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Weekly Market Update for January 18, 2019

by Jared Plotz

The Dow was up on Friday, rising 336 points to close at 24,706. For the week, the Dow was up 3.0% (SP500 +2.9%) and year-to-date is now up 5.9% (SP500 +6.5%). The yield on the 10-year Treasury (an important interest-rate indicator) rose eight basis points, closing at 2.78%.

After a challenging fourth quarter of 2018 across most all asset classes, our fixed income and equity accounts have bounced back nicely in January, outpacing their respective benchmarks. Our very own Nat Beebe was recently featured (again) in Barron’s, highlighting the attractive setup for preferred stocks and our popular Intelligent Fixed Income strategy. We’ve noticed an uptick in prospective client inquiries, suggesting that cash on the sidelines may soon be put to work again. Now may be a good time to consider deploying any idle cash you may have.

Although earnings reports are coming into the spotlight, Fed policy, trade negotiations, and global growth continue to be the biggest drivers of sentiment and markets. Most investors now assume the Fed is on “rate hike pause” until at least June, that some kind of compromise with China will be reached, and that China will continue stimulating their economy to offset the slowing global growth we’ve seen in recent months.

This week saw the first full docket of fourth-quarter earnings reports. United Health Group put up another good quarter, beating analyst estimates and reaffirming 2019 guidance. The major banks also reported favorable results, showing strong investment banking revenues, steady consumer activity, and controlled costs. Those tailwinds offset a continued industry-wide decline in trading activity; though a decline that was no worse than anticipated. Credit quality remains steady and comments on macro commentary from management teams were more positive than the fourth-quarter market volatility implied to investors.

The price of crude oil rose 5% this week to $54 a barrel – up 19% YTD, with domestic producers’ stocks following in footstep. Oil prices continued marching higher after OPEC published a list of individual output cut quotas of its members and other major producers. The lack of such list pressured prices in December as traders questioned members’ commitments to the coordinated cut and thus overall group compliance. Additionally, the White House floated the possibility that they may reduce the number of waivers granted to buyers of Iranian oil in May. Recall the waivers, given to eight countries that rely heavily on Iran oil, are set to expire at April-end, and three of these countries have already ceased such imports.

As a reminder, our office (and the market) is closed Monday in observation of Martin Luther King Jr. day. Upcoming earnings next week include Johnson & Johnson on Tuesday, Comcast and IBM on Wednesday, and a number of airlines/railroads on Thursday. We will also get more China economic data and central bank decisions by the BOJ and ECB.

*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

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