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Archive for March, 2022

Weekly Market Update for March 25, 2022

by Jim Ulland

It didn’t seem like the market went up almost 2% this week, but it did.  This follows a 6% surge by the S&P 500 a week ago and an 8% spike by the NASDAQ.  The rise this week was masked by a lot of market volatility and the news dominance of the Russian invasion.  Inflation and increasing interest rates found frequent headlines as well.

The market is sensing a peace deal soon, which may explain two weeks of market recovery.  The Ukraine had some battlefield victories, one of which included blowing up a Russian warship docked at a Ukrainian port.  The ground war had fallen into a stalemate.  Ukraine even recaptured one small town.  The most significant remarks of the week came from Putin who said that the world was trying to cancel 1000 years of Russian culture.  The sanctions must be working.  The President of Turkey, who has taken a mediator role, said that peace talks were focused on six issues, four of which were near agreement.  As farm fields get muddy, making troop movements impossible, time may now be on the side of Ukraine.

The Russian invasion has hurt the Fed’s efforts to control inflation.  Oil and gas shipments are disrupted and that is shown in the price of each.  Corn and wheat are dramatically higher since Russia and Ukraine are two of the world’s largest producers.  Ports and bridges are damaged, and farmers are rightly afraid to be out in the open planting.  Metals produced in Russia like aluminum and nickel have seen prices soar.  Freight rates are up for international goods shipments. Unemployment filings for the week dropped to a very low level. Inflation will not be easy to control.

The Fed could make a big mistake in its attempt to control inflation. One problem is that it only has interest rate increases as a tool.  Moving rates up too fast could tip the economy into recession.  Home mortgages already are up a full percent.  Home sales are down, although this is partly from a lack of inventory.  The geopolitical uncertainty and higher interest rates may freeze business decisions and slow growth further. Slower growth or a recession would stabilize and then reduce interest rates.

The Russia/Ukraine talks are ongoing.  An agreement would trigger a big market recovery.  Prices too would moderate some.  We see potential for an agreement in April.  The sooner the better.

For the week, the S&P 500 was up +1.79% and the NASDAQ +1.98%. Monday the S&P 500 was down -0.04%, Tuesday +1.13%, Wednesday -1.23%, Thursday +1.43%, and Friday +0.51%.

Next week, the biggest news will be from the March net new jobs report.  If job growth starts to weaken, an economic slowdown will not be far behind.

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 March 18, 2022

by Jim Ulland

Did we see the market’s bottom on Monday? ‘Sure looks like it. On Monday, the NASDAQ hit Bear Market territory, down 20% from its high. By Friday, the NASDAQ was up 8.18% for the week including Monday’s 2% decline. All three major indices had their best week since November of 2020, the month that the first results of the Pfizer Covid vaccine were announced. Think what would happen if we had a cease fire and then a peace agreement.

The Russia/Ukraine talks are ongoing. Unfortunately, Russia’s pattern in Chechnya was to talk and bomb. Russia literally bombed Chechnya to bits, at which point whoever was alive surrendered and the country became a vassal of Russia. The difference in Ukraine is that the sanctions are very strong. Over time, Russia’s economy will be driven into a recession. On the war front, Russia is looking at either a decades long guerilla war or a peace agreement. China, which could safety-net Russia and blunt sanctions, implied that it would prefer to stay somewhat “neutral.” The market seems to sense that an end is coming. Putin knows that a muddy spring in Ukraine, which is near, makes the worst possible conditions for troop and equipment movements. Perhaps the weather also will drive him towards peace.

Other than the war and China getting another dose of Covid, the big news of the week was the Federal Reserve’s plan for interest rate increases. On Wednesday they raised interest rate by 0.25% and said six more raises of 0.25% could be expected this year. One of the Fed’s mandates is to control inflation and create price stability. The only tool they have to do this is by raising or lowering interest rates. In an economy short of goods because of a tight labor market and supply chain bottlenecks, increasing interest rates might not be as effective as hoped. Congress has no vow of price stability and runs counter to the Fed’s efforts by increasing spending, thus demand, thus higher prices.

Economic growth has not succumbed to inflation or labor shortages. In fact, corporate profits are still rising. The 2022 GDP growth estimates have been reduced but remain above the 2.1% norm. If the Fed slows the economy too much, we will have a recession. Interest rates will then decline. In fact, after the Fed’s increase on Wednesday, interest rates did decline and were flat Tuesday through Friday. This allowed a nice recovery in our fixed income strategy, Intelligent Fixed Income, which has a current yield of approximately 5.5%.

When a deal is announced, we expect a dynamic market recovery. That is why we recommend staying fully invested. Those with patience were rewarded this past week.

For the week, the SP 500 was up 6.16% and the NASDAQ +8.18%. Monday the SP 500 was down -0.74%, Tuesday +2.14%, Wednesday +2.24%, Thursday +1.23%, and Friday +1.17%.

Next week, the Fed governors and the Fed Chairman will give a total of 15 speeches. They are attempting to formulate an economic message that distills to that TV line, “We got this.” Let’s hope they do. Spring arrives Sunday, another sign of renewal. Enjoy.

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 March 11, 2022

by Jim Ulland

The market is a hostage to war headlines. On Wednesday, the President of Ukraine said he was willing to discuss neutrality and not to seek NATO membership. The SP 500 went up 2.57% and the Nasdaq 3.59%. On Thursday evening, Putin said, there were “certain positive shifts” in the talks and the pre-market was up over 1%. That quickly faded as Russia intensified its bombing of new Ukrainian towns. The very strong market on Wednesday suggested that the market could spring back once a peace agreement is reached.

Everyone knows that inflation has hit the economy hard. That was quantified on Thursday when the February CPI was announced. Prices were up 7.9% over the last twelve months, the fastest annual pace since 1982, forty years ago. The Fed’s effort to reduce inflation could depress economic growth. The Fed’s primary tool to slow inflation is raising interest rates. The Fed is expected to announce its first raise of 0.25% next Wednesday. At least three more raises are predicted for 2022.

If economic growth slows, corporate profits will also. Reduced profits will make it harder for the stock market to recover. Fixed income securities, including our highly rated Intelligent Fixed Income strategy, have been hurt by this combination of inflation, higher interest rates, and potentially slower growth.

For the financial markets to recover, the first imperative is a peace deal. This will stop the deterioration in the world’s supply chains. Supply chain disruption is an important cause of price increases. A peace deal also will reduce fear that is in the market. Many worry that Putin could use nuclear weapons on the Ukraine, or even possibly Europe and the US. That fear could be responsible for as much as 5% of the market’s decline. Congress too must show spending restraint. More spending creates more demand. More demand raises prices. Higher prices force the Fed to raise interest rates faster. And faster rate increases will slow the economy, perhaps forcing a recession.

It is impossible to determine when a peace deal will be reached. When a deal is announced, we expect a strong market recovery. That is why we have stayed almost fully invested. For those in cash, the snapback is likely to be missed. It is hard to be patient as the market worries its way lower. For those who take a longer view and ask where the market will be in six months, the answer is “probably higher.” It seems like an eternity to get there, but day by day we will.

Other news in the market was over shadowed. Amazon’s decision to split its shares 20-for-1 was followed by a jump in its stock price. Unemployment filing stayed low. The Iranian talks bogged down under more demands for concession by Russia, the mediator. Many think any deal Iran will accept will be bad for the West if it brings Iran closer to having nuclear weapons and cash for funding terrorists.

For the week, the SP 500 was down -2.9% and the NASDAQ -3.5%. Monday the SP 500 was down -2.95%, Tuesday -0.72%, Wednesday +2.57%, Thursday -0.43%, and Friday -1.3%.

Next week, the big news will be from the Fed. It is likely to raise interest rates by 0.25% Wednesday. Although this is expected, the language in the announcement will be market moving since it may indicate the pace of future raises. Other than the Fed, next week will be all about Russia’s invasion and the progress of peace talks. Our thoughts are with the beleaguered Ukrainians.

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 March 4, 2022

by Jim Ulland

The horrors and tragedy of war are being shared live by the Ukrainian fighters and victims by cell phone. The ruthlessness and recklessness of Putin is evident for the world to see, most graphically in the rocket attack on the Ukrainian nuclear power plant, the largest in Europe. It is little wonder that the war dominated this week’s market.

The war was so pervasive in the news that covid ended without even a celebration. Also smothered by war reports was relatively sound economic news on the US economy. Job growth in February was 678,000 and unemployment fell to 3.8%. Average hourly earnings were flat, perhaps signaling a slowing pace of wage increases. The February manufacturing index was up as well. Interest rates, as reflected in the 10 Yr Treasury, dropped sharply. The Fed brought some definiteness to its plans to raise rates, hinting at a quarter of a percentage point hike in March. They also implied an increase for the entire year of 1%. All of this was welcome news.

What was less welcome was the consequences of the war. Wheat was up 6.6% on Friday alone, 57% so far this year. Russia and Ukraine are the first- and third-largest wheat exporters, respectively. Less developed countries, where wheat and bread are staples, could see unrest. Crude oil too was up sharply on Friday, 6.8% and 47% so far in 2022. Russia is the world’s second-largest producer with 12% of the total. The cost of going to work, going on vacation, and transporting goods will reflect these cost pressures soon.

US markets will snap back once there is a truce or an end to the conflict. However, it is very difficult to see how or when this will happen. Putin seems intent on bombing Ukraine back to the Middle Ages. He may even threaten Europe with blowing up the nuclear power plant his forces just captured unless sanctions are eased. If Russia takes all of Ukraine, it will then border Poland, a NATO member, creating ongoing tensions.

The decline in interest rates has allowed our fixed income strategy to begin a recovery. We expect considerably more. The IFI strategy currently produces a 5%+ dividend. The pullback in the equity markets and the reduced GDP expectations from a war-disrupted world should slow the Fed’s pace of interest rate hikes. This would be another benefit to the strategy. Equities are due for a powerful snapback for those investors with patience.

For the week, the SP 500 was down 1.27% and the Nasdaq -2.78%. Monday the SP 500 was down -0.24%, Tuesday -1.55%, Wednesday +1.86%, Thursday -0.53%, and Friday -0.79%.

Next week, there may be a deal with Iran to get its oil back on the market without restrictions. The US is in a weak position to protect against Iran funding terrorist organizations with the funds or accelerating its nuclear development. The last thing needed is another reckless nuclear player. On Thursday, the February CPI will be released. Although wage growth has moderated, expect the worst from other components, especially commodities.

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