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Archive for November, 2021

Weekly Market Update for November 24, 2021

by Jim Ulland

We expected the Thanksgiving week to be quiet because many in the industry take the week off.  Four events or news stories intervened causing a lot of market volatility. First, interest rates, as represented by the 10 Yr. Treasury, went up sharply Monday and Tuesday in reaction to inflation before stabilizing Wednesday.  Second, crude oil pushed higher after the President said oil would be released from the Strategic Petroleum Reserve. Crude was up 3.4% through Wednesday. This was a little ironic since the goal for releasing oil from the reserve was to have the opposite market response.  The third major news item of this holiday-shortened week came from unemployment filings.  Weekly unemployment filings were the lowest since 1969 implying that exceedingly few employers are laying off workers. This reflects both the strength of the economy, holiday hiring, and the shortage of workers. Finally, Covid cases kicked up even among the vaccinated.  Some countries like Austria instituted a rather severe lockdown.

If you are not working Friday, get your booster shot.  It will immediately restore your protection to near 100%.  Our office will be very lightly staffed on Friday when the market is only open until noon.  While the market is open, we will respond to any urgent needs that cannot wait until Monday.

Through Wednesday, the S&P 500 was up +0.07%, the NASDAQ -1.32%. Monday the S&P 500 was down -0.32%, Tuesday +0.17%, Wednesday +0.23%.

Next week also is expected to be quiet.  We’ll see.  The one news item of market moving potential will be the Friday jobs report which gives the net new jobs created in November.  This will be one indicator of the country’s economic health.

Warmest wishes during this traditional week of family gatherings.

 

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 November 19, 2021

by Jim Ulland

The economic recovery grinds higher partially because the largest government stimulus in history is still fueling growth. The Fed insists it will keep rates low at least until the middle of 2022. Covid infections and breakthroughs have turned up recently, however; these hopefully will decline as the New Year approaches. The SP 500 and the NASDAQ kept setting records and the market ended positive once again. Surprisingly, interest rates declined as reflected in the 10 Yr. Treasury.

Inflation is the factor that could disrupt what has been a great recovery. How can inflation be neutralized? First oil and gas prices must stabilize and then decline. Crude did fall below $80/barrel this week. The recent Covid spike will depress short-term demand. Can OPEC resist the urge to raise production? Secondly, people must get back to work. The booster shots and all-age vaccinations will allow many to do so. Third, the chip shortage needs to normalize. Several auto firms say this is happening. Fourth, supply chain bottlenecks need to lessen. After the holidays, consumer demand will decline leading to reduced imports. This should allow ports to unclog and for delivery times to improve. Finally, Congress must resist spending even more money in this inflationary environment. Monitor these issues and you will be able to predict the direction of inflation in 2022.

Some of the companies that have done well during the recovery will continue to prosper even if inflation drives interest rates higher. If inflation persists, to stay in this high-performance group, companies will have only modest debt at best. Some Tech companies are huge cash generators and can take advantage of the dislocations provided by inflation. Acquiring the weak is a quick way to grow. Banks are favored when interest rates climb since they earn more on their idle deposits. Underperforming sectors can reemerge if they have pricing power, an important characteristic for any company’s success during inflation. Healthcare and Pharma have low valuations and are in this category. Real estate and commodities tend to outperform during inflation assuming they can keep costs like interest expenses under control.

Yet, inflation may surprise us and be neutralized by the factors mentioned above. The Fed could be correct in everything but timing. “Transitory” could be the characteristic of inflation in 2022.

This week’s market closed higher. The SP 500 was up +0.32%, the NASDAQ +1.24%. Monday the SP 500 was flat +0.0%, Tuesday +0.39%, Wednesday -0.26%, Thursday +0.34%, and Friday -0.14%.

Our equity strategy Intelligent Blend is up 30% since 1/1/20, a period of 22 months. Our fixed income strategy IFI is up over 20%, remarkable for fixed income. IFI’s performance is at or near the top in the peer group. Because of this strong performance, new and current clients have pushed our assets under management (AUM) up $150 million this year to a total of $600 million. Contact us if you see a fit for these high-performance strategies.

Next week is expected to be quiet because of Thanksgiving, although the appointment or reappointment of the Fed Chair has been promised.

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 November 12, 2021

by Jim Ulland

Inflation is a tax on the poor and the retired. Anyone whose income cannot rise at the rate of inflation is losing ground. Inflation is a cruel tax which hits those least able to respond. The result is a lower standard of living for those affected. The CPI for October (annualized) was at a 6.2% rate, the highest in a decade. For those who felt happy about getting a 5% raise this year, understand that with inflation at 6.2%, you went backwards. The Producer Price Index (PPI) was even scarier. It rose at an 8.6% rate. This implies that producer prices (PPI) will push consumer prices (CPI) even higher. Gasoline, food, autos, and wages moved higher. If the inflation persists, it will not end well.

Today’s inflation is largely demand-driven. This means that much of the Covid government spending and transfer payments are turning into consumer demand. Goods producers were not prepared for the demand surge. When they tried to respond, there were Covid-related worker shortages causing bottlenecks in critical parts like microprocessors. The sudden demand congested ports, which didn’t have enough truck drivers to haul the containers away, causing more delays, congestion, and shortages.

Energy costs spiked as producers hesitated to invest, fearing government regulation would make the investment unprofitable. This week’s threat from Congress to prohibit the export of oil and gas will raise the level of uncertainty and further restrain investment. Europe is in the same mess, having gone completely away from coal to rely on wind. This is generally a good idea if you have a back-up source of energy in case the winter is cold, or the winds are less than needed. Of course, Putin could threaten to reduce the supply of natural gas to Europe, which would cause immense pain.

Stocks spent the week trying to put the pieces of this puzzle together in an investment strategy. The task was complicated by the belief that stocks are already highly valued. If interest rates move up, as they did in the last half of the week, stocks will be under pressure, as will fixed income securities. Strong corporate earnings and stock buy-backs will cushion part of this blow.

The Fed, which implied it would not raise interest rates until the last half of 2022, does not know who the next Chairman will be. Current Chair Powell will be either reappointed or replaced. The announcement could come this weekend. The market does not need this additional uncertainty.

There are still 10,000,000 open jobs, so we do not expect the economy to rapidly deteriorate. Covid has been stubbornly unhelpful. Perhaps that will change soon. Maybe the bottlenecks in the supply chain will ease. Perhaps Congress will not pass another huge spending package. Any of these factors could determine the direction of the economy for 2022. That is why the investment picture is so complex.

This week’s market closed lower by less than 1%. The SP 500 was down -0.31%, the NASDAQ -0.69%. Monday the SP 500 was +0.09%, Tuesday -0.35%, Wednesday -0.82%, Thursday +0.06%, and Friday +0.72%. Our recommendation is for investors to stay in this market but increase the size of the companies in their portfolios and use more fixed income, especially our top-performing strategy.

Next week we will point out sectors that do relatively better in inflationary periods than others.

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 November 5, 2021

by Jim Ulland

Pfizer rode to the rescue on Friday.  It announced a treatment for those with Covid symptoms that is 89% effective if administered within three days and 85% effective if within five days.  Pfizer’s drug can be taken in pill form.  It is targeted at those who are not vaccinated and become infected as well as “break-through” cases of those who have been vaccinated.  A week earlier, Merck had announced a treatment that was about half as effective.  These are the first two oral treatments as contrasted with more cumbersome and expensive injections.  Having a treatment may provide a pathway out of the current conflict where the government is mandating that employers essentially fire workers who are not vaccinated by the New Year.  The government mandate may be extended to employers with less than one hundred employees.  These employers and economists fear a loss of workers as a result, which would have a negative impact on the recovery.  In summary, the Pfizer treatment has the potential to end the pandemic.

Stocks trended up all week boosted by positive news.  Corporate earnings reports continued to be impressive.  CEOs stated that demand remains strong, margins have improved, and most have been able to manage supply shortages, a problem they see as peaking.  This was the last big week of earnings reports.

Other positive economic news came from the Fed, which implied it would not raise interest rates until the last half of 2022, if then.  They did say they will reduce their bond buying, which the market had expected.  Interest rates trended down after these remarks and continued down for the rest of the week.  Low interest rates are generally favorable for business, particularly if inflation can be kept under control.  The surge of inflation may be moderating as the supply chain starts to normalize slightly.

531,000 more jobs were reported for October and another 100,000 were added as figures from September were revised.  More jobs means more consumers to support the recovery.  Consumer savings remains high and will provide strength for future spending.

Congress insisted on staying in the news, but not because of its efficient or collaborative work.  Some House members took the position that they wanted to know what the new safety net legislation would cost before voting on it.  They were roundly criticized for such rational behavior.

The market focused on the good news and propelled the SP 500 and the NASDAQ to new highs.  For the week, the SP 500 was up +2.00% and the NASDAQ +3.05%. Monday the SP 500 was +0.18%, Tuesday +0.37%, Wednesday +0.65%, Thursday +0.42%, and Friday +0.37%.  Our recommendation is for investors to stay in this market and resist the urge to go to cash.

Next week earnings season largely will conclude.  Expect more positive results.  Firms have been buying back their shares and this too will help the market’s upward track. Don’t look for relief in gas prices since OPEC will only increase production slightly and US production has been slowed by government restrictions.  Last Tuesday’s elections have concluded but expect Congress to stay in full battle gear for 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. 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