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by Jared Plotz, Director of Research

Markets, both equities and fixed income, moved lower this week. Fears of a resurgence of inflation were stoked by a hotter (i.e. stronger) jobs report in addition to rhetoric on tariffs and percolating concerns of a rising US fiscal deficit. The S&P 500 fell -1.9%, while the Nasdaq fell -2.3%. The 10-Year Treasury, an interest rate indicator, closed the week at 4.76%, up +16 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended up +2 bps at 4.30%.

Economic data was strong this week. One measure of business confidence reached an 18-month high and showed “new orders” for services expanding at the fastest pace in nearly three years. Job Openings (JOLTS) for December were higher than expected, with over eight million vacancies – a sign that businesses are looking to hire. Friday’s monthly employment report showed that the US added 256,000 jobs in December – 100,000 more than expected – while the unemployment rate ticked down to 4.1%. A stronger labor market is often viewed as one contributor to inflation and a reason for the Federal Reserve to be less aggressive lowering benchmark rates.

Speaking of the Federal Reserve, many members echoed an opinion this week that the inflation fight is not yet done. This is partly attributed to the most recent uptick in inflation readings and employment/wage growth. However, according to the group’s minutes from its last meeting, it also originates from the impacts of potential changes to government trade and immigration policy. The rise in interest rates this week was led by a combination of stronger economic data and a Fed that is less confident in the speed at which inflation will return to its 2% target.

In stock portfolio news, Nvidia CEO Jensen Huang confirmed that Blackwell systems (the firm’s newest chip line) are in full production and the company is seeing expanding use cases, including into robotics. Meanwhile, Microsoft announced they would spend $80 billion over the next year building AI-enabled datacenters. While we believe the AI wave still has a long runway ahead of it, we are actively considering trims to our AI position weights over the coming weeks to manage overall exposures.

Next week brings the start to fourth-quarter earnings reporting by companies. The big banks will give us the early look starting Wednesday. On Tuesday, the PPI inflation report for December will be released, with the CPI report out on Wednesday. Both will be watched closely to determine whether the recent uptick may be the start of a broader reacceleration in prices.

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.

by Jared Plotz, Director of Research

An upbeat Friday capped off what was a “no-show” by the seasonal Santa Rally – in fact, major stock indices declined five straight trading days surrounding the turn to the New Year. Friday’s bounce helped the S&P 500 end the shortened week down just -0.48%, while the Nasdaq fell -0.51%. The 10-Year Treasury, a rate indicator, closed the week at 4.60%, down -2 bps from last week. The 6-Month Treasury, a favorite of our US Treasury strategy, ended down -2 bps, at 4.28%. Preferred securities improved this week as pressures from the recently rising long-term rates eased.

As we look ahead towards what 2025 may have in store, it’s always worth revisiting where we have been. 2024 turned out to be another banner year for the equity markets, despite low expectations entering the year. Major Wall Street strategists, as a whole, predicted the S&P 500 would end the year either at a loss or an ever-so-slight gain. Instead, the S&P 500 Index rose 23.3%, on top of a 24.2% gain the year before.

Within fixed income, the S&P Preferred Stock Index rose more than 9% in 2024, despite a rise in long-term interest rates, as the 10-Year US Treasury rose 69 basis points (0.69%). Inflation did come down through the year, and, as the Federal Reserve shifted towards reducing short-term rates, the yield curve “steepened” (i.e. short-term rates moved below long-term rates – typically good for the economy). Amidst these shifts, UIA’s flagship strategy, Intelligent Fixed Income, vastly outperformed its benchmark, as did our principal equity strategy.

Looking forward, even though equity markets notched their second consecutive 20%+ return, we still see reasons to remain optimistic for 2025. We will save the underlying drivers for our quarterly piece, but we will note here that not all stock performance was the same in 2024. The markets were led heavily by the largest companies in the technology sector. The equally-weighted S&P 500 index – a better representation of the average stock in the market – was up a more modest 11% this past year. If market leadership can broaden further from the mega-sized tech companies to other pockets of the economy, this could provide additional support to the major indices.

News flow picks up next week. On Tuesday, we will get the JOLTS job openings for November. On Wednesday, we will read the Federal Reserve’s minutes from their December meeting. Equity markets will be closed on Thursday in recognition of the National Day of Mourning for former President Jimmy Carter. Then on Friday, the jobs report for December will be released. Economists are expecting payrolls to rise by 155,000 positions.

As we enter this bright new year, we request clients remain diligent when clicking on links in their personal emails and texts, or when entering passwords. Our firm’s custodian of client assets recently highlighted active “phishing” campaigns that attempt to compromise personal data.

Have a great start to 2025 this weekend!

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.

by Jared Plotz, Director of Research

It proved to be a very quiet week. Equity markets rose ahead of the Christmas holiday and then drifted lower afterwards. The S&P 500 ended the shortened week up +0.67%, while the Nasdaq rose +0.76%. The 10-Year Treasury, a rate indicator, closed the week at 4.62%, up +9 bps from last week. The 6-Month Treasury, a favorite of our US Treasury strategy, ended up +1 bp at 4.30%. Preferred securities were pressured by the rise in long-term interest rates, with the 10-Year yield up +45 bps since November. However, we still expect that if inflation can remain manageable and the Federal Reserve reduces short-term rates, long-term rates will follow lower, a potential benefit to Preferred securities next year.

Consumer Confidence, measured by the Conference Board, weakened in December, though survey participants noted tamer expectations of inflation with a weaker job outlook. In line with the latter outlook, weekly continuing unemployment claims were the highest in three years. Official job openings data for November won’t come for a couple weeks, but indicators suggest fewer available positions. Given the Federal Reserve’s dual mandate of promoting stable prices and maximum employment, a looser job market would give weight on the balance towards rate cuts.

More notable headlines came from outside the US, with China’s industrial profits falling harder than anticipated and another presidential impeachment in South Korea. Lawmakers in South Korea voted to impeach the acting president after impeaching the prior president less than a month ago. Meanwhile, a big merger of steel companies hangs in the balance, as President Biden weighs whether to block Japan’s Nippon Steel from acquiring U.S. Steel.

Wall Street activity will be slowed again by the New Year’s Day holiday next week. The markets, and our office, will be closed Wednesday. Economic readings and regulatory decisions will again be rather quiet as the December jobs report gets pushed to the following week. Happy New Year from all of us at UIA!

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.

by Jared Plotz, Director of Research

Volatility has picked up. The Chicago Board Options Exchange maintains an index that tracks stock market volatility, known as the “VIX.” The index remained low and range-bound largely for the entirety of the first half of 2024. It spiked notably in late July around the time that President Biden dropped out of the election race. It remained a bit higher in the second half of the year with a few spikes, the most recent being this week. Oftentimes, the market becomes more of a “stock-picker’s market” when volatility rises. It can be argued that as the correlation between equities declines (i.e. not all stocks going up in unison), the value of an investment manager’s research and discretion (“picks”) increases. We will see if this trend gathers steam in 2025.

During the week, the S&P 500 slumped -1.99%, while the Nasdaq fell -1.78%. On Monday the S&P 500 was +0.38%, Tuesday -0.39%, Wednesday -2.39%, Thursday -0.09%, and Friday +1.09%. Sectors that outperformed the broader move included Technology and Utilities, while laggards included Energy and Real Estate. The 10-Year Treasury, a rate indicator, closed the week at 4.53%, up +13 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended down -3 bps at 4.29%. The rise in longer-term rates has pressured fixed income securities of late.

The week’s big news was the Federal Reserve meeting on Wednesday. The rate-setting committee lowered its benchmark rate by 25 basis points, as was widely expected. The more noteworthy development was the group’s updated economic projections, which they adjust on a quarterly basis. In 2025, real GDP is now anticipated to expand by 2.1%, a small improvement from 2.0% in September’s forecast. Inflation, as measured by the personal consumption expenditure index (PCE), is anticipated to rise by 2.5%, a notable uptick from 2.1% prior. And two rate cuts are now forecast for 2025, down from four cuts a quarter ago and the three cuts investors had penciled in. Despite the higher expected economic growth, the mix of higher inflation and fewer rate cuts contributed to the rise in the 10-Year Treasury and the pullback in stocks Wednesday/Thursday. The group will next meet during the last week of January.

Elsewhere in economics land, November retail sales were stronger than expected (+0.7% from October) while manufacturing readings were weaker. Housing starts and building permits were mixed. The final reading of GDP for the third quarter moved up to +3.1% (annualized rate), from 2.8%, suggesting the economy remains strong. Lastly, the third major inflation reading of the November month showed that PCE rose at a more tepid pace. That data point contributed to the market’s bounce back on Friday.

Wall Street activity will be slowed by the holiday next week. The markets, and our office, will close at noon central on Tuesday before trading resumes Thursday morning. Economic readings and regulatory decisions will also be rather quiet. We wish a safe, warm, and happy holiday to you and yours next week!

Before we go, we’d like to highlight the Minnesota Star Tribune’s feature on Jim Ulland that was published yesterday, and which we sent via email. If you missed it, the link to the feature on the Star Tribune website is HERE.

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.