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Weekly Market Update for August 20, 2021

by Jim Ulland

For a summer week, headlines were unusually bold. The stories behind the headlines included: “Vaccines and Booster Shots to Prevail Against Covid Variant.” This story developed as the fear of Delta variant infections drove more of the unvaccinated to the get theirs. Higher Delta exposure wasn’t the only fear raised. More infections meant some reintroduction of restrictions on restaurants, entertainment, and other gathering spots. Retail in July was down more than expected as many returned to online shopping. Amazon surpassed Walmart as the world’s largest retailer. Yet the public seems to have little tolerance for another lockdown and thus most elected officials have been reluctant to reimpose the restrictions just lifted.

A second story was inflation. We all know it is lurking, but crude oil has had seven straight days of decline. Lumber is 73% below its May peak and back to the level before the price spike. Soon the special unemployment payments will end, taking some wage pressure out of the mix. That is not to say inflation is subdued, but it has slowed.

A third story was Afghanistan and the clumsy withdrawal. In economic term, our economy doesn’t know the country exists. It is small, remote, and almost totally disconnected from the US as either a supplier or a market. History suggests Afghanistan will be soon forgotten…unless all of the US weapons left behind create a well-armed and destabilizing Taliban. Afghanistan is still a major political story and tragedy, so its major short-term impact may be in the midterm elections.

A fourth story is that of China. It is playing nice with the Taliban so that it can control the rare metals deposited in those rugged mountains. However, China is not playing nice with its large tech companies. Xi Jinping doesn’t like powerful people like the CEOs of its large tech firms. He deems them too rich as well as having better information on China’s citizens than the government. We have reduced our exposure to Chinese stocks by more than half due to this uncertainty.

A final story is that the market continues to grind forward. The SP 500 has set 48 all-time highs since last December. In the history of the SP 500, there has only been one year when it set more highs, 1964. Part of the fuel in the market came from the very strong corporate earnings reports from Q2. CEOs raised their predictions for revenue and profit growth for Q3. Many companies announced stock buy-backs which tend to drive stock prices and earnings per share up. Our view is that the market will go higher, and investors should stay invested. For those who want a more defensive positioning, our fixed income strategy, Intelligent Fixed Income, continues to rank exceedingly high among all fixed income managers producing a current yield between 4-5%.

For the week, The NASDAQ was down -0.73% and the SP 500 was down nearly the same at -0.59%. Monday the SP 500 was +0.26%, Tuesday -0.71%, Wednesday -1.07%, Thursday +0.13, and Friday +0.81%.

Next week, watch as the stories above make new headlines. It is unlikely that the market will find them so unsettling that it is knocked off its grind upward.

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.

 

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Ulland Investment Advisors

4550 IDS Center · Eighty South Eighth Street · Minneapolis MN 55402 · Telephone: 612-312-1400 · Facsimile: 612-204-3464