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Weekly Market Update for April 24, 2020

by Jim Ulland

There was little dramatic news on the Covid-19 front from this week and the market ended a percent below where it started on Monday. Gilead’s treatment drug, Remdesivir, had some negative news from an uncompleted trial in China which disappointed the market. Three more trial results will be released by the end of May. News of progress on a vaccine will be market moving when it comes. The news we did get was more incremental. Deaths are declining and so are hospital admissions. Equipment shortages are less and the US is now sending ventilators to foreign countries to help them.

Important announcements came from several states, including Minnesota, which are allowing people to go back to work. Weekly unemployment claims declined, but were still at the fourth highest level in history. Admittedly, it is a delicate balance in getting people back to work and keeping them safe at the same time. Naturally this is easier in lightly populated area than it is in cities.

Securities trading improved this week. Volatility was lower and this is reflected in the volatility index called the Vix. Under normal market conditions, the Vix index is between 10 and 20. At the peak of distress in March, the Vix shot up to 70. This week’s Vix looked like this Monday +14.9%, Tuesday + 3.6%, Wednesday -7.6%, Thursday -1.4%, and Friday -13%. For the week, the Vix was down 4.8% to 36. Low volatility helps both fixed income and stocks. High volatility disrupts the market and can trigger harmful illiquidity. The pattern for the S&P 500 this week reflected lower volatility. Monday the S&P was -1.8%, Tuesday -3%, Wednesday +2.3%, Thursday -0.1%, and Friday +1.3%. The weakest sectors this week were banks (again), real estate (again), and utilities. Energy had rebound as the announcements of people going back to work increased.

In portfolios, we are putting cash back into the market gingerly. We continue to favor those companies that will benefit from new customer behavior. This means more technology than other sectors. Healthcare is also attractive as both medical need and government funding drives expectations.

Our fixed income strategy using preferred stock had a week of further gains. The returns on 10 Year Treasuries ended the week at 0.61% whereas the 5.56% annual yield on preferreds is nine to ten times higher and continues to be compelling.

Next week will have a lot of market moving earnings announcements: Facebook, Google, Visa, Apple, an, Amazon. Each will move the market.

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.