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Weekly Market Update for March 27, 2020

by Jim Ulland

Huge volatility continued this week, but more of it was because the market was going up rather than down. Preferreds had a particularly good week and we were actively trading this market and putting cash to work.  The same was not true with equities.  Although equities had a great recovery, we continued to lighten positons and accumulate cash.  Where a client has both equities and fixed income, we moved some of the cash being generated to fixed income.

Here is the pattern for the S&P 500 this week: Monday -2.9%, Tuesday +9.4%, Wednesday +1.2%, Thursday +6.2%, and Friday -3.4%. The S&P 500 was up 10.3% in total over the last five days.  Part of the favorable news came from the White House and Congress as the large relief package was passed.  This was offset somewhat by the increasingly bad Covid-19 news from New York, where higher numbers of people are infected.

During the week, the Governor of Minnesota followed several colleagues around the country and, by executive order, required people to stay home starting Friday at midnight.  All of our office will be working remotely starting Monday.  Investment advisory firms are required to have a “Disaster Plan.” Ours is working as expected and the equipment to do our trading and record keeping is already in use remotely. Basically, our computers at home login directly to our computers at work, which allows us to have secured lines for data and client information.  Calls to the office are automatically routed to our remote phones.  You can continue to use our existing numbers: Nat Beebe at 612-312-1402, James Skjong 612-312-1406, James Ulland 612-312-1401, Jared Plotz 612 -312-1404, and JM Hanley 612-312-1407.  We expect Nasra to be back in the office on April 13, if employees are allowed to return, as the Governor indicated.

The new “stay at home” order in Minnesota and many other states is going to have a big economic impact. Now that the good news of the relief package has been announced, the market has few positive events coming until the number of those infected in the U.S. starts coming down or until positive test results are announced from either a vaccine or treatment.  Either of these announcements would turn the market.  The malaria drug, chloroquine phosphate when combined with another drug, is in widespread trials.  Since chloroquine has been used for 70 years, the dosage and side-affects are known.  Numerous other approaches are in trial.

Nike reported quarterly sales on Tuesday and said sales for the quarter in China were down only 5%.  Of course, Nike has a very aggressive digital sales platform.  Nike’s CEO said they were seeing the other side of the crisis in China.  Let’s hope we get there soon.

In portfolios, our strategy of reducing equity exposure and leaving the cash generated in cash or moving it to fixed income continues. We resisted buying stock even during the week’s recovery.  This is largely because the new flow of corporate earnings will be negative as will the economic projections. Bad news tends to depress stock prices.  Fixed income in the form of preferred stock had an historic week. Liquidity returned to the market and many found the 6-7% returns on preferreds vastly superior to the less than 1% returns on 10Yr Treasuries. We feel that 6-7% will continue to be compelling. Buying will stay aggressive as the market stabilizes.  Until then, be safe and enjoy one of life’s pleasures, the coming of spring.

*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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Ulland Investment Advisors

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