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Weekly Market Update for August 14, 2020

by Jim Ulland

Last week was spent waiting for Congress to agree on the next recovery package.   This week was spent the same way; deadlock ensued; and, Congress went on summer break without reaching agreement.  The President did issue an Executive Order to continue part of the benefit package, but this is “only” $100 billion whereas the negotiated figures are likely to be $1-1.5 trillion, so 10% of what is eventually expected.  The market was mildly disappointed.

Covid-19 hospitalizations continued to decline in all regions except the SE states and in the West, primarily California and Nevada. Positive news came from a potential treatment for those who have contracted the virus. A longer trial has started with high hopes.  President Putin declared that Russia had discovered a vaccine, an assertion that was quickly dismissed since there had been no extensive trials. High schools in Georgia that had opened for in-class education experienced an increase in transmission.

Tension levels in the Mideast fell as Israel and the UAE reestablished normal relations.  Other Mideast countries are expected to join in this embrace. The dispute with China continues to hang over the market. China is one of our top three trading partners. Fortunately, talks are scheduled to start this weekend which hopefully will reduce tensions there also.  Part of the talks will focus on China’s commitment, in the already signed trade deal, to buy large amounts of US goods, energy, and agricultural products.  For a number of reasons, China has not met the agreed to amount of buying.

US economic news was mostly positive.  Unemployment filings dropped below one million and
those already on unemployment fell by 600,000.  That said, 15.5 million still remain on unemployment. Manufacturing continued to improve although retail sales were weaker than expected.

Our fixed income strategy, Intelligent Fixed Income (IFI), run by Nat Beebe, received a lot of favorable interest after its #1 ranking against the peer group of publicly traded strategies using preferred stock (data source Morningstar Direct*).  IFI performance continued to increase during the week even as the interest rate on the 10 Yr Treasury rose from 0.57% to 0.71%. One of the reasons for the increase in Treasury rates was the relatively large sale of government bonds designed to lock in low rates to finance the budget deficit.

Equity markets are generally slow at this time in the summer and this week was no exception. Tech stocks were flat. The S&P 500 was up +0.64%.  Monday was +0.27%, Tuesday -0.80%, Wednesday +1.40%, Thursday -0.20%, Friday -0.02%. The S&P 500 flirted with setting a record high, but fell slightly short.  It is historically remarkable that the equity markets have recovered so quickly from the very steep drop in March.  Of course, the averages don’t show that many sectors of the market still are down substantially including transportation, retail, energy, real estate, and banks to name a few.

Next week expect a lot of politics as the Democratic National Convention occurs at the end of the week followed by the Republicans the next week. The public will hear from former VP Biden’s running mate pick Senator Harris, among many others.

*Source: Morningstar Direct

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.