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Weekly Market Update for May 15, 2020

by Jim Ulland

Sometimes it is more helpful to think of the “stock market” as a “market of stocks.”  This is important when there is wide divergence between sectors of the market or markedly different performance between stocks. Such was the market this week, the worst since early April. For instance the small pharmaceutical company Sorrento announced it had a cure for Covid 19 and the stock went up 170% on Friday. Human trials have not been conducted. The Healthcare ETF (XLV) was up 1% for the week and is flat so far this year. On the other hand, Wells Fargo was down 8.5% this week, about the same as the bank ETF (KBR). So far this year Wells Fargo is down 56% and the bank index is down 38%.  This is a market where you have to be in the right sector and the right stocks in the sector.  

The SP 500 was down 2.3% for the week and 11.3% for the year. The NASDAQ (QQQ) continued its out-performance and was down 1%, staying green for the year at +5%.  Small companies were down 6.5% for the week and 24% so far this year.    

The economic news continued to be dismal.  Unemployment claims rose by 3 million to a total of 25 million, less of an increase than last week. Retails sales in April fell 16% with the worst areas being clothing, gasoline, and bar/restaurants. Groceries was the only category showing an increase. JC Penny filed for bankruptcy.  Increased trade tensions with China also dampened market enthusiasm.

Yet, the news was not all gloomy.  States continued to allow workers to return to work and you can now have your elective surgery.  Consumer confidence was up. Crude oil got back close to $30/bl which will prevent some energy company bankruptcies. Covid 19 tests are more available and employers are incorporating health checks on workers returning.

The week’s trading continued the trend of declining volatility. The SP 500 had two bad days, one of which was Tuesday when Fed Chair Powell raised concerns about the economy, while insisting the Fed would do what is needed: +0.02% on Monday, -2.05% on Tuesday, -1.75% on Wednesday, +1.15% on Thursday, and +0.46% on Friday. 

Our fixed income strategy performance was about a -2%. Bank common stocks were very weak and since banks issue most of the preferreds, this negative sentiment dragged down the preferreds as well.  The returns on 10 Year Treasuries ended the week at 0.64% an increase from 0.62%.  Low rates are expected to continue although the Fed Chairman said negative rates, like in Europe, are unlikely.

Next week the news will focus on business re-openings and any up-tick in Covid 19 spread.

*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.

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Ulland Investment Advisors

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