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Weekly Market Update for August 28, 2020

by Jim Ulland

Congress has yet to agree on the next stimulus package, which most economists think is needed to get the economy back to health. Agreement might happen in September although everything is more difficult in an election year. The Fed met during the week and committed once again to doing what is needed to fashion a recovery. One of the members, Loretta Mester, said, “I think accommodative monetary policy is going to be very important throughout this recovery…which is going to be a slow one.” In English, this means interest rates will be low for the foreseeable future. Low interest rates provide a good environment for stocks and our fixed income strategy IFI.

Covid-19 news was encouraging this week. Hospitalizations continued to decline in all regions including the hot spots in SE states and in the West, primarily Texas, California, and Nevada. Abbott Labs had a rapid test approved for Covid that only costs $5. Additional positive news came from Moderna on early results from their vaccine candidate. Vaccine test results from the four leading developers are now targeted for October or November.

US economic news was mostly good. The four week rolling average of unemployment filings dropped again as did those already on unemployment. Mortgage demand and new home sales were very strong as were orders for durable goods. The revised GDP for Q2 came in better than expected, which means a little less terrible than the first reading. The only disappointment was an unexpected decline in consumer confidence.

Our fixed income strategy, Intelligent Fixed Income (IFI), run by Nat Beebe, is set to defend its #1 performance ranking at month-end 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 to 0.72%. One of the reasons for the increase in Treasury rates was the Fed’s comments that it would not slow down the economy if inflation exceeded its 2% target. We expect continued solid gains in our preferred stock strategy as money flows to preferreds from less desirable options including cash, government securities, and municipal bonds.

Equity markets persisted in their remarkable rise as all major indices hit records for the year. The NASDAQ was up 3.39% and the S&P 500 was up 3.17% this week. Gains were solid all week: Monday +1.00%, Tuesday +0.36%, Wednesday +1.02%, Thursday +0.17%, Friday +0.59%. With inflation subdued and a lot of money available to investors at low interest rates, money is flowing into stocks and fixed income. Our stock strategies continue to out-perform. We expect more upward trending prices until the uncertainty of the election puts investors on hold.

Next week expect August auto sales reports, which should be good, as should be manufacturing growth. The most important news will be on Friday with the August jobs report. Expectations are for 1.4 million new jobs.

*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.


Ulland Investment Advisors

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