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Weekly Market Update – June 9, 2017

The Dow finished up on Friday, rising 89 points to close at 21,272. For the week, the Dow rose 0.3% (S&P 500 -0.3%) and year-to-date is now up 7.6% (S&P 500 +8.6%). The yield on the 10-year Treasury rose 3 bps on Friday to 2.20%. Through Thursday, June 9, our trust preferred portfolios were up substantially more than the Barclays Aggregate Bond Index, which was up 2.4% – expanding our lead.

The economic calendar was uneventful this week and was overshadowed by US and UK politics. In the US, former-FBI Director James Comey testified before Congress, providing statements contradictory to those of the Trump administration. Attorney General Jeff Sessions will testify next week in front of the same Senate Intelligence Committee. In the UK, Prime Minister Theresa May’s “snap election” backfired, with her party losing seats and their majority in parliament.  These events contributed to a rise in market volatility. On Friday, investors began selling large-cap tech companies – which have risen dramatically YTD – and redeploying funds into Financials, Energy, Health Care, and Industrials. We made moves earlier in the week into Financials and Industrials, though still hold a sizeable position in Technology today. The NASDAQ was down 1.6% this week despite being up 15.3% YTD.

The price of crude oil fell 4% this week and is once again under $46 a barrel – now down 15% YTD. Crude stockpiles showed an unexpected build – by 1.6m barrels – and product inventory of gasoline (+3.3m bls) and diesel rose sharply as well (+4.4m bls). While one report does not make a trend, and in fact the data has been very favorable the past few months, this was a negative report and led to a sharp correction in energy equities mid-week before some bounce back on Friday. Energy fixed income held in well.

Next week’s economic calendar is extremely busy, including the NFIB Small Business Optimism Index on 6/13, May inflation on 6/13, retail sales on 6/14, the FOMC rate decision on 6/14, capacity utilization on 6/15, and then housing starts and consumer sentiment on 6/16. Inflation is expected at the high end of its 1.5-2.0% range. Capacity utilization and housing starts may pick up, while business optimism and consumer sentiment stay steady. And the FOMC is expected to raise the Federal Funds Rate range from 0.75-1.00% up to 1.00-1.25%.  According to the CME Group, the odds of a June hike are nearly 100% now vs. 83% a month ago, and odds of a 3rd hike by year end stand at 53%.

Lastly, I’d be remiss this week if I didn’t mention our own Jim Ulland’s panel participation at the Private Wealth Great Plains Forum in Minneapolis on Thursday. Speakers from numerous family offices, investment advisors, private banks and large wealth management firms, including Abbott Downing, Wells Fargo, and Ascent (US Bank), discussed a variety of important market topics. Jim co-led a panel titled “Fixed Income: Redefining Yield in the Post-Bond Bull Market,” sharing the attractiveness of our Preferreds strategy (including its interest rate hedge) in the current low-yield fixed income environment.

 Jim great plains 2_6.9.17


Ulland Investment Advisors

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