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Weekly Market Update for March 23, 2018

by JM Hanley

The Dow was down on Friday, falling 425 points to close at 23,533. For the week, the Dow fell 5.7% (SP500 -6.0%) and year-to-date is now off 4.8% (SP500 -3.2%). The yield on the 10-year Treasury, an important interest-rate indicator, rose one basis point, closing at 2.83%.

From investors’ perspective, this week’s Federal Reserve meeting could have gone worse. The Fed did raise interest rates by a quarter of a percentage point. But the central bank left unchanged its projection to raise rates just twice more in 2018. An additional rate hike is instead forecast to come next year. The Fed also noted that the economy’s momentum had slowed. On the other hand, the Fed expects the already-tight labor market will keep adding jobs. Inflation could quicken. If one Fed “dove” were to change his mind, the Committee could probably pass a fourth rate-rise this year.

Washington policymakers weighed on markets this week.  The Administration introduced tariffs on sixty billion dollars’ worth of technology, aerospace, and machinery imports from China. Separately, China’s Commerce Ministry responded to America’s previously-announced tariffs on steel with duties on a relatively modest three billion dollars in US imports. While America has adopted a more aggressive posture towards China, analysts doubt that a broad trade war will ensue. The government has exempted the European Union and major Asian and Latin American economies from its new trade duties. US negotiators revising the North American Free Trade Agreement have also proven accommodating.

Concerns about Facebook preoccupied the market this week. The New York Times reported last Sunday that the social networking site had given data firm Cambridge Analytica information on fifty million users without their permission. Intense media scrutiny and criticism in Congress again stirred worries that Facebook and its big tech peers will soon contend with more aggressive regulation. Shares of the company fell fourteen percent this week. Yet Facebook’s advertising customers (the source of its revenues) are unlikely to leave, and the company continues to develop lucrative ways to target users.

Sales of existing homes rose in February, ending a two-month decline. The supply of homes for sale remains low, and prices continue to climb. Orders of durable goods, an important indicator of economic growth, outpaced expectations last month. Finally, the Markit PMI survey of business owners found that manufacturing remains strong, offset by weakness in the service sector.

*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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