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Weekly Market Update for September 20, 2019

by JM Hanley

The Dow was down on Friday, falling 160 points to close at 26,935. For the week, the Dow was down 0.5% (SP500 -0.7%) and year-to-date is now up 15.5% (SP500 +19.4%). The yield on the 10-year Treasury (an important interest-rate indicator) fell eighteen basis points, closing at 1.72%.

The price of crude oil rose 6% this week to $58 a barrel – up 28% YTD. Prices rose precipitously early in the week after Iranian-linked militias attacked Saudi Arabian refineries, precipitating the largest known disruption in oil production. Prices settled later on after the Saudi oil ministry said that lost production could be brought back on-line at the end of the month. Tensions between the two Middle Eastern powers remain high.

At their much-anticipated September meeting, the Fed cut interest rates by a quarter of a percentage point, as expected. More surprising was the final vote: five participants, two shy of a majority, voted against the cut. Excluding some volatile industries, inflation has been higher than the Fed’s target since its last meeting.  That may explain the opponents’ change of tune. Markets had previously anticipated the Fed would cut rates again in October, but now more than half say rates should be left unchanged. At least one more cut is expected between now and December, however. Chairman Jerome Powell emphasized his willingness to aggressively cut rates during an economic downturn, so market reaction was sanguine.

Low rates have already provided a fillip to a previously lackluster housing market. Existing home sales rose about a percent last month; Wall Street had expected a decline. “Starts” on the construction of new homes were also better than expected. The week also brought hopeful signs in manufacturing. Industrial production rose by half a percent, with business equipment purchases particularly strong.

China’s latest trade delegation arrived in the US this week. The group mostly consists of low-level emissaries preparing the ground for more consequential officials arriving next month. Bilateral discussions seemed to largely go as expected, though the deputies returned home early. Trade uncertainty remains the market’s most significant worry.

*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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