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Weekly Market Update – August 25, 2017

The Dow finished up on Friday, rising 30 points to close at 21,814. For the week, the Dow rose 0.6% (S&P 500 +0.7%) and year-to-date is now up 10.4% (S&P 500 +9.2%). The indexes’ modest gains follow back-to-back declines, though trading volumes were light in this second-to-last week of August. Somewhat dovish commentary from Fed Chairwoman Janet Yellen, along with incrementally positive economic data, cheered investors. Markets also were buoyed by signs of progress on tax reform. The yield on the 10-year Treasury fell one basis point on the week, closing at 2.18%.

US economic data were mixed this week. New home sales fell by 9% from June to July. Economists had expected the rate to hold steady. Existing home sales, which were expected to increase, declined as well. Durable goods orders dropped 6.8% in July. That was worse than the 6.0% forecast. Lagging aircraft orders weighed on the index. Markit’s manufacturing PMI, which tracks private firms’ economic activity, also came in below estimates. However, the services PMI beat expectations.

Stock and bond markets were pleased with Federal Reserve Chairwoman Janet Yellen’s speech at the Kansas City Fed’s annual Jackson Hole conference. Commentary from other Fed members earlier in the week emphasized ensuring global financial stability after years of low interest rates. Investors were consequently concerned that Yellen would use the speech to hint at a more aggressive approach to raising rates.  However, Yellen didn’t speak about the subject at all. This fits with the Fed’s more measured approach recently, in the face of slower-than-expected inflation. The dollar fell afterwards in currency-exchange trading. 

Elsewhere on the policy front, investors grew more hopeful about the prospects for tax reform.  Headlines this week seemed to indicate that key players have agreed upon the legislation’s main principles. However, concerns persist about Congress increasing the government’s debt ceiling by the end of September.

The price of crude oil fell 1% this week, back below $48 a barrel – down 11% YTD. US crude stockpiles showed an in-line draw of 3.3m barrels. Crude oil showed strength through Wednesday as another week of solid inventory draws brought the cumulative drawdown since March to 85m barrels while Libyan oil fields encountered disruption. However, as Hurricane Harvey moved towards the Texas Gulf Coast, investors became concerned that demand would get dinged more than supply would be curtailed, leading to a price pullback.

Highlights on next week’s economic calendar include the Dallas Fed manufacturing index on 08/28, consumer confidence on 08/29, and revised second-quarter GDP numbers on 08/30. Investors will be most interested in the nonfarm payrolls report, which will be released next Friday 9/1.  Employers are expected to have added 180,000 jobs in August, down slightly from the 209,000 added in July.  Unemployment is expected to stay at 4.3%.

 *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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