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Weekly Market Update – February 10, 2017

The Dow kept its advance going this week, climbing 97 points on Friday to close at a record 20,269.  For the week, the Dow was up 1.0% (S&P 500 +0.8%) and year-to-date is now up 2.6% (S&P 500 +3.5%).

Markets benefited this week from surprisingly low jobless claims, reinforcing last week’s favorable January employment report, as well as renewed reflation momentum and de-escalating tensions between Eurozone lenders and IMF officials on their Greek bailout review.  This week’s jobless claims fell 12,000 to just 234,000 – better than the consensus forecast of 249,000 and only a hair off this cycle’s low of 233,000 reported back in November.  The University of Michigan’s sentiment index ticked down in February to 95.7 versus consensus 98.0 and the prior 98.5 reading in January; however, the index remains very favorable.

In the US, talk of infrastructure stimulus got a boost this week after the National Governors Association sent the Trump administration a list of 428 “shovel-ready” projects.  Tax reform, which has jockeyed back and forth in priority for the Administration and House Republicans, moved back to the spotlight this week after the President stated Thursday that “something phenomenal” could be announced in the next few weeks.  White House press secretary Sean Spicer also confirmed a comprehensive tax reform plan (corporate and individual rates) would be outlined in the coming weeks.

In other international news, President Trump has told Chinese President Xi Jinping that he will respect the “One China” policy (which states that a country cannot hold official diplomatic relations with both Taiwan in addition to mainland China) in an effort to ease relations between the two countries.  Japan’s Prime Minister Abe met with the President today, but the meeting was relatively uneventful as commentary on potential currency manipulation of the Japanese yen seems to have been sidestepped.  There remains some uncertainty in the markets ahead of the G20 meeting in Baden-Baden, Germany on March 17-18.  The group may face opposition from the Administration on a number of issues.

After crude oil fell mid-week to $51 due to a very large crude inventory build in the US, the commodity rebounded the last two days to close the week roughly flat, near $54.  The improved sentiment was driven partly by growing optimism regarding compliance with the OPEC-led global supply reduction (compliance was already 90% in January).  A favorable IEA report, which lifted 2016 & 2017 global crude demand estimates, as well as favorable January import data out of China also contributed to the late-week rally.  We think the set-up for energy investments in 2017 looks favorable and are actively evaluating opportunities.

The yield on the 10-year Treasury rose 1 bp Friday to 2.41%, down 5 bps for the week and still down 7 bps for the year. Through Thursday, February 9, our trust preferred portfolios were up over 1.5% YTD, substantially more than 0.2% for the Barclays Aggregate Bond Index. 

Next week’s economic calendar highlights will be busy, including January inflation data on 2/14 & 2/15, January industrial production on 2/14, January retail sales on 2/15, and January housing and weekly jobless claims on 2/16.  All of this data will influence the Fed’s thinking on interest rates.

Have a great weekend!


Ulland Investment Advisors

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