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Weekly Market Update for November 21, 2018

by JM Hanley

The Dow was unchanged today, closing at 24,465. For the first three days of the week, the Dow was down 3.7% (S&P 500 -3.1%) and year-to-date is now down 1.0% (S&P 500 -0.9%). The yield on the 10-year Treasury (an important interest-rate indicator) was unchanged, closing at 3.07%.

It was a mercifully holiday-shortened week on Wall Street. Large US tech firms came under especially acute pressure, but their problems reverberated through the whole market. Apple, which cut production of its profitable XR model, and Facebook, whose ham-handed response to the data privacy scandal came under further scrutiny, had a particularly bad time of it. For years, investors paid up to get in on Big Tech’s seemingly limitless potential for earnings growth. Now business has slowed a bit just as miscues are attracting the interest of regulators.

When equity markets first showed signs of trouble in October, plenty of investors were optimistic that the Fed would soften its rate hike schedule to cushion their fall. But with the economy close to full employment and inflation nearing the Fed’s target, Chairman Powell has other factors to consider. Recent Fed commentary to that effect explains why all sectors – not just tech – had a bad week.

The price of crude oil fell 4% this week to $54 a barrel – down 10% YTD. Prices largely fell during Tuesday trading, driven by continued demand concerns, trade war uncertainties, and rising production out of the US. Resolution of the US-China trade tension would be a key catalyst for crude oil, as would any production cut by OPEC on Dec. 6th or in early 2019. For now, share prices of domestic producers embed a low-$50 WTI outlook and remain attractively valued.

Our office will be closed tomorrow for Thanksgiving. We will be lightly staffed on Friday, when the market will close at noon.

*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