by Jim Ulland

The market grew increasingly anxious this week with the Omicron news and the potential for more lockdowns or other economic restrictions.  The fear that this variant could sweep across the country and bring the recovery to a halt was widespread. Yet, Pfizer’s treatment pill was shown to reduce hospitalizations, and more were getting vaccinated and boosted.  Other studies showed that Omicron had higher rates of transmission but milder symptoms. None of the positive news seemed to matter as the market fell four of the five days.

The only day the market rose was Wednesday when the Fed announced its latest views on interest rates and inflation.  The Fed plans to raise the Fed Funds rate from about 0.2% to 0.9% during 2022.  These rates are still historically low; however, this is a policy change in the direction of higher interest rates.  Rising interest rates are normally a headwind for stocks.  The Fed also confirmed that it had miscalculated inflation and that it was likely to stay higher than their target until the end of 2022 when it once again should go below 3%.  The latest inflation report showed November producer prices rose at an annualized pace of over 9%.  Rising producer prices will push up future consumer prices.  The combination of a changed direction in the Fed’s interest rate policy and a huge rise in the Producer Price Index hurt the market.

The current thinking is that Covid is keeping a lot of workers from returning to the work force.  Unemployment filing were historically low again although a little higher than last week.  Strong demand and a shortage of workers does force wages higher and feeds inflation.

Despite the market’s unsettled state and the inflationary flames, interest rates stayed virtually flat for the week.  This helped our fixed income strategy, Intelligent Fixed Income (IFI) to have strong performance.  The total return of this strategy is over 4.5%, excellent in this low-yield environment.  Our equity strategies declined with the downward move in the SP 500 of -1.68% and the NASDAQ of -2.95%.

Our hope for 2022 is that by the middle of Q1 Covid will be more manageable, and inflation will have peaked.  However, there could be a lot of volatility until we get there. We expect interest rates to grind slowly higher throughout the year, influenced by the Fed’s policy change.

On Monday the S&P 500 was down -0.91%, Tuesday -0.75%, Wednesday +1.63%, Thursday -0.87%, and Friday -1.03%.

Next week should be quiet on the news front as Christmas approaches.  There will be some indicators of holiday spending levels as well as reports assessing inflation.  Covid/Omicron is likely to trigger additional market volatility. Be prepared.

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

Inflation is turning out to be less “transitory” than hoped.  Today’s CPI number confirmed this concern as the annualized inflation rate stayed over 6%, down slightly from October.  Labor still is in short supply, although more are returning to the workforce. Unemployment filings hit a 52 year low on Thursday and open jobs increased to eleven million. Housing is tight and rents are up.  Lumber prices are higher again.  With the continued inflation, at its meeting next week, the Fed is expected to reduce its bond buying program earlier than planned.  Bond buying has kept short-term interest rates lower than they would have been otherwise.

Of course, interest rates are influenced by more than the level of inflation.  The renewed Covid fears caused a steep drop in rates last week with some recovery this week. Pfizer announced high effectiveness of both its vaccine and its booster against the new variant.  Also, symptoms seem to be milder for those infected than from the initial Covid surge. This calmed the market.

Our preferred securities in our fixed income strategy IFI are up about 1% in December because of a stabilizing interest rate environment.  Equities also surged higher during the week.  The NASDAQ was up +3.61% and the SP 500 +3.82%.  The SP 500 exceeded its all-time high on Friday. The NASDAQ is 2.7% below its high.  Remember that if you are in cash, you are both going backward in purchasing power because of the inflation and you are missing a market that continues to move upward.

There are “black swan” events that could disrupt.  One of these apparently was resolved, an agreement to raise the government debt ceiling.  Other international events simmer.  Russia could invade the Ukraine and China could do the same with Taiwan, although probably not before the Olympics are over.  Other than these unlikely occurrences, we expect continued strong corporate profits, more stock buybacks, robust consumer balance sheets, historically low interest rates, and a gradual loosening of the supply chain bottlenecks.  Market volatility should diminish as the Omicron variant is managed.  One good result is that the increased concern about infection has encourage more to get vaccinated or boosted.

On Monday the S&P 500 was up +1.17%, Tuesday +2.07%, Wednesday +0.31% Thursday -0.72%, and Friday +0.95%.

Next week the news will focus on the Fed meeting.  Year-end tax planning is on many to-do lists.  Remember that if you are 72, you are required to take a distribution (RMD) from your IRA.  RMDs were not required last year.

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 CEO of BioNTech, Pfizer’s vaccine partner, said the current generation of vaccines will likely still protect against severe disease in people infected with the Omnicom variant. He added, people should not “freak out.” But the market did freak out this week and fashioned the biggest two day selloff in 14 months.

We think little has changed. The economic recovery grinds higher fueled by the largest government stimulus in history. The Fed insists it will keep rates low and the market saw the 10 Yr Treasury fall from 1.47% to 1.355%. Covid infections should decline into the New Year. The CDC says 81% of US residents over 12 are vaccinated. Corporate earnings have been surprisingly good and trending higher. Inflation and the supply chain bottlenecks are slightly better especially with the fall in the price of crude oil by 21% from its peak earlier in the quarter.

The Omicron variant dominated the week. There was so little data, that it was hard to disprove worst case predictions. Australia’s Chief Medical Officer said there is no evidence that Omicron is more deadly than other strains. He added that all cases in Australia have been very mild or with no symptoms. Perhaps the benefit of this latest scare is that more will become vaccinated or get the booster. The public does not have any appetite for more lock-downs, so we are in a “manage the problem” mode. The market should get to that point of view next week. Hard data will come in two weeks on vaccine effectiveness.

Other economic data was mixed. Unemployment filings were the lowest since 1969. The net new jobs report was below expectations, but this may have been caused by a reluctance for workers to return to work. That said, 210,000 jobs were added, hourly wages went up, and the unemployment rate fell. Congress even passed a bill to keep funding government, but only at the last minute. The debt ceiling drama will be next.

We expect market volatility to be less next week especially after the roller coaster this week. The market still has healthy gains for the year and December is often one of the market’s best months.

For the week, the S&P 500 was down -1.22%, and the NASDAQ -2.62%. Monday the S&P 500 was up +1.32%, Tuesday -1.90%, Wednesday -1.18% Thursday +1.42%, and Friday -0.84.

Next week should produce some facts to help guide Omicron opinions. The unknown almost always is more troublesome than the known.

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

We expected the Thanksgiving week to be quiet because many in the industry take the week off.  Four events or news stories intervened causing a lot of market volatility. First, interest rates, as represented by the 10 Yr. Treasury, went up sharply Monday and Tuesday in reaction to inflation before stabilizing Wednesday.  Second, crude oil pushed higher after the President said oil would be released from the Strategic Petroleum Reserve. Crude was up 3.4% through Wednesday. This was a little ironic since the goal for releasing oil from the reserve was to have the opposite market response.  The third major news item of this holiday-shortened week came from unemployment filings.  Weekly unemployment filings were the lowest since 1969 implying that exceedingly few employers are laying off workers. This reflects both the strength of the economy, holiday hiring, and the shortage of workers. Finally, Covid cases kicked up even among the vaccinated.  Some countries like Austria instituted a rather severe lockdown.

If you are not working Friday, get your booster shot.  It will immediately restore your protection to near 100%.  Our office will be very lightly staffed on Friday when the market is only open until noon.  While the market is open, we will respond to any urgent needs that cannot wait until Monday.

Through Wednesday, the S&P 500 was up +0.07%, the NASDAQ -1.32%. Monday the S&P 500 was down -0.32%, Tuesday +0.17%, Wednesday +0.23%.

Next week also is expected to be quiet.  We’ll see.  The one news item of market moving potential will be the Friday jobs report which gives the net new jobs created in November.  This will be one indicator of the country’s economic health.

Warmest wishes during this traditional week of family gatherings.

 

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