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Weekly Market Update for June 29, 2018

by JM Hanley

The Dow was up on Friday, rising 55 points to close at 24,271. For the week, the Dow fell 1.3% (SP500 -1.3%) and year-to-date is now off 1.8% (SP500 +1.7%). The yield on the 10-year Treasury (an important interest-rate indicator) fell four basis points and closed at 2.86%.

Tech stocks underperformed this week. The business outlook for big technology firms is still bright. But their steady growth has made them popular to own, and there is concern that the premium the stocks now command may be unreasonable. Financial stocks also struggled. Worries persist that the interest-rate curve may invert. That occurs when shorter-dated Treasury bonds pay more than longer-dated.

Markets also remain troubled by turbulence in international trade. Despite the tariffs imposed by America, Chinese concessions have not been forthcoming. The European Union hasn’t yielded much ground either. For its part, the Administration is said to be discussing duties on forty-five billion dollars’ worth of auto imports. A number of German carmakers have reduced their profit outlooks for the year.

The economy continues to look somewhat peaky. Economists now say that GDP grew 2% in the first quarter. After months of rapid growth, consumer spending increased only modestly. So did shipments of capital goods. Fewer homes are under contract, but that’s largely because fewer were for sale in the first place. New-home sales hit a six-month high. Inflation remains elevated by recent standards.

Shares of CVS suffered this week after Amazon announced it had purchased a small online pharmacy, PillPack. While Amazon has mulled an entry into the pharmacy business for some time, major regulatory roadblocks remain. Investors still get skittish at any move made by the e-commerce behemoth.

The price of oil rose 8% this week, and closed at $74.15 a barrel. Supply has tightened, and may tighten further still. Crude stockpiles declined by nearly ten million barrels last week. It was the biggest draw of the year, and far exceeded analysts’ forecasts. Additionally, a power outage has halted production at a major Canadian oil-sands well operated by Syncrude. And American diplomats are pressing allies to shut off imports of Iranian oil by the fall.

Barron’s, the financial markets weekly, quoted Ulland’s own Nat Beebe this week. In a column titled “Overvalued Preferreds,” Nat gave his view on the technical rally in $25-par preferred securities.

The market, and our offices, will be closed next Wednesday in observance of Independence Day.

*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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