Receive Weekly Market Updates via Email


Weekly Market Update – July 28, 2017

The Dow finished up on Friday, rising 33 points to close at 21,830. For the week, the Dow rose 1.2% (S&P 500 -0.0%) and year-to-date is now up 10.5% (S&P 500 +10.4%). The yield on the 10-year Treasury fell 2 bps Friday to 2.29%, up 5 bps for the week. The “repeal now, replace later” healthcare plan failed to pass this week, and now legislators are likely to shift to tax reform and the debt ceiling when they return from summer recess. Investors had already moved on from healthcare, and will be keenly watching developments on the corporate tax front come September.

US economic data were mostly positive this week. Consumer confidence, durable goods orders, and preliminary manufacturing activity were all better than expected. Existing home sales were light while US GDP was roughly in line. The first estimate of US Q2 GDP indicated that economic activity increased 2.6% y/y vs. 1.2% in Q1 (Q1 revised down from 1.4%). The Fed met this week and left rates unchanged, as expected, and noted that balance sheet normalization (i.e. reducing its bond portfolio) will start “relatively soon,” probably in September.

The International Monetary Fund (IMF) reduced their forecasts for US GDP growth to 2.1% in 2017 as well as 2.1% in 2018; however, they also revised estimates up for Europe and China. The Eurozone has been showing improvement this year, with manufacturing activity humming along, job creation strong, and improving sentiment. This week, Germany’s IFO index (measure of the business climate) surprised to the upside leading to the strongest inflow of investment funds into Europe in three months.

The price of crude oil rose 9% this week to nearly $50 a barrel – still down 7% YTD. US crude stockpiles showed a larger-than-expected draw – of 7.2m barrels – and product inventories of gasoline (-1.0m bls) and diesel (-1.8m bls) declined as well. In addition to large inventory draws the past four weeks, oil prices were supported by an OPEC technical meeting, oil pipeline attacks in Nigeria, rising US sanctions on Venezuela, and reports of slowing growth amongst US producers. OPEC reiterated their view that the drawdown in global oil stocks would accelerate over the next few quarters and roped Nigeria into the group agreement, setting a cap on their production (OPEC members Nigeria and Libya had previously been excluding from cuts). Additions to the US rig count have slowed to two per week from 10 during much of this year and some producers announced drilling capex cuts this week.

Next week’s economic calendar highlights will include June pending home sales on 7/31, the July ISM manufacturing index and automotive vehicle sales on 8/1, and the employment report on 8/4. Vehicle sales are expected to tick up but remain shy of a 17 million annualized rate. July job additions are expected near 180,000 vs. 222,000 in June. Unemployment is expected at 4.3% vs. 4.4% in June. Positive results would be supportive of the Fed’s balance sheet normalization strategy mentioned above.

*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.


Ulland Investment Advisors

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