%. Individual income tax brackets would be reduced to four, while the standard deduction and the child tax credit would both increase. The estate tax would be eliminated beginning in 2024.

The revenue lost is to be made up by eliminating or reducing a number of special deductions. Filers would no longer be able to deduct state and local taxes on their federal return. Additionally, homeowners with mortgages over $500,000 would no longer be able to claim interest expense on the loan (previously, this limit had been set at one million). Larger university endowments would be subject to an excise tax. However, contrary to some earlier reports, the bill does not change amount that one can contribute to a 401(k).

The legislation will change in the coming weeks since Senate leaders are writing separate legislation, which would need to be reconciled with the House version. As the legislation is now written, all domestic firms would benefit from the lower corporate rate. Other winners include firms with lots of cash held overseas.

Elsewhere in the capital, the President appointed Jerome Powell to succeed Janet Yellen as chair of the Federal Reserve. Powell, a current Fed governor, is considered a safe choice who will maintain a gradual pace in raising interest rates and reducing the Fed’s holdings of US government debt. In other news, the economy added 261,000 jobs in October. This was a bit weaker than economists’ expectations. Unemployment fell to 4.1% – a sixteen-year low.

The price of crude oil rose 3% this week to over $55 a barrel – up 4% YTD. US crude stockpiles showed a larger-than-expected draw. Saudi Arabia raised official selling prices for barrels exported to Asia for the third consecutive month; this is another indicator that suggests the excess inventory in the Atlantic Basin is normalizing.

Third quarter earnings report continued. In Ulland portfolios, Apple, Alibaba and Stamps.com reported strong revenue growth and expanded profit margins, although Stamps fell because the estimate of future sales was not increased. Priceline, L Brands, and Callon Petroleum, among others, will report 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 October 27, 2017

by JM Hanley

The Dow was up on Friday, rising 33 points to close at 23,434. For the week, the Dow rose 0.45% (S&P 500 +0.23%) and year-to-date is now up 18.58% (S&P 500 +15.8%). Strong third-quarter earnings reports from large tech companies including Amazon, Google, and Microsoft pushed stocks higher.   Higher-than-expected growth in third quarter GDP also gave equities a boost.

The yield on the 10-year Treasury rose five basis points this week, closing at 2.43%.  Confidence that the Federal Reserve will raise interest rates in December continues to grow. The yield on the 10 Year has climbed nearly four-tenths of a percentage point since early September as a consequence.  A seemingly small move in yields on Treasury bonds can have a sharply negative impact on traditional fixed income, since the securities’ yield will decrease relative to new issues.  In anticipation of rising rates, most of our fixed-income securities are preferred stock with a floating-rate component – thus, mostly protected from this scenario.  Our fixed-income strategies continue to outperform the benchmark Barclays Aggregate Bond Index by a widening margin.

Third-quarter GDP grew 3% from the previous year, according to the first estimate.  This was substantially better than the 2.5% expected by economists.  The outperformance came despite the headwinds from an especially disruptive hurricane season.  Private capital investment and business inventory growth were particularly strong.  Personal consumption, which grew at a slower pace than in the second quarter, proved to be the only weak spot.

The price of crude oil rose 4% this week to nearly $54 a barrel, jumping into positive YTD territory after being down as much as 17% in June. US crude stockpiles, when added to product inventories of gasoline and diesel, both fell dramatically. Refinery utilization popped back above the 3-year average following the prior week’s hurricane curtailments as refiners look to capture favorable product spreads.  Lower-48 oil production has been relatively flat over the past two months which has helped draw down elevated levels of both crude and product inventories in the US.  While oil prices have recovered lost ground this year, oil stocks are still off quite a ways from their highs. We expect that gap to narrow.

Third-quarter earnings reports brought more good news.  In Ulland portfolios, shares of Amazon climbed 13% on Friday after the company reported strong profits expansion.  Google’s stock also rose substantially after it reported accelerating growth in advertising revenues. And Granite Construction reported that its backlog of projects had grown to a year’s worth of revenue, pushing its equity nearly 9% higher.  The good news may continue next week. Alibaba, Facebook, Anadarko Petroleum, and Envision Healthcare, among others, are expected to report.

*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