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Weekly Market Update for April 19, 2024

by Vinicius d’Avila, Research Associate

In the absence of major economic datapoint releases, the market pullback seen this week was largely attributed to the escalation in geopolitical tensions. The S&P 500 closed down -3.05%, with the Nasdaq down -2.05%.

Commentary by Federal Reserve officials indicated that the Fed might wait longer to be confident that inflation is under control before lowering interest rates. This comes after last week’s inflation data (CPI and PPI) came in slightly higher than expectations. Another inflation metric, the Personal Consumption Expenditures index report for March (to be released next Friday) should add to the data analyzed by the Fed.

On the corporate front, Minnesota-based UnitedHealth’s First Quarter report was taken positively by investors as the company’s earnings projections remained resilient following a cyberattack in February. As the market approaches peak earnings season, Google, Meta, and Visa are among the major companies reporting their First Quarter performances in the coming week.

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 April 12, 2024

by Jared Plotz, Director of Research

After the markets’ early year run up on the backs of AI optimism and the prospect of lower interest rates, indices may be entering a choppier period until the Federal Reserve actually begins to cut benchmark rates. Shifting expectations regarding the timing and magnitude of such cuts in 2024 may move markets up and down. With another month of “hotter” inflation metrics, the consensus of investors has moved to just two 25-basis point rate cuts in 2024, down from three previously, with the first expected to come later (July or September). The S&P 500 rose 1.7% in January, 5.3% in February, and 3.2% in March, but is down about 2.5% in April thus far. Likewise, fixed income securities, following a strong start, have moved sideways the past few weeks as we wait on the Fed.

This week brought additional inflation readings. The consumer price index (CPI) for March rose 3.5% from a year ago, a faster pace than the 3.2% rise in February. The producer equivalent (PPI) rose 2.1%, also a quicker pace than the prior month. Meanwhile, manufacturing data moved back into “expansionary” territory, with new orders growing once again. Weak investor demand for longer-term Treasury bonds has exacerbated these higher readings, with the 10-year Treasury yield rising ~40bps (to 4.52%) in recent weeks. The economy continues to hum along better than expected, making the Fed’s job trickier. Nonetheless, we believe rate cuts are necessary and coming.

Housing can also be tricky with inflation. Though restrictive benchmark rates are supposed to bring down overall inflation and slow the economy, they also make mortgages more expensive and current homeowners less likely to move. This reduces homes available for sale and thus pushes home prices up further. Home prices are up ~6% over the past year and represent a considerable portion of weight in inflation indices.

Bank earnings kicked off the corporate reporting season today. JPM said consumers remain financially healthy, supported by the resilient labor market; however, excess cash reserves have normalized, leading to slightly higher delinquencies among lower-income cohorts. Despite a strong Q1, JPM’s stock declined after their 2024 guidance wasn’t raised. Though Wells Fargo & Citigroup also maintained full-year guidance, their stock moves were more muted. Next week, we will hear reports from UnitedHealth Group, a large equity portfolio position that has been facing some difficulties of late, as well as from additional banks, healthcare, and transport companies.

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 April 5, 2024

by Vinicius d’Avila, Research Associate

The market was closed last Friday for the holidays when the Personal Consumption Expenditures index (the Fed’s preferred inflation gauge) was released. The headline inflation measure read 2.5% for the trailing year, with “core” inflation (which excludes more volatile food and fuel prices) at 2.8%. The reading is much milder than in 2022 – when headline inflation peaked at 7.1%, with a 5.6% core measure on an annual basis – but remains above the Federal Reserve’s target of 2%.

February’s Job Openings remained steady at 8.76 million, according to the Job Openings and Labor Turnover Survey (JOLTS) released on Tuesday. The jobs report for March (released this Friday) showed a stronger-than-expected labor market, with US employers adding over 300,000 new hires, marking the 39th consecutive month of job growth. The unemployment rate ticked down to 3.8%, and hourly earnings were in line with expectations (up 4.1% on a yearly basis).

While there should be caution when relying on any data point, some investors are hesitantly optimistic that the Federal Reserve has shown a balanced approach to cool inflation without squeezing the labor market too tightly. The expectation remains for the Fed to hold rates steady for the next meeting in May, with markets expecting a rate cut later this summer.

Israeli airstrikes in the Gaza Strip and the Iranian embassy in Syria added some volatility to the market this week, with the Nasdaq closing -0.80% and the S&P 500 -0.95%. The 10-Year Treasury moved higher this week (+20 bps to 4.40%) following strong labor market data, with the 6-month Treasury yield at 5.33%.

Next week should be busy on the economic front, with the March CPI release out next Wednesday and the PPI report the day after. Wells Fargo and JP Morgan will announce their quarterly earnings results next Friday, marking the unofficial beginning of the First Quarter earnings season.

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.

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