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Archive for October, 2021

Weekly Market Update for October 29, 2021

by Jim Ulland

Among the more entertaining news this week was the fact you will be able to rent a Tesla from Hertz, which ordered 100,000 of them.  And, you won’ t have Facebook to kick around anymore – they changed the name to Meta.  Covid kept in the news with the FDA approving vaccines for kids.  MN is offering teens a $200 payment to get vaccinated…expensive, but more acceptable than firing their parents for not getting vaccinated (seems like we could be more creative than that).

Other than those three headline items, the market focused on earnings and the tax and safety-net spending legislation in Congress.  Earnings news continued to be good.  The average earnings report was 12% ahead of expectations.  CEOs cited robust demand that partially offset the drag of supply chain disruptions and input cost escalation.  Apple attributed a $6 billion hit to sales to these issues.  Amazon noted labor shortages, higher wages, and additional transportation costs as the reasons its profits were depressed.  Both Apple and Amazon’s stocks were down about 2% Friday.

Congress showed this week why observers say it is dysfunctional.  One issue is the process being used.  Complex tax legislation is being proposed without committee hearings or input from issue experts and the public. No wonder it is hard to get agreement.  The ideas are not well thought out.  A second observation is that with inflation already hot, more spending is mistimed at best.  Inflation financially cripples those who are retired and on fixed income.  Inflation also is a financial disaster for those in low paying service jobs.  Congress seems oblivious.

Despite Congress, consumer optimism went up and unemployment went down.   The economy slowed in Q3, but the recovery is likely to reaccelerate.  Automakers say the chip shortage is abating and are raising production accordingly.  New home sales in September beat expectations.  Interest rates trended down.  Visa and Mastercard usage had strong improvement from a year ago.

The stock market took it all in stride and both the SP 500 and the NASDAQ set records on Friday.  For the week, the SP 500 was up +1.33% and the NASDAQ +2.7%. Monday the SP 500 was +0.47%, Tuesday +0.18%, Wednesday -0.51%, Thursday +0.98%, and Friday +0.19%.

Next week earnings will provide the news.  The Fed will meet and probably say they will decrease the amount of bonds they been buying.  This is expected but may bother the market for a day. Congress will find its way into the news, but local elections could bring bigger headlines.  The “Defund the Police” issue is on the Minneapolis ballot and the governorship race in Virginia is thought to be close and perhaps an indicator of what to expect in 2022 midterm elections.  ‘Never a dull moment. It could be spookier than Sunday night!

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. Investors 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 investors 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 strategy 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. See www.ullandinvestment.com for important strategy disclosures.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investing involves risk; principal loss is possible. Investors should consider the investment objectives, risk, charges, and expenses of the strategy carefully before investing. This and other important information can be obtained by contacting Ulland Investment Advisors.

Weekly Market Update for October 22, 2021

by Jim Ulland

Earnings news was more mixed this week than last. Negative pressure came to digital economy companies that rely on selling advertising on their sites as a business model. Earlier in the year, Apple had increased its privacy screens on the iPhone and Mac operating systems. This made it harder for Facebook, Google, and Amazon to show customers the effect of their advertising. Since these three, which dominate digital advertising, have become less able to show the effectiveness of advertising, it is harder to price it. Snap, which is a relatively small firm in this business, announced revenues and earnings noticeably below expectations. They blamed Apple and noted that the decline in advertising also was caused by the goods shortages, i.e., why advertise if you don’t have enough goods to sell already. Amazon, Facebook, and Google were down 3-5% on Friday as a result.

The financial sector continued to send positive signals. After the prior week’s blockbuster earnings from the big banks, American Express reported. Its revenues and earnings were better than expected driven by higher sales in lodging, transportation, bar and restaurants, and retail purchases. This helped boost the stocks of other credit card companies such as Visa. Banks also fared well as interest rates increased. Banks have surplus deposits which are more profitable reinvested at higher rates. Their stocks rose too.

The shortage of workers, supply chain disruptions, and inflation continue to be mentioned as major business concerns for the rest of the year. Even Fed Chair Powell now sees inflation as longer and more persistent than expected. One technique the Fed has used to keep interest rates low is to buy bonds, forcing bond prices up and their yields lower. The Fed is expected to reduce their purchases starting in November, perhaps pushing rates a little higher.

Our fixed income strategy, Intelligent Fixed Income (IFI) run by Nat Beebe, continues to have record setting performance in both the peer group of other preferred stock managers and among the entire universe of fixed income managers. Performance for the last three-year period has ranked in the top 5% of the 1180 fixed income separate account managers reporting to Morningstar. So far this year through 9/30, performance is over 5%. We have had a steady inflow of new clients as a result.

Just as investors must manage around interest rates, the country is figuring out how to manage around Covid. Covid and the Delta variant linger as one of the causes for the labor shortage and inflation. Of course, if governments and companies lay off or fire workers who do not get vaccinated, the labor shortage will grow. Giving workers who do not want to get vaccinated the option of a weekly Covid test seems to make sense. We’ll see.

Despite the market headwinds, the SP 500 had four positive days this week and set another record on Thursday. For the week, the SP 500 was up +1.64% and the NASDAQ +1.29%. Monday the SP 500 was +0.34%, Tuesday +0.74%, Wednesday +0.37%, Thursday +0.30%, and Friday -0.11%.

Next week is all about earnings, again. Google and Amazon will report and influence the tech sector. Hundreds of other companies will report as well giving a clearer picture of what to expected in Q4. Congress will be in the news as it tries to reach agreement with two moderate Senators so that the large spending and taxing package can pass. The country does not need this level of additional spending, but it may get it anyway. Stay tuned.

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. Investors 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 investors 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 strategy 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. See www.ullandinvestment.com for important strategy disclosures.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investing involves risk; principal loss is possible. Investors should consider the investment objectives, risk, charges, and expenses of the strategy carefully before investing. This and other important information can be obtained by contacting Ulland Investment Advisors.

Weekly Market Update for October 15, 2021

by Jim Ulland

The market loved Friday 10/15. One reason is that it followed a very strong Thursday with blow-out Q3 bank earnings and unexpectedly high earnings from Minneapolis based United Health Group. The market had been in a holding pattern until Thursday waiting for the first corporate earnings to be announced. Earnings started off with a bang.

On Friday, the market was propelled upward by higher-than-expected September retail sales. It had been feared that the shortage of goods and workers would dampen consumer spending. If it was dampened, it was not by much. Amazon, the world’s biggest retailer, jumped 3.3% on the news. Goldman Sachs moved the whole banking sector another notch higher with its huge earnings announcement.

Some negative issues from the week earlier were softened. Congress lifted the debt ceiling, but only for two months, allowing us to experience that crisis again. China assured the market that the default by its biggest property developer would not topple other developers. Many are not that confident. China was not as positive about electricity. Large users had curtailments which started to sound like summer in California. US interest rates were relatively calm and down for the week giving a boost to our nationally- recognized fixed income strategy’s performance.

For the week, the market over-looked the festering problem of inflation. Headline CPI was the highest since 2008. One of the leading indicators of inflation is what level of inflation consumers expect. If consumers expect higher prices soon, they buy now. Of course, that forces prices higher and makes the expectation a self-fulfilling prophecy. Social Security checks also will be increased by 5.9% reflecting the inflationary environment.

Supply chain bottlenecks persist, aggravating inflation. The Port of Los Angeles will remain open 24/7 to move the one million containers floating offshore in the sixty-plus ships. Unfortunately, there are not enough truck drivers to take all the additional containers away, nor is there available warehouse capacity. Just keeping the port operating for more hours is unlikely to solve much. Covid mandates have the unintended consequence of reducing the labor force and add to back-ups in the supply chain. Hospitals also are experiencing worker shortages and restricting admissions.

Energy prices crept even higher triggering additional price rises from energy users like truckers. Hurricanes, government restrictions on drilling, and limitations on building pipelines have crimped supply. Expect much higher natural gas prices this winter in home heating bills.

But, on Thursday and Friday the market plowed ahead, taking the “glass is half-full” mantra. For the week, the SP 500 was up +1.82% and the NASDAQ was similar at +2.18%. Monday the SP 500 was negative 0.69%, Tuesday -0.24%, Wednesday +0.30%, Thursday +1.71%, and Friday +0.75%.

Our fixed income strategy, Intelligent Fixed Income (IFI), continues to provide shelter for those worried about equity prices. YTD our IFI strategy is up about 5%. Most of the dividends are “Qualified” thus subject to lower tax rates than interest income.

Next week is all about earnings. Expect excellent earnings news. However, the CEOs are likely to warn about the negative impacts of supply chain bottlenecks and workers shortages in coming quarters.

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. Investors 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 investors 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 strategy 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. See www.ullandinvestment.com for important strategy disclosures.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investing involves risk; principal loss is possible. Investors should consider the investment objectives, risk, charges, and expenses of the strategy carefully before investing. This and other important information can be obtained by contacting Ulland Investment Advisors.

Weekly Market Update for October 8, 2021

by Jared Plotz

After ending the month of September in the red, major market indices squeaked out a positive week to kick off October. The S&P 500 was up 0.8%, while the DOW advanced 1.2% and the NASDAQ trailed at +0.1%. Trading in technology stocks remained mixed, while energy stocks continued their move higher as WTI oil prices crossed over $80 per barrel. Financials also had a good week, benefiting from the rise in 10-yr Treasury Bonds from 1.46% to 1.60%.

There were several notable items in Friday’s employment report. The headline nonfarm payroll metric showed a gain of 194,000 jobs in September, which was below expectations of around 500,000. However, July’s strong job gains were revised even higher, as were August gains. Furthermore, the unemployment rate ticked down more than expected, falling to 4.8%, as the labor force participation rate edged lower. Average hourly earnings rose 0.6% month over month, continuing to show signs of upward wage pressure. On the whole, the report didn’t do too much to move the needle on the Fed’s tapering decisions.

On the legislative side this week, the Senate helped kick the debt-limit can down the road to December, ending a weeks-long standoff. The House is expected to pass the short-term extension as well. This saves the economy from potential fiscal crisis and indices bounced higher Thursday on the early news.

A few market risks hang in the balance though as we push further into October. For one, talk of margin issues stemming from supply chain and labor market disruptions may be front and center during earnings reporting season. Uncertainty around monetary tapering (timing/scope) likely builds as we approach the November FOMC meeting.  And despite the resolution of the immediate debt ceiling predicament, Washington dysfunction surrounding major infrastructure and reconciliation proposals continues.

Corporate third-quarter earnings begin next week, with JPMorgan getting the ball rolling on Wednesday. Most of the other big banks will follow them over the ensuing two days, and United Healthcare will report Thursday as well. Additional economic data points will also come in, including the September Producer Price Index, retail sales, and trade/business inventories.

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. Investors 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 investors 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 strategy 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. See www.ullandinvestment.com for important strategy disclosures.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investing involves risk; principal loss is possible. Investors should consider the investment objectives, risk, charges, and expenses of the strategy carefully before investing. This and other important information can be obtained by contacting Ulland Investment Advisors.

 

Ulland Investment Advisors

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