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Weekly Market Update for September 18, 2020

by Jim Ulland

This week, the market was assuming that there will be no additional stimulus package until after the election, which dampened a lot of buyer enthusiasm. At mid-week, the Fed repeated its intention of keeping interest rates low until 2023, a little longer than the last pronouncement, but stocks were looking for something more and sold off as a result. Fixed income in general, and our preferred stock strategy welcomed this statement. Continued low interest rates favor preferred stock. Politics and election advertising dominated both the news and the advertising around the news. There will be six more weeks of charge and countercharge. The substantially different policy implications of the two Presidential candidates will keep the market on edge making it unlikely that stocks will go higher.  The worst case for the market would be a contested election. In 2000, the Bush vs. Gore election took until mid-December to resolve and that was with only one state in doubt.

Covid-19 news was more encouraging. Hospitalizations declined again in the hot spots of CA, TX, AZ, NV, FL. In total 62% of the states showed a decline. The only region where most of the states showed an increase was in the Northeast. These states had dropped to very low levels of hospitalization, so an uptick is not meaningful yet. The news often reports the number of new Covid cases. This metric is not very informative since an increase in testing brings more cases and a decrease in testing brings less cases. In MN, for instance, headlines told of the increase in new cases whereas the number of hospitalizations fell rather sharply. We feel hospitalization numbers are the best indicator to understand the Covid impact. Pfizer announced progress on a treatment for Covid and expanded its trial. One of the five leading vaccine developers, Moderna, said early vaccine trial results may be announced in October although November is more likely.

There was no big economic news during the week; however, unemployment filings stayed below one million again and showed a 30,000 decrease. Those who continue to be on unemployment insurance decreased by 900,000. Housing starts were down, but there have been shortages of some building materials, so that may not be a surprise. Manufacturing showed strength. Several of the NFL teams demonstrated that they could have fans in the stands again, although with distancing. This encouraged the Big Ten to reverse course and announce they will have a football season. There was a lot of money at stake which probably influenced the decision. The country continues to become more open, but still the necessary ingredient is a vaccine to get individual comfort levels higher.

Our fixed income strategy, Intelligent Fixed Income (IFI), run by Nat Beebe, managed modest gains for the week. Concerns that the equity markets are fully valued, and the uncertainty of the election have investors reallocating money from stocks to fixed income.

For the week, the Nasdaq was down -0.56%. The SP 500 was down -0.64%. Volatility moderated: Monday the SP 500 was +1.27%, Tuesday +0.52%, Wednesday -0.46%, Thursday -0.84%, Friday -0.64%.

We expect volatility to increase as the political races become more frantic. The Presidential debate will be a news maker about ten days from now.

*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/prospective clients are strongly urged to consult with their tax advisors regarding any potential investment. Performance quoted is past performance. Past performance is not indicative of future performance. There is always a possibility of loss. Current performance may be lower or higher than performance shown. Differences in performance versus the indices/funds may be attributable, in part, to differences in the asset make-up of the strategies vs. the indices/funds. Performance calculations are based on the reinvestment of dividends and gains unless these amounts were paid out to the client. Performance is subject to revision.

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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