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Archive for December, 2021

Weekly Market Update for December 31, 2021

by Jim Ulland

The week and the year ended on a positive note as the S&P 500 booked a couple more records.  News was light on everything but Omicron.  The variant was characterized by research from South Africa as having milder symptoms and fewer hospitalizations than its predecessors. The same limited data suggests that those who have had Omicron have strengthened immunity to the Delta variant. This gave cover to government officials who, knowing the public would not tolerate another set of lockdowns, did not announce them.  Holiday sales figures came in very solid and added to a positive quarter-end.  Unemployment filings continued to bounce along a fifty-year low.  The number of workers already on unemployment fell to low, pre-pandemic levels.  For those worried about a market crash or a recession, it is improbable to have either when everyone and their dog are working, inventories are low, and eleven million jobs are unfilled.

Fourth-quarter earnings reports will start in two weeks.  They will be good, although supply chain pressures will hurt some company results.  Consumer savings are high and some of these dollars have boosted demand.  Low inventories mean fewer mark-downs and expanded margins. Expanded margins mean better profits.  Better profits result in higher dividends, additional stock buy-backs, and more valuable share prices.  If interest rates stay in check and only move higher gradually, the market should do well as 2022 starts once it shakes off the drag of Omicron.  This week the 10-Yr Treasury hovered around 1.5%, still historically low and continuing to provide a favorable tailwind.

Intelligent Fixed Income (IFI), our popular fixed income strategy, ended the year with a return solidly over 5%, remarkable in this yield-starved environment. We will have comparative rankings soon and we expect to be very near the top for performance once again.  Today’s low interest rates have put a lot of pressure on those trying to generate meaningful income from their portfolio.  If you have an acquaintance or friend in this circumstance, we are delighted to explain the IFI strategy to them.

On Monday, the S&P 500 was up +1.38%, Tuesday -0.10%, Wednesday +0.14%, Thursday -0.30%, and on Friday -0.26%.  For the year the S&P 500 was up 26.89% and the NASDAQ +21.39%.   Quite a year.

Next Tuesday we will get some important information from the ISM Manufacturing Index followed on Thursday by the ISM Non-Manufacturing Index.  On Friday, the biggest economic news of the week will come from the December jobs report.   The jobs numbers may be pressured by the Omicron impact on travel, entertainment, and food and beverage.  Another chapter will be written in the inflation story in January.  With crude oil headed back up, don’t expect any relief at the gas pump.

Warmest wishes to all in this New Year.  We appreciate and value the opportunity to work with you.

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 December 23, 2021

by Jim Ulland

On Monday, the market thought Omicron was the Black Plague.  By Tuesday, it looked more like the flu.  And that was the story of the week.  The S&P 500 overcame Monday’s loss and ended the week up a net +2.28% for a record high.  The NASDAQ did even better this week, up a net +3.19% but fell just short of a record.  Part of the turnaround news came out of South Africa where Omicron cases dropped sharply.  Their researchers suggested that the rapid spike up and now the spike down might be the pattern other countries will experience.  Pfizer provided some support to the market when its drug for the newly infected got FDA approval.  The drug can be taken at home, another advantage.

The public has no appetite for more lockdowns and school closings.  The Biden administration seemed to sense this public sentiment and encouraged schools to stay open.  Also the administration announced that new home Covid rapid test kits will be available to the public free.  Unfortunately, these were just ordered, so the delivery on this program may come well after the Holidays.

Economic news was on balance positive. Consumer confidence was higher than expect.  Unemployment filings stayed unusually low.  November existing-home sales were higher than October.  Durable goods orders were up.  November personal spending and income were both up. There was also some relief when Senator Manchin said he could not support the large spending bill Congress is considering.  His concern, shared by many, was that the spending was inflationary and would raise the deficit.  Also the bill contained an endless list of tax increases, which normally are a drag on the economy.  However, as they say in Washington, no bill is ever dead, so stay alert to this one.

Interest rates, as reflected in the 10-Yr Treasury, rose during the week, but still stayed in the 1.4-1.5% band.  There are some signs that the supply chain bottlenecks are diminishing, and that inflation may have peaked.  More data is needed to draw any hard conclusions.  30-Yr Treasury bonds are below 2%, which implies that the bond market does not anticipate runaway inflation.

Even with the rise in the 10-Yr Treasury, our fixed income strategy, Intelligent Fixed Income (IFI) was up.  With a week to go, it looks probable that the total return in our fixed income strategy will be between 4.5% and 5% for the year.  We expect these returns to be near the top of all managers of preferred stock strategies.  Our equity strategies generally were ahead of the market as well.

On Monday, the S&P 500 was down -1.14%, Tuesday +1.78%, Wednesday +1.02%, Thursday +0.62%, and on Friday the market will be closed all day.   Our office also will be closed.  We will be back on Monday for the last week of the year.  It should be quiet, but then that was supposed to happen during the tumultuous Thanksgiving week.

Warmest wishes as the year comes to close.  Give yourself a “booster” for a present.  There is little to be said for running unnecessary risks.

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 December 17, 2021

by Jim Ulland

The market grew increasingly anxious this week with the Omicron news and the potential for more lockdowns or other economic restrictions.  The fear that this variant could sweep across the country and bring the recovery to a halt was widespread. Yet, Pfizer’s treatment pill was shown to reduce hospitalizations, and more were getting vaccinated and boosted.  Other studies showed that Omicron had higher rates of transmission but milder symptoms. None of the positive news seemed to matter as the market fell four of the five days.

The only day the market rose was Wednesday when the Fed announced its latest views on interest rates and inflation.  The Fed plans to raise the Fed Funds rate from about 0.2% to 0.9% during 2022.  These rates are still historically low; however, this is a policy change in the direction of higher interest rates.  Rising interest rates are normally a headwind for stocks.  The Fed also confirmed that it had miscalculated inflation and that it was likely to stay higher than their target until the end of 2022 when it once again should go below 3%.  The latest inflation report showed November producer prices rose at an annualized pace of over 9%.  Rising producer prices will push up future consumer prices.  The combination of a changed direction in the Fed’s interest rate policy and a huge rise in the Producer Price Index hurt the market.

The current thinking is that Covid is keeping a lot of workers from returning to the work force.  Unemployment filing were historically low again although a little higher than last week.  Strong demand and a shortage of workers does force wages higher and feeds inflation.

Despite the market’s unsettled state and the inflationary flames, interest rates stayed virtually flat for the week.  This helped our fixed income strategy, Intelligent Fixed Income (IFI) to have strong performance.  The total return of this strategy is over 4.5%, excellent in this low-yield environment.  Our equity strategies declined with the downward move in the SP 500 of -1.68% and the NASDAQ of -2.95%.

Our hope for 2022 is that by the middle of Q1 Covid will be more manageable, and inflation will have peaked.  However, there could be a lot of volatility until we get there. We expect interest rates to grind slowly higher throughout the year, influenced by the Fed’s policy change.

On Monday the S&P 500 was down -0.91%, Tuesday -0.75%, Wednesday +1.63%, Thursday -0.87%, and Friday -1.03%.

Next week should be quiet on the news front as Christmas approaches.  There will be some indicators of holiday spending levels as well as reports assessing inflation.  Covid/Omicron is likely to trigger additional market volatility. Be prepared.

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 December 10, 2021

by Jim Ulland

Inflation is turning out to be less “transitory” than hoped.  Today’s CPI number confirmed this concern as the annualized inflation rate stayed over 6%, down slightly from October.  Labor still is in short supply, although more are returning to the workforce. Unemployment filings hit a 52 year low on Thursday and open jobs increased to eleven million. Housing is tight and rents are up.  Lumber prices are higher again.  With the continued inflation, at its meeting next week, the Fed is expected to reduce its bond buying program earlier than planned.  Bond buying has kept short-term interest rates lower than they would have been otherwise.

Of course, interest rates are influenced by more than the level of inflation.  The renewed Covid fears caused a steep drop in rates last week with some recovery this week. Pfizer announced high effectiveness of both its vaccine and its booster against the new variant.  Also, symptoms seem to be milder for those infected than from the initial Covid surge. This calmed the market.

Our preferred securities in our fixed income strategy IFI are up about 1% in December because of a stabilizing interest rate environment.  Equities also surged higher during the week.  The NASDAQ was up +3.61% and the SP 500 +3.82%.  The SP 500 exceeded its all-time high on Friday. The NASDAQ is 2.7% below its high.  Remember that if you are in cash, you are both going backward in purchasing power because of the inflation and you are missing a market that continues to move upward.

There are “black swan” events that could disrupt.  One of these apparently was resolved, an agreement to raise the government debt ceiling.  Other international events simmer.  Russia could invade the Ukraine and China could do the same with Taiwan, although probably not before the Olympics are over.  Other than these unlikely occurrences, we expect continued strong corporate profits, more stock buybacks, robust consumer balance sheets, historically low interest rates, and a gradual loosening of the supply chain bottlenecks.  Market volatility should diminish as the Omicron variant is managed.  One good result is that the increased concern about infection has encourage more to get vaccinated or boosted.

On Monday the S&P 500 was up +1.17%, Tuesday +2.07%, Wednesday +0.31% Thursday -0.72%, and Friday +0.95%.

Next week the news will focus on the Fed meeting.  Year-end tax planning is on many to-do lists.  Remember that if you are 72, you are required to take a distribution (RMD) from your IRA.  RMDs were not required last year.

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