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Weekly Market Update for September 4, 2020

by Jim Ulland

We are still waiting for the next stimulus package from a deadlocked Congress, but in the meantime, life has gone on. During August, 1,370,000 new jobs were created dropping the unemployment rate to 8.4%.  Average hourly earnings also increased giving consumers more spending power.

Covid-19 news continued to get better this week. Hospitalizations declined in all regions including those states that had a mid-summer spike: CA, TX, AZ, NJ, FL.  MN and several small states like WV, MT, SD, and ND showed a modest increase. Many feel that with the frequent hand washing and face masks, the flu season will be more modest than usual and thus take the pressure off hospital beds.

US economic news was mostly good.  The unemployment filings dropped below one million, more than expected.  Those already on unemployment also fell by 1.2 million.  Productivity increased markedly, +10.1%.  One of the few disappointments was exports. This is partially a result of less air travel, a major US export earner.

Our fixed income strategy, Intelligent Fixed Income (IFI), run by Nat Beebe, successfully defended its #1 performance ranking at month-end against the peer group of publicly traded strategies using preferred stock (data source Morningstar Direct).   Interest rate on the 10 Yr Treasury rose Friday to close the week flat at 0.72%. The slight rise in interest rates helped bank stocks because banks can now earn a little more on their substantial amount of unused cash deposits. The strength in banks helped their preferred stock and IFI performance which was very solid in a week of correction in the equity market.  The strategy is up 7% from January 1 through August 31!

Equity markets set another series of records early in the week and then ended, at least for now, their remarkable rise since the end of March. Steep increases in equities in a short amount of time often are slowed by a correction.  This is what happened Thursday and Friday. The NASDAQ was down -3.3% for the week, but this only returned performance to the August 24th level. The S&P 500 was down only -1.82% this week. Volatility spiked as reflected in the daily S&P returns:  Monday -0.22%, Tuesday +0.75%, Wednesday +1.54%, Thursday -3.51%, Friday -0.81%. The conditions that drove the market’s rise still exist. Inflation is subdued, low cost money is available, and the digital economy stocks keep reporting exceptional earnings.  Our stock strategies continue to out-perform.

Next week expect reports on small business optimism, job openings, and the Consumer Price Index.  You may quickly tire of political ads.  A flood of them is coming, since Labor Day officially marks the start of campaign ads.  Ads are stressful because they invariably stretch the truth. Eat healthy foods and get your exercise.  This will be over in two months unless we are plagued by unclear results.  Let’s hope not.

Publicly Traded Peer Group Requirements: Minimum $150 million in ETF/Fund; Excludes low-duration funds; Excludes closed-end funds; Includes share class with largest AUMs; Excludes real estate preferred funds; Minimum 3-year track record

*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