Receive Weekly Market Updates via Email

shadow

Weekly Market Update for April 17, 2020

by Jim Ulland

The signs are evident that the market has ended its sharp decline and started a recovery. The market’s drop came directly from Covid 19, so we should look for signs of recovery there as well. The most dramatic news was from a trial by pharmaceutical company Gilead, which had preliminary data released on a Covid-19 treatment, where nearly everyone in the trial got better! Gilead’s stock rose 10% as did the country’s spirits and the stock market.

A second sign came from New York City which reported that death rates and hospital admissions were declining. This happened sooner than expected. Hospital beds in other hot spots are available and several temporary hospitals have been disassembled or reduced in size.

The third sign was a change in the tone of discussion on Covid-19. The discussion has shifted from “shelter-in-place” to finding safe ways to get people back to work. A vaccine is essential in the long term to get people comfortable with being close to other people whether in restaurants, planes, or sporting events. But a vaccine with take up to 12 months. Johnson&Johnson promised one on Tuesday. However, in the short term, testing is critical. Huge test capacity is on the way. Testing for Covid-19 might be the new TSA line.

Governors started announcing additional businesses that may reopen including logical ones like golf courses, marinas, and craft stores. Guidelines for reopening were being formulated and announced.

Securities trading improved this week. Volatility was lower and this is reflected in the daily market movements. The pattern for the SP500 this week was Monday -1%, Tuesday +3.1%, Wednesday -2.2%, Thursday +.6%, and Friday +2.7%. The weakest sectors this week were banks, real estate, and oil and gas. Retail had a little rebound, led by Walmart, Target, Amazon, and Costco which have been strong all year. The rest of retail is very stressed.

In portfolios, our strategy of reducing equity exposure has ended. We are putting cash back into the market gingerly. Those companies that will benefit from new behaviors are favored. For instance Amazon and Alibaba will see a permanent increases in business with their market leading home delivery. The more-time-at-home gaming companies Electronic Arts and Tencent are benefiting. Healthcare, of course, will have a long-term benefit especially those in testing, vaccines, and treatment. Technology continues to be the best positioned sector for the needs of the “new economy.” The NASDAQ was up 6% this week.

Our fixed income strategy using preferred stock had a week of strong gains. The returns on 10 Year Treasuries ended the week at 0.64% whereas the 6-6.5% annual yield on preferreds is ten times higher and continues to be compelling. One of the preferreds we use is issued by Synchrony Financial. It was up 10% on Friday! Contact us as you have questions. We are delighted to have referrals to those you know who need income from their investments.

*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 are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss.