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Weekly Update Archives

Weekly Market Update for January 10, 2019

by JM Hanley

The Dow was down on Friday, falling 133 points to close at 28,824. For the week, the Dow was up 0.7% (SP500 +0.9%) and year-to-date is now up 1.0% (SP500 +1.1%). The yield on the 10-year Treasury (an important interest-rate indicator) rose three basis points, closing at 1.82%. The price of crude oil was down 6% this week to $59 a barrel – down 3% YTD.

Progress on the trade deal continues, as the Administration has affirmed the signing of a Phase 1 deal with China.  Chinese vice premier Liu He is apparently en route to Washington for the ceremony, a more tangible indicator of success. Investor speculation has turned to the deal’s mandate that China increase its purchases of US goods by $200B. Soybeans and commercial aircraft would typically be at the top of Beijing’s list. But these look less attractive in light of a poor soy growing season, a swine epidemic that reduced China’s need for animal feed, and Boeing’s grounding of its newest commercial jet.  Electrical equipment, machinery, and industrial chemicals may take their place.  In any event, the PBOC may need to support the value of the Chinese currency as import purchases ramp up. The mandate is denominated in dollars, so a weaker yuan would end up costing Beijing more.

After a good jobs report for November, today’s release showed the labor market coming back to earth.  Payrolls growth was about 10% lower than expected, despite a major boost from better weather and calendar timing.  Prior months’ data was also revised lower. Perhaps worst of all, average hourly earnings growth fell below 3%. This additional indicator of sluggish wage growth (and thus, inflation) gives the Fed little incentive to revisit its permissive stance on interest rates. That makes the news something of a silver lining for investors. The good, if somewhat paradoxical, news in the report was that unemployment and underemployment edged lower.

A survey of managers in the non-industrial economy showed more optimism than expected, providing a spot of good news. News from the industrial economy was less positive, as factory orders dropped. Two other domestic data points – inventory growth and the trade deficit – were marginally lower than expected.  Overseas, a tracker of Chinese business activity moderated, and inflation was lower than expected.  Germany was a similarly mixed bag: its service sector surged, but factory orders dropped.

Fourth quarter earnings season will begin in earnest next week.  The big banks (JP Morgan, Goldman Sachs, Wells Fargo, Citi, and Bank of America) are at the top of the docket.  Wall Street expects SP 500 earnings in aggregate to drop about a percent from last year.  This is a slight improvement from the third quarter.

*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 January 3, 2020

by JM Hanley

The Dow was down on Friday, falling 234 points to close at 28,635 (SP500 -0.7%). The Dow finished 2019 up 22% and the S&P finished up 31%, assuming the reinvestment of dividends. The yield on the 10-year Treasury (an important interest-rate indicator) was down nine basis points, closing at 1.79%.

The price of crude oil was up 2% this week to $63 a barrel. Prices were actually down before the US killed a top Iranian general in Baghdad yesterday evening. The attack worsens an already strained relationship between the two countries. Investors, like everyone else, are uncertain about what will happen next.  The rise in the price of oil, and the accompanying pullback in the broader equity market, are actually modest in light of the potential regional conflagration. Iranian retaliation could threaten oil production in Iraq and Saudi Arabia, while tightened sanctions could further constrain Iran’s own lackluster production.

The modest market pullback may forecast that little will come of the latest flare-up. Markets reacted more dramatically when an Iranian attack crippled Saudi oil production last fall. But they quickly recovered when it became clear neither side had an appetite for further escalation.

Economic news this week was otherwise limited.  Pending home sales rose last month, but by less than expected.  The same was true of home prices.  The lack of affordable starter homes, a longstanding trend, continues to constrain the housing market’s momentum, even with interest rates low, household formation high, and the employment outlook robust. Additional data points were similarly unencouraging. An important survey of manufacturers touched a post-Recession low; employment, new orders, and total production have all fallen.  Consumer confidence also edged lower after a strong reading in December.  The trade deficit for goods declined last month, but the reasons were murky. It would be good news if consumption of domestic goods has risen instead, bad news if importers have slowed their buildup of inventory (a component of GDP).

Data from China also was mixed.  Two surveys of manufacturers indicated the sector is at, or slightly below expectations. The only exception was rising prices, which indicates the impact of the government’s fiscal stimulus. Yesterday the PBOC (the Chinese central bank) followed through on anticipated monetary stimulus, an interest rate cut of half a percentage point.

Fourth quarter earnings and earning outlooks for 2020 will start to be released in two weeks.  These results and forecasts are likely to move the market.

*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 December 27, 2019

by Jared Plotz

This week’s update includes intra-day index levels, as I will be heading out at noon here.  The Dow is up 58 points today, rising to a fresh, all-time high of 28,679. For the week, the Dow has risen 0.8% (S&P 500 +0.7%) and year-to-date is now up 22.9% (S&P 500 +29.3%). The yield on the 10-year Treasury (an important interest-rate indicator) stands at 1.87%, down 4 points from last week. As regular readers of our weekly know, US Treasuries have been quite volatile this year, with the 10-year rising to a high of 2.78% in January and a low of 1.46% in early September.

This December feels starkly different than the prior, when markets were on their backs following a Federal Reserve interest rate hike along with a yield curve inversion, the start of a government shutdown, and declining consumer confidence. Instead, we will likely close out this year near all-time index highs, with strong consumer confidence and employment, a recently agreed trade deal with China (“phase one”), and a Federal Reserve that is determined to hold interest rates low until sustained inflation presents itself. The holidays seem a bit more cheerful, at least as investment portfolios are concerned.

The holiday week was quiet, without much major news. November orders for manufactured goods were soft, as were new home sales; but unemployment claims were in check, and consumer comfort levels favorable. Next week should be quiet as well before December employment numbers are released on January 10th.

Our office will return to more normal staffing next week; however, we will be closed Wednesday for New Year’s. We are looking forward to seeing the final performance numbers for our fixed income strategy, which has had a very strong year, likely its best.

We wish everyone a Happy New Year and prosperous 2020!

*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 December 20, 2019

by JM Hanley

The Dow is up today, up 121 points at 28,498. For the week, the Dow is up 1.3% (SP500 +1.7%) and year-to-date is now up 22.2% (SP500 +28.6%). The yield on the 10-year Treasury (an important interest-rate indicator) was rose ten basis points, closing at 1.92%. The price of crude oil was up 2% this week to $61 a barrel – up 36% YTD.

News from Congress was unexpectedly positive this week, as the House and Senate have proven unusually productive at year’s end. A revised version of NAFTA, the USMCA, – essentially designed to aid domestic auto manufacturing, and tighten some regulatory standards – passed the House today. Now it heads to the Senate. Healthcare stocks also rose earlier in the week after a spending bill repealed some taxes on health insurers and medical device manufacturers. And, in another boon to health insurers, a federal appeals court in Texas left most of the Affordable Care Act intact in a decision handed down Wednesday.

Economic data brought more good than bad. The final estimate of third quarter GDP was left unchanged, as higher consumption and building activity offset downward revisions to inventories. Manufacturing, a sector that’s borne most of the economic slowdown, also showed glimmers of growth. Industrial production bounced back last month, in part due to the end of a strike at General Motors. But business equipment – a category very sensitive to corporate America’s prognosis for the economy – also was stronger than expected. Renewed confidence in a trade deal with China could be trickling down.

Unfortunately, just as clouds hanging over the international trade regime seem to be lifting, the industrial economy must now contend with Boeing’s decision to totally halt production of its 737 Max model, which the FAA grounded last year after a software malfunction led to two crashes overseas. Up until now, Boeing has continued making the planes at a reduced rate and has simply put them into storage. Recertifying the planes is taking longer than expected, which makes that strategy no longer tenable. Goldman Sachs expects this decision will cost the economy 0.4% of GDP growth in the first quarter.

Existing home sales declined slightly last month, but “starts” on the construction of new housing rose and a survey of homebuilders hit a 20-year high. The discrepancy could be explained by a long-running conundrum: the country’s housing shortage increases the price of existing stock beyond the means of the average buyer, and turnover declines. But demand for new homes remains robust.

Our office will be lightly staffed next week, and will close Wednesday for Christmas. Barring unforeseen circumstances between now and the end of the year, we expect our fixed income strategy will show its highest total return in history.

*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