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Weekly Market Update – July 14, 2017

The Dow finished up on Friday, rising 84 points to close at 21,637. For the week, the Dow rose 1.0% (S&P 500 +1.4%) and year-to-date is now up 9.5% (S&P 500 +9.8%). The yield on the 10-year Treasury was flat Friday at 2.32%, down 6 bps for the week. Some investors are questioning whether there is a concerted effort by advanced economies’ central banks to tighten global monetary conditions and whether the bar of preconditions for further tightening is being lowered. It does appear so thus far.

Despite the upwards movement in the major stock indices this week, US economic data was incrementally negative. The NFIB Small Business Optimism Index was still strong, but sequentially ticked down below expectations. Inflation data came in a bit weaker, but remains in the 1.5-2.0% range. Retail sales disappointed and declined from last month’s pace. Capacity utilization and consumer sentiment also came in weaker.

Fixed income markets rose slightly this week as the underlying economic data mentioned above was a bit weaker; however, the move was volatile. Bonds declined on Thursday as rates rose when a report by the Wall Street Journal suggested the European Central Bank (ECB) may signal a wind down strategy for its quantitative easing program soon. They speculated this could occur at the Federal Reserve’s Jackson Hole conference in August or at the ECB policy meeting in early September. Then on Friday, bonds rose and rates were down most of the day when a Reuters report called into question this timing and economic data (inflation, retail sales) disappointed.

The price of crude oil rose 5% this week to over $46 a barrel – down 13% YTD. US crude stockpiles showed a larger-than-expected draw – of 10.7m barrels – with product inventory of gasoline down (-1.6m bls) and diesel up (+3.1m bls). Oil prices finished up every day this week as global inventories marked a decline. The IEA also revised up their oil demand growth estimate for 2017 and are projecting strong growth for 2018 as well.

Next week’s economic calendar highlights will include June housing starts on 7/19, weekly jobless claims on 7/20, and June leading economic indicators on 7/20. Housing data is expected to tick up along with leading indicators. Initial jobless claims are expected in the 240,000-250,000 range versus the YTD low of 227,000 (in February) and high of 261,000 (in March). Q2 earnings reports will be released in larger numbers next week, including reports by UnitedHealth, Bank of America, Goldman Sachs, and Citigroup.

*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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