Receive Weekly Market Updates via Email

shadow

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 Healthcare stocks also rose earlier in the week after a spending bill repealed some taxes on health insurers and medical device manufacturers.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.

Weekly Market Update for December 13, 2019

by JM Hanley

The Dow was up on Friday, rising 3 points to close at 28,135. For the week, the Dow was up 0.4% (SP500 +0.7%) and year-to-date is now up 20.6% (SP500 +26.4%). The yield on the 10-year Treasury (an important interest-rate indicator) was down two basis points, closing at 1.82%. The price of crude oil was up 1% this week to $60 a barrel – up 30% YTD.

It was, as ever, difficult to discern progress on the trade deal amidst the fog of rumor. But Washington and Beijing have apparently reached a “phase one” deal along the lines laid out weeks ago.  The extensive tariffs Washington had scheduled to come into effect this Sunday has been suspended; beyond this, the tariff rate on an additional $120B in Chinese goods will be cut in half. In exchange, China has committed to purchase hundreds of billions’ worth of American products, including agricultural goods. Negotiators are expected to sign the deal in January. Talks on the second phase of agreement will begin immediately.

Across the Atlantic, the pro-Brexit Conservative Party won a substantial majority in British elections yesterday. The country now seems likely to exit the European Union in a more orderly fashion. Though domestic equities have little exposure to the UK economy, a chaotic departure was a potential source of volatility.

Economic data from the US was mixed.  Retail sales last month were lower than expected, and prior months were revised downward.  Other consumer indicators look healthy, so the late timing of Thanksgiving may have pushed some holiday shopping into this month. In accordance with this view, inflation in the US last month was very slightly higher than expected at 2.3%.  This is a healthy pace, albeit unsurprising in light of the Fed’s interest rate cuts throughout the year.  The Fed followed its own advice and left rates unchanged at its December meeting. Reports from the meeting seem to indicate that the Fed will hold rates flat through the end of 2020. Chairman Powell said he only would support higher rates if inflation accelerates for a sustained period of time, which he believes is unlikely.

Highlights on next weeks’ economic calendar include some manufacturing indicators and data from China, both on Monday.

*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 6, 2019

by JM Hanley

The Dow was up on Friday, rising 337 points to close at 28,015. For the week, the Dow was down 0.1% (SP500 +0.2%) and year-to-date is now up 20.1% (SP500 +25.5%). The yield on the 10-year Treasury (an important interest-rate indicator) was unchanged, closing at 1.84%. The price of crude oil was up 7% this week to $59 a barrel – up 29% YTD.

Trade news, always fickle, was good this week. China’s government apparently has been processing applications by domestic importers for exemptions from Beijing’s tariffs on American pork and soybeans. The news augurs well for the success of ongoing trade talks. But domestic political drama may rear its head before the end of the year. Besides progress on the trade deal, markets also expect Washington to pass a funding bill a revised trade agreement for Canada and Mexico. Lawmakers are running out of time to do so.

Economic data swung the market back and forth this week. The ISM’s index of manufacturing, released Monday, was worse than expected. Construction spending, new orders, and employment were notably worse than expected. The equivalent metric for the service sector came out just slightly better. Business activity was tepid.  Elsewhere, while factory inventories increased in October, business inventories (one of the main components of GDP) was lower than expected.  The streak of (mostly) bad news prompted some banks to cut their estimates of GDP growth.

But renewed fears about macroeconomic growth were almost completely vanquished by today’s jobs report. The 266,000 increase in payrolls was far better than expected, and unemployment fell to a new low of 3.5%. Labor force participation was essentially unchanged.  The end of an autoworkers’ strike provided a bit of an artificial boost.  But this was partially offset by bad weather and a late Thanksgiving, which seem to have pushed the start of some retail and construction jobs into this month. Job gains were otherwise distributed broadly across most sectors of the economy – a notable improvement from recent history. Earnings growth remains stubbornly slow, but job gains in October were revised up.  Today’s consumer confidence report was also better than expected.

Major items on investors’ calendar next week include the Fed’s rate decision on Wednesday, and November retail sales on Friday.  The Fed is expected to leave rates unchanged.  The British election next Thursday could provide some long elusive clarity on Brexit, but American indices remain mostly indifferent. But the most important item will be a decision on the next increase in tariffs on China, scheduled to come into effect a week from this Sunday.

*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 27, 2019

by JM Hanley

The Dow was up on Wednesday, rising 98 points to close at 28,164. So far this week, the Dow is up 1.0% (SP500 +1.4%) and year-to-date is now up 20.7% (SP500 +25.8%). The yield on the 10-year Treasury (an important interest-rate indicator) was unchanged, closing at 1.77%. The price of crude oil was unchanged this week at $58 a barrel – up 28% YTD.

Economic data from the US has mostly been good this week.  Third quarter GDP estimates were revised up, and now show a 2.1% increase. Income growth was notably strong, a positive. Home prices increased more than expected last month. So did capital expenditures (long-term corporate spending).

News was worse in China. Industrial profits in the still manufacturing-reliant country fell 10% last month. Exports, and another indicator of corporate profitability, also dropped last month.   The dismal readouts may prompt Beijing to accelerate ongoing fiscal and monetary stimulus. If trade negotiators can’t reach a compromise, the expansive slate of US tariffs scheduled for December 15 may come into effect, which would make the situation worse.

On a related note, sentiment surrounding a trade deal with China also improved.  Beijing has apparently conceded that it will need to improve protections for intellectual property.  Communication between high-level negotiators would seem to augur well.

Our offices will be closed Thursday in observance of Thanksgiving. We’ll be lightly staffed on Friday.

*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.

shadow
 

Ulland Investment Advisors

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