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Weekly Market Update – July 21, 2017

The Dow finished down on Friday, falling 31 points to close at 21,580. For the week, the Dow fell 0.3% (S&P 500 +0.5%) and year-to-date is now up 9.3% (S&P 500 +10.4%). The yield on the 10-year Treasury fell 2 bps Friday to 2.24%, down 9 bps for the week.

US economic data were positive this week. June housing starts (1.22m annualized pace) and permits (1.25m annualized pace) came in stronger than expected, and May starts were revised higher. Weekly jobless claims came in at 233,000, better than expectations. The Conference Board’s June US Leading Economic Indicators grew 0.6%, above forecasts of +0.3%.

The markets largely ignored president-related headlines this week, as well as the failure of the Senate’s repeal & replace healthcare proposal. Senate Majority Leader McConnell is pushing ahead with a “repeal now, replace later” plan, but focus amongst investors and many politicians is already shifting to tax reform. Top negotiators are reportedly targeting a corporate tax rate in the 20-25% range versus 15-20% previously. House Speaker Ryan thinks a 20% rate funded by closed loopholes and special interest deductions is possible, with no mention of a border adjustment tax. Outside the US, attention remains on when the ECB will discuss tapering scenarios this fall.

The price of crude oil slid 2% this week to just under $46 a barrel – down 15% YTD. US crude stockpiles showed a larger-than-expected draw – of 4.7m barrels – and product inventories of gasoline (-4.5m bls) and diesel (-2.2m bls) declined as well. Oil prices were pressured by reports suggesting OPEC compliance fatigue with the group cut (including a possible exit by Ecuador) as well as group production increases in July. OPEC and non-OPEC countries will hold a joint technical committee meeting on Monday in Russia to discuss compliance with the cut agreement and current views on the oil market rebalance.

Next week’s economic calendar is busy, including June existing home sales on 7/24, July consumer confidence on 7/25, the FOMC rate decision on 7/26, June prelim durable goods orders on 7/27, and the market-moving Q2 advance GDP report on 7/28. Existing home sales are expected to slow sequentially, along with consumer confidence. The Fed is expected to keep the Fed Funds Rate target unchanged at 1.00-1.25%. Then on Friday, Q2 GDP is expected to show growth of 2.5%, a pickup from 1.4% seen in Q1.

*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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