Weekly Update Archives

by Jim Ulland

What just happened? The Nasdaq was down more than 2% twice last week and up 1% or more twice. The yield on the 10 Yr Treasury spiked upward to pre-pandemic levels and hurt fixed income securities. Growth stocks fell sharply and value stocks like banks and energy did better.

The market does not like the latest stimulus package. Less than 10% of the spending is for Covid treatment and faster vaccinations. The money for schools will not be spent for a year, so it will be of little help in getting kids back in classrooms now. 75% of the $1.9T goes to individuals and is viewed as untargeted and potentially inflationary. This potentially inflationary spending will be on top of spending of savings accumulated from cancelled vacations and limited out-of-home dining or entertainment. Exacerbating this spending level is the proposed infrastructure bill that would spend almost twice as much.

Covid cases and deaths have dropped dramatically. Progress on getting more people vaccinated continues at an increasing pace. The supply of vaccines grows with J and J’s vaccine soon to be approved. As this happens, the lockdowns will be lifted. Many of the ten million people still unemployed will return to work. Corporate profitability will improve. In this type of robust recovery, added stimulus has the potential to cause more problems than it solves. Thus, the market took its concern out on stock and bond prices. On Friday the Senate Parliamentarian ruled that a minimum wage change was not germane and must be removed from the stimulus bill. Only then did the Nasdaq start to improve, although this news did not help the Dow or the SP 500 turn positive. A $15 minimum wage is controversial in rural America where wages tend to be well below urban areas. The Congressional Budget Office had forecast a job loss of 1.4 million. This provision will be brought forth again in separate legislation.

Signs of the recovery were evident on Thursday’s unemployment filings, which dropped sharply from the prior week. Unemployment filings tend to be influenced by weather and seasonal factors, such as the storm in Texas. Thus, we will wait several more weeks before calling this a trend. But consumer confidence did increase, durable goods orders were better than expected, and home prices improved.

This week’s market performance was volatile and sharply down on two days. The Nasdaq was down -4.92% for the week. The SP 500 was -2.45%. Monday the SP 500 was -0.77%, Tuesday +0.13%, Wednesday +1.14%, Thursday -2.45%, and Friday -0.47%.

Looking forward, we hope to see a calmer market. The volatility of this week was more than the news warranted exposing some areas of market illiquidity. Because interest rates have reached pre-pandemic levels, they should plateau soon. Covid, vaccination, and economic news is likely to trend positive. But the fears surrounding the stimulus bill will be with us for longer.

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.

by Jim Ulland

This week can be summarized by the favorable market impact from improving Covid numbers, an increasing pace of vaccinations, the expectation of another stimulus package, and additional strong Q4 earnings reports. Market volatility from the impeachment trial did not occur, although the final vote is not expected until Sunday or later.

After the late fall and early winter spike of Covid hospitalizations and deaths, these numbers are now coming down, way down. We have almost reached the low point of last summer. In addition, there has been almost no flu this season. Perhaps the hand washing and mask wearing have provided additional benefits.

During the week, the Administration announced the purchase of another 200 million doses of vaccine from Pfizer and Moderna. Studies showed the Pfizer vaccine also provided protection against the virus variations that have recently emerged. Other studies said that one dose of Pfizer would provide 65% protection. The combination of those having contracted Covid and developing their own immunity plus the immunity from vaccines will have a meaningful economic impact by spring. Lockdowns are being relaxed, although many of the teachers’ unions will not let teachers return to the classrooms even with the CDC’s recommendation.

The coming stimulus package has received some criticism for not being targeted and for being too big. Remember, we must pay those borrowed funds back at some point. The proposal has not been finalized, so some positive changes still could be made.

The WSJ reported that job postings have returned to pre-pandemic levels. Unemployment is still high but trending ever so slightly down. This downward pace should accelerate as spring arrives. Corporate earnings also showed favorable trends. 81% of the largest 500 companies that have reported exceeded expected profitability. In fact, there was some concern that the stimulus package would overheat the economy and cause inflation. Those worries pushed interest rates higher and presented a headwind to our fixed income strategy Intelligent Fixed Income. After the 14.92% return last year (net of fees), a short pause is expected. The Nasdaq and SP 500 did not pause and powered ahead to set new records. The market’s path seems higher. Expect another burst when the stimulus package is adopted.

Our view continues to be that the market will move higher in 2021. This week’s performance was strong. The Nasdaq was +1.73%. The SP 500 was +1.23%. On Monday, the SP 500 was up +0.74%, Tuesday was -0.11%, Wednesday -0.03%, Thursday +0.17%, and Friday +0.47%. The Fed said during the week it would keep interest rates low, so we feel the modest rise in rates this week will not persist unless the final stimulus package is too big for its own good.

Next Monday is a holiday and the markets and our office will be closed. Earnings of mid-sized companies are still trickling out. Favorable trends are set to continue.

by James Ulland

The last week in January was tough for the market. The “short-squeeze” on those with short positions in Gamestop et al infused the market with uncertainty. The vaccine distribution news was contentious. Job loss was feared from the Administration’s moratorium on oil and gas leases. And the stimulus package was in doubt. As a result, the Nasdaq was down -3.49% and the SP 500 was down -3.31%. Buyers came back in this Monday to “Buy the dip.” They bought the dip all week and pushed the SP 500 and the Nasdaq to new all-time highs.

The market narrative is unchanged. The stimulus will pass and push economic growth higher. The pace of vaccinations will increase and bring “herd immunity” by late summer. Lockdowns will be lifted. Kids will get back to school making their parents more productive. Those who have saved money by not going out will start to do so. Jobs will return from those businesses that have survived. Plus, the Fed will keep interest rates low during 2021 as promised.

This positive narrative was supported by corporate earnings announcements that were better than expected. Half of the SP 500 companies have reported Q4 2020 earnings and 86% were higher than expected. Some of the notable reports were from Amazon whose revenue was up 44% over the same quarter last year. Google (Alphabet) reported a 22% growth in revenues.

Economic news was mildly supportive as well. The number of workers filing for unemployment declined as did the unemployment rate. December factory orders rose.

Our view is that the market will move higher by fits and starts throughout 2021. This week’s performance was impressive. The Nasdaq was +6.01%. The SP 500 was +3.89%. On Monday, the SP 500 was up +1.61%, Tuesday was +1.39%, Wednesday +0.10%, Thursday +1.09%, and Friday +0.39%. Interest rates did drift up; however, our Intelligent Fixed Income strategy was modestly positive.

Next week, earnings of mid-sized companies will predominate. The stimulus package will be voted on and it is likely to pass. The impeachment trial will begin on Tuesday, February 9^th and could unsettle the market.

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.

by Jim Ulland

The market anticipated a peaceful inauguration of President Biden and it was. Stocks went up the day before, the day of, and the day after the swearing in. The Senate went right to work and sent Janet Yellen’s nomination as the next Treasury Secretary to the Senate floor for approval. The least controversial of the other cabinet nominations are expected to follow shortly.

The market embraced another large stimulus bill proposed by the President. Since the $1.9T stimulus is all borrowed money and does not contain any liability protection for employers who acted in good faith in their handling of Covid, Republican senators were less enthusiastic. A compromise is expected.

The week’s Covid news was mostly positive. The disorganized distribution of vaccines is still an issue; however, the number of new cases and deaths have turned down. Pfizer and Moderna continue to ramp production.  As early as next month, they could be joined by J&J and AstraZeneca, if these vaccines are approved. J&J can produce large volumes of vaccines to help reduce wait times. Hospitals were relieved that the flu did not show up this winter because of all the hand washing and masks.

President Biden’s goal of bringing the country together will be complicated if the Senate goes forward with the first impeachment trial of a President who has completed his term in office.

Economic news was mixed. Unemployment filings decreased slightly although December job creation was negative because of the lockdowns. There were large job losses in bars and restaurants. This month may show weak construction numbers with the President’s cancellation of the XL Pipeline project permits and a halt to the construction of the southern border wall. Manufacturing continues to rebound as evidenced by a strong report from the Federal Reserve for the Mid-Atlantic states.

The major stock market indices set new records led by the NASDAQ. Initial corporate earnings for Q4 were above expectations. Interest rates, as represented by the 10Yr Treasury, eased, which was beneficial to our Intelligent Fixed Income strategy. For the week, the Nasdaq was up +4.19%. The S&P 500 was up +1.94%. On Monday, the market was closed, Tuesday the S&P was +0.81%, Wednesday +1.39%, Thursday +0.03%, and Friday -0.30%.

Measured remarks both to and from China helped Chinese stocks and American stocks with business in China. The reappearance of the wealthiest man in China, Jack Ma, who started Alibaba, was reassuring. Next week, earnings reports are numerous. Well-known names, not all of which we use, include Johnson&Johnson, 3M, Starbucks, Apple, Facebook, Tesla, and Visa. Each report will affect the prices of other companies in the sector.

Last year, investment performance was heavily influenced by the sector selection. Technology was the leader and continues that role in 2021. Energy was strong with OPEC’s production constraints, but this sector has under-performed for years and the new Administration is not carbon-friendly. “Green” stocks have gotten an early boost, but this year, more than most, it is a market of stocks, not a stock market. Stock selection is as critical as sector concentration. Next week, we expect to announce exceptional fixed income and strong equity performance for 2020.

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.