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Weekly Market Update for September 10, 2021

by Jim Ulland

Following the poor new jobs report on Friday 9/3, the market declined every day thereafter including this Friday. Ironically, the relatively low number of new jobs filled was contrasted with 10.9 million open positions, a record. It seems many are reluctant to go back to work. Perhaps this will correct now that the bonus unemployment checks have ended, the vaccination rate is higher, and schools have reopened for in-person teaching allowing many parents to go back to work.

One thing the Delta variant has done is to urge more to become vaccinated. The one-shot vaccination rate is up to 75% for adults. On Thursday, the President announced a new mandate for employers of over one hundred workers. They are to require employees to be vaccinated. Dr. Scott Gottlieb, the former FDA Commissioner and frequent commentator on CNBC, said that this requirement is likely to take so long to implement that the Delta wave will be over. He noted that OSHA, the agency charged with implementation, would have to develop rules. This process is lengthy, and even more so on an issue with high controversy. Dr. Gottlieb said that the current voluntary system is working and even a mandate is unlikely to bring the vaccination rate over 90%. Others suggest that there will be a constitutional challenge, further delaying the mandate. As an aside, our office is 100% voluntarily vaccinated.

The Delta variant drag on the economy was only one of this week’s negative factors. Inflation is still with us. The Producer Price Index came in “hot” at an annualized increase of 8.3%, the highest in the index’s history. China continued to penalize its large technology companies, many of which are traded on US exchanges. The fiscal stimulus is coming to an end. There might be one more burst of spending from the proposed $3.5T “infrastructure” bill, but passage is far from assured. Should it pass, it will fuel worries about inflation and an economic drag from the large number of tax increases.

All was not doom and gloom. Corporations continued to buy back their stock. Consumers are still sitting on high levels of savings. Interest rates remained historically low and stayed fairly flat for the week. GDP estimates were revised slightly lower, but only to 6%, still two to three times higher than normal. There seems to be plenty of recovery left.

We are keeping client portfolios fully invested for now. Our view is that the recovery has twelve months to go before headwinds increase. There is too much power in the recovery to move to cash or government bonds, neither of which pay anything. Naturally, as a boutique, we can change this view quickly as economic signals warrant.

Both the SP 500 and the Nasdaq lost ground this week. The NASDAQ was off -1.61% and the SP 500 by -1.69%. Tuesday the SP 500 was -0.34%, Wednesday -0.13%, Thursday -0.46%, and Friday -0.77%.

Next week the political fires may heat up. The Recall vote on CA Governor Newson will be held. He is leading in the polls. The CPI number will be released probably confirming more inflation concerns. Afghanistan is likely to stay in the news, but no hurricanes are scheduled. Looks like a beautiful weekend in MN, 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 September 3, 2021

by JM Hanley

The market as a whole drifted upward again this week. That masked significant dispersion, as growth stocks significantly outperformed cyclical companies that benefit most from reopening. Rising concerns about the Delta variant’s affect on growth have weighed upon the latter. Industrials, energy firms, and banks (which benefit from higher interest rates) underperformed the most. Large tech companies like Google, which tend to grow no matter the state of the economy, led the market higher. The SP 500 finished the week up 0.6%; the Dow was down 0.2% and the tech-heavy Nasdaq was up 1.6%.

Today’s jobs report was the marquee release of the week, and it sent mixed signals. Many fewer jobs were created last month than expected as the Delta variant spread across the US. On the other hand, the unemployment rate went down, as much as it has in every month of 2021 so far. Wages continue to increase, albeit not as fast as inflation. E Employees are also working more hours than they were before the pandemic. Job openings, and people quitting their jobs, also increased. The number of available jobs per unemployed worker is at a record high.

In other words, the Delta variant has caused some of those without a job to put off looking for work for longer. Labor force participation has decreased. The expiration of high pandemic unemployment benefits next week may change their calculus. The economy will benefit if they find their way back sooner rather than later. The long-term unemployed typically find it hardest to return to the workforce. Overall, the economy remains seven million jobs short of where it ought to have been before the pandemic.

Because the poor report was due to fewer people looking for work – rather than economic growth slowing – it’s unlikely to change the Fed’s behavior. The Fed will probably reduce bond purchases, one of its two support mechanisms to prop up the pandemic economy, at its December meeting. That minimized the report’s impact on the market.

Next week seems to be relatively light on news. Wednesday will bring data on job openings, while one indicator of August inflation will come on Friday. Our office will be closed Monday for the Labor Day holiday.

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 August 27, 2021

by Jim Ulland

Federal Reserve Chair Powell knows how to end the week on an upbeat note. After the troubling international and domestic headlines, he calmed the markets by saying the Fed was not through providing stimulus to the economy in the form of continued low interest rates. Many felt his Jackson Hole retreat comments would signal a reduction in the asset-purchase plan used to keep rates low. However, he said this “tapering” would not begin until year-end and that it would not signal an immediate interest rate increase. This now is expected at the end of 2022. The market embraces statements like this since low interest rates tend to fuel the economy and the stock market.

During the week, the market ignored the problematic rise in the Covid Delta variant. There is not a rush to close the economy again. The public seems willing to manage around this health problem and allow more parts of life to return to normal.

Inflation concerns also took a back seat to Chairman Powell’s remarks. This was despite the rise in crude oil prices by 10% and the announcement by the largest chip manufacturer in the world, Taiwan Semiconductor, that it was increasing prices by up to 20%. Chips shortages, which have slowed auto production, are expected to be in short supply well into next year. Unemployment filings were up marginally, but still bumping along a pandemic low. The July Consumer Price Index was up 4.2%, well above the Fed’s 2% target, the fastest pace in more than twenty-five years, but slightly below expectations.

Afghanistan generated big headlines, but the market seemed to lump that story in the political rather than economic news category. As tragic as the Afghanistan story is, it has not had an impact on the market, yet. Other political news was important, but not to the market. The Supreme Court allowed the renters’ eviction moratorium to expire. And the $3.5T “infrastructure” bill is not close enough to passage to cause alarm. Fears linger that this amount of additional spending will trigger inflation. The tax increase provisions in the bill are both numerous and substantial. If passed, these could slow the recovery. That concern will intensify if the legislation gets closer to passage.

Pandemic news was largely positive. The Pfizer/BioNTech vaccine received final approval. Previously, it and all other Covid vaccines had been for “emergency use only”. Official approval may encourage more to get vaccinated. A high vaccination rate is the ultimate defense against the pandemic.

The market wants to go up. By the end of the week, both the SP500 and the NASDAQ had set new records. For the week, The NASDAQ was up +2.82% the SP 500 was up +1.52%. Monday the SP 500 was +0.85%, Tuesday +0.15%, Wednesday +0.22%, Thursday -0.58%, and Friday +0.88%.

Next week, watch for the report on net new jobs created in August.

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 August 20, 2021

by Jim Ulland

For a summer week, headlines were unusually bold. The stories behind the headlines included: “Vaccines and Booster Shots to Prevail Against Covid Variant.” This story developed as the fear of Delta variant infections drove more of the unvaccinated to the get theirs. Higher Delta exposure wasn’t the only fear raised. More infections meant some reintroduction of restrictions on restaurants, entertainment, and other gathering spots. Retail in July was down more than expected as many returned to online shopping. Amazon surpassed Walmart as the world’s largest retailer. Yet the public seems to have little tolerance for another lockdown and thus most elected officials have been reluctant to reimpose the restrictions just lifted.

A second story was inflation. We all know it is lurking, but crude oil has had seven straight days of decline. Lumber is 73% below its May peak and back to the level before the price spike. Soon the special unemployment payments will end, taking some wage pressure out of the mix. That is not to say inflation is subdued, but it has slowed.

A third story was Afghanistan and the clumsy withdrawal. In economic term, our economy doesn’t know the country exists. It is small, remote, and almost totally disconnected from the US as either a supplier or a market. History suggests Afghanistan will be soon forgotten…unless all of the US weapons left behind create a well-armed and destabilizing Taliban. Afghanistan is still a major political story and tragedy, so its major short-term impact may be in the midterm elections.

A fourth story is that of China. It is playing nice with the Taliban so that it can control the rare metals deposited in those rugged mountains. However, China is not playing nice with its large tech companies. Xi Jinping doesn’t like powerful people like the CEOs of its large tech firms. He deems them too rich as well as having better information on China’s citizens than the government. We have reduced our exposure to Chinese stocks by more than half due to this uncertainty.

A final story is that the market continues to grind forward. The SP 500 has set 48 all-time highs since last December. In the history of the SP 500, there has only been one year when it set more highs, 1964. Part of the fuel in the market came from the very strong corporate earnings reports from Q2. CEOs raised their predictions for revenue and profit growth for Q3. Many companies announced stock buy-backs which tend to drive stock prices and earnings per share up. Our view is that the market will go higher, and investors should stay invested. For those who want a more defensive positioning, our fixed income strategy, Intelligent Fixed Income, continues to rank exceedingly high among all fixed income managers producing a current yield between 4-5%.

For the week, The NASDAQ was down -0.73% and the SP 500 was down nearly the same at -0.59%. Monday the SP 500 was +0.26%, Tuesday -0.71%, Wednesday -1.07%, Thursday +0.13, and Friday +0.81%.

Next week, watch as the stories above make new headlines. It is unlikely that the market will find them so unsettling that it is knocked off its grind upward.

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