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Weekly Market Update for November 20, 2020

by Jim Ulland

The market is in a big “tug-of-war” with more lockdowns on one side and two very effective vaccines on the other. It is probable that the 95% effective vaccines will win this battle but getting from here to there is the challenge. The market normally would look through the next six months, see a robust economic recovery, and continue to trend higher. Therefore, the strategy most likely to reward investors is to stay invested or get invested, for those sitting in a high percentage of cash. Conservative investors or those who need dependable income can look to our #1 ranked fixed income strategy, Intelligent Fixed Income (IFI). We refresh this rank monthly which compares to ETFs and mutual funds with similar strategies (disclaimer below).

Equity investing is more complex. The market loves divided government, which in today’s case means the market would like to see the Republicans hold on to the Senate by winning at least one of the two January 5 runoff races in Georgia. Divided government means moderation, which is an ideal environment for stocks and businesses. Our equity strategies Intelligent Blend, Strategic Equity, and Defensive Growth have exceeded the New York Stock Exchange Composite substantially. Each has taken a slightly different approach to do so. But the common thread is the same, each strategy focuses on who will be the winners in the post-Covid world.

The biggest winners will continue to be the “work and live digitally” companies. Amazon has won the retail contest in the US while Alibaba has done the same in China. Digital entertainment has a lot of winners including gaming stocks, Facebook, its Chinese counterpart Tencent, and Netflix. In communication and information, Apple and Google will continue to dominate. In healthcare, the vaccine companies should ride high for at least the next two or three years and steady strategic players like United Healthcare will excel for the next decade. Elective surgery suppliers like Boston Scientific should have a comeback as the fear of doctors’ offices subsides. Electronic payment systems like Visa and lesser-known names should thrive. Home remodeling will continue strong at least until those do-it-yourselfers are freed from stay-at-home restrictions. There are hundreds of mid-sized and smaller companies, who few know, that also will benefit. Yet, one must be very sensitive to valuation even in these sectors. Let us know where we can help.

Some sectors are likely to lag a robust recovery. Brick and mortar retail is permanently impaired. Real estate is expected to come back, but slowly. The same is true for lodging, travel, oil & gas, and dining. In the slow-to-recover companies, one must ask if they have the financial resources and market positioning to grow post-Covid. Has the consumer shifted away permanently? Just surviving will not reward shareholders.

The economy continues a march to recovery. Unemployment filings rose slightly with the renewed lockdowns, but the number of workers already on unemployment declined by another 400,000. Stimulus talks appear to be on again in Congress. More stimulus would give the market a boost.

For the week, the Nasdaq was up +0.22%. The S&P 500 was down -0.77%. Monday the S&P 500 was +1.16%, Tuesday -0.48%, Wednesday -1.16%, Thursday +0.39%, Friday -0.68%.

Next week looks quiet unless your kids’ school just closed. Both our office and the markets will be closed Thursday and have a shortened day Friday.

*Ranking per Morningstar Direct in Publicly Traded Peer Group

*Publicly Traded Peer Group Requirements: Minimum $150 million in ETF/Fund; Excludes low-duration funds; Excludes closed-end funds; Includes share class with largest AUMs; Excludes real estate preferred funds; Minimum 3-year track record

*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. Clients or prospective clients 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 clients/prospective clients 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 strategies 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.

Weekly Market Update for November 13, 2020

by Jim Ulland

The market’s love of a potentially divided government was partially over-shadowed by the growing prospect of another major “lockdown” of the economy. This spring, lockdowns crushed the economy and drove unemployment to 14%. Today unemployment is 6.9%. Half of the jobs lost last spring have returned. This week’s lockdown fears have been fueled by a sharp spike in Covid-19 cases and hospitalizations. Many hospitals have delayed elective surgeries to keep beds available for Covid patients.

The spike in Covid cases is troubling, but perhaps understandable. We all dutifully are wearing masks, washing hands, and keeping our distance. But warm weather ended and people moved activities indoors.  Hot spots for transmission include restaurants, bars, weddings, funerals, fitness centers, and probably college dorms. Minnesota’s own Dr. Michael Osterholm proposed a tight lockdown of the entire US for four to six weeks. Many economists think this would be devasting to the economy. A full lockdown was tried this spring without the lasting result of Covid control.

It was just this Monday that Pfizer and partner BioNtech announced a vaccine that is tracking to be more than 90% effective. Moderna is expected to announce results of its vaccine this month, maybe next week. Both vaccine developers have been ramping production, anticipating both good results and FDA approval. Once the vaccines start to roll out, the worst of the crisis will be behind us. Perhaps, rather than risking irreparable harm to the economy with permanently lost jobs from a tight lockdown, we should manage our way through the next six months as best we can while letting the vaccines do their work.

The economy continues to heal and grow. Unemployment filings dropped again. The number of workers already on unemployment declined by another 600,000. Consumer prices were unchanged in October. Interest rates rose mid-week and then retreated although staying higher than a week ago. They still are historically low and very favorable for our fixed income strategy IFI, which booked more strong performance.

The market feared a lockdown but still looked through to the other side of the pandemic when things will return to normal. Thus, the most beaten down sectors of this spring performed well. Hotels, airlines, retail stores, food chains, and banks were among them. The technology-related work-at-home stocks took a pause and settled slightly lower. The influence of the election on the market went into neutral as all eyes turned towards Georgia where the control of the US Senate and tax policy will be decided on January 5th in two Senate runoff races.

For the week, the Nasdaq was down -0.55%. The SP 500 was up +2.16%. Monday the SP 500 was +1.17%, Tuesday -0.14%, Wednesday +0.77%, Thursday -1.00%, Friday +1.36%.

Next week Lowe’s and Home Depot report, which will give an indication of the strength of the home improvement market. Expect election litigation to grind on.

*Publicly Traded Peer Group Requirements: Minimum $150 million in ETF/Fund; Excludes low-duration funds; Excludes closed-end funds; Includes share class with largest AUMs; Excludes real estate preferred funds; Minimum 3-year track record

*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. Clients or prospective clients 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 clients/prospective clients 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 strategies 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.

Weekly Market Update for November 6, 2020

by Jim Ulland

The market loves divided government. In today’s case, the President, very probably, will be Biden, the House will stay Democrat, and the Senate probably will be Republican. A Republican Senate depends on at least one of the two incumbent Republican Senators in Georgia winning the runoff election January 5th. Divided government prevents anything both parties do not agree to from becoming law. The biggest worry the market had before the election was the long list of tax increases Biden had proposed. These will not pass a Republican Senate, so the market had a sigh of relief and stampeded higher. In addition, the market favors another stimulus bill which is more likely now than before the election. Perhaps reduced tensions will help fashion a compromise.

The economy continued to power forward. Unemployment filings persisted at last week’s reduced level. The number of workers already on unemployment declined by another 700,000. The unemployment rate fell from 7.9% to 6.9% reflecting strong job growth in October. Worker productivity also increased, an important factor in helping US exports to be competitive. The Fed did its bit by leaving interest rates at historically low levels and promising to keep them there.

The market fears of renewed lockdowns were overshadowed by the election and the market’s exuberance about divided government. Yet more lockdowns might come. England instituted a lock-down for a month. In the Midwest, Covid-19 hospitalizations have surged, and hospitals are straining to find available beds. The same is true in the Dakotas. This is not good news. However, vaccine trials expect to report results by year-end and perhaps sooner. Trial results will have a big impact on the economy and the market. Hopefully, businesses stressed by Covid-19 can survive until then.

Our fixed income strategy, IFI, was up about 1% for the week as investors put cash back to work in both stocks and fixed income. IFI also retained its top performance spot through October among ETFs and mutual funds with similar strategies. See disclaimers below in how we define the peer group. The current yield on this strategy is 4.76%. Through 10/31, it is up over 8% before fees. Trading profits and appreciation have helped these returns.

Remember how bad the market was last week? The Nasdaq was down -5.51%. This week the Nasdaq was up 9.01%. Remarkable. The SP 500 was down -5.64% last week and up +7.32% this week. Monday the SP 500 was +1.23%, Tuesday +1.78%, Wednesday +2.20%, Thursday +1.95%, Friday -0.03%.

Our equity strategies stayed tech heavy and benefited from the explosive performance in this sector. Our tactical repositioning to add some Chinese exposure and a new cannabis ETF worked well. However, one of our favorite companies, Alibaba, the Amazon of China, fell. The IPO for Ant Financial, a huge payment processing, lending, and investment firm, had its IPO delayed by regulators. Alibaba owns one third of Ant. We expect the IPO to be rescheduled within the next nine months.

Next week will produce final election figures from Georgia, Arizona, North Carolina, Pennsylvania, Nevada, and Alaska. There will be a lot of election-related litigation, which is unlikely to change the ultimate result of the Presidential election. Q3 earnings will continue, but most larger firms already have announced.

*Publicly Traded Peer Group Requirements: Minimum $150 million in ETF/Fund; Excludes low-duration funds; Excludes closed-end funds; Includes share class with largest AUMs; Excludes real estate preferred funds; Minimum 3-year track record

*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. Clients or prospective clients 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 clients/prospective clients 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 strategies 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.

Weekly Market Update for October 30, 2020

by Jim Ulland

Do not blame the economy for this week’s sharp decline in the stock market. The annualized rate of GDP growth, announced this week for Q3, was 33.1%, about ten times the average rate. The economy now has recovered about 75% of the drop in the first half of the year. Unemployment filings were positive as well and lower than forecasts. Unemployment filings had been flat for several weeks and have now broken lower. Those already on unemployment fell by 700,000. Reopening the economy has been the key to job restoration.

The major cause of the market’s weakness was the fear of Lockdown 2.0. Many countries in Europe have closed or reduced the hours of their bars, restaurants, sporting and entertainment events, and gatherings in general. The lodging and travel industry is in shambles. Many businesses did not survive the first lockdown. With savings exhausted, a large number are not expected to survive the second. This week, US investors focused on Europe and feared their experience would become ours.

Maybe not. Hidden away in the Covid hospitalization numbers are some interesting trends. For instance, only the Midwest states exceeded the average peak hospitalizations of late spring and summer. The Western states touched the summer averages. But the NE, SE, and SW were below the summer peaks and some states were way below. Also, the ICU patients per 100,000 population were flat. This implies that treatments are more effective and perhaps the people getting the virus are younger and recover without a serious hospital stay. Additional positive notes in this news include a very mild to non-existent flu season in Australia. Hand washing, mask wearing, and social distancing seem to have controlled the flu during winter there. Hopefully, our experience will be similar.

A second lockdown in the US would blunt the rapid recovery in corporate earnings. The fear was so intense on Friday that even the great earnings and revenue growth released by Apple, Google, Facebook, and Amazon could not keep the market positive. The US was not alone in that all major global stock markets ended the week down.

Our fixed income strategy, IFI, was down, but modestly. The normal relationship between our fixed income performance and stocks is for every 5% decline in stocks, our fixed income strategy goes down 1% and so it was this week, at least approximately. The month of October is over, and we expect to retain our spot as the top performing fixed income preferred stock strategy among ETFs and mutual funds with similar strategies. See disclaimers below in how we define the peer group.

How bad was the market? Bad! The Nasdaq was down -5.51%. The SP 500 was down -5.64%. Monday the SP 500 was -1.86%, Tuesday -0.30%, Wednesday -3.53%, Thursday +1.19%, Friday -1.21%.

Next week will be dominated by the election. We have done some offensive repositioning, adding to Alibaba (BABA), the Amazon of China, and adding to Tencent (TCEHY), the Facebook of China. China may be a relative winner in the election. Although we are not fans of the product, cannabis could be an election winner as several states have ballot provisions to allow both medical and/or recreational use. There is a new ETF that focuses on US cannabis producers (MSOS) that we like.

*Publicly Traded Peer Group Requirements: Minimum $150 million in ETF/Fund; Excludes low-duration funds; Excludes closed-end funds; Includes share class with largest AUMs; Excludes real estate preferred funds; Minimum 3-year track record

*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. Clients or prospective clients 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 clients/prospective clients 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 strategies 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.