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Weekly Market Update for December 23, 2022

by Jim Ulland

Even the new Avatar movie underperformed during its opening last weekend. As they say, “Join the Club.” Everything, except for energy, has underperformed in 2022. To show you how tough the market has been, one only needs to look at Amazon (which is down 48%) and Google (37%). The Fed has crushed both the equity and fixed income markets, but it has yet to crush the economy. The Fed wants the economy to slow, probably causing a recession, so inflation will decline to about 2%. The annualized GDP for Q3 didn’t cooperate and was revised up to an annualized 3.2% after two negative quarters to start the year. The market feared the GDP news would compel the Fed to raise interest rates even more than already expected.

It is lucky we are not homebuilders. Their confidence index is down for the twelfth straight month. Current home sales are near pandemic lows. Although Tesla announced layoffs, the labor market continues to be tight as shown in the weekly initial jobless claims, which have remained relatively flat since October. The Fed wants unemployment filings to increase, so that the upward pressure on wages is diminished. This is traditional economic theory until one of those laid off is a family member or neighbor.

The mess we are in can be rightly blamed on the Fed (for keeping interest rates too low for too long, which over-stimulated the economy), on Congress (for its historically huge spending, which was blissfully increased this week, putting more fuel on the inflation fire), and on the Russian invasion of Ukraine (which has dislocated the world energy market and disrupted international trade, forcing prices higher).

Our guidance to investors has not changed. We feel cash should go to fixed income. Here there are two good choices. We just launched a US Treasury strategy (IFI GOV), which invests in US government bonds with maturities of three years or less. This pays about 4% and is exempt from state and local taxes. Most consider US Treasuries almost risk-free. For those willing to tolerate more volatility, the potential reward is greater. Our Intelligent Fixed Income strategy (IFI) has a current yield of about 7%. The core security in this strategy is preferred stock. The primary issuers are the banks. In this strategy, you can lock in almost a 7% yield for a long time. Whether the preferred prices rise or fall, the dividends will remain constant, thus locking in today’s high yields. There is also the potential for substantial appreciation when the Fed starts lowering rates.

We advise waiting before adding to equity positions. Equities will have headwinds until the Fed starts lowering interest rates. The Fed suggests this will not happen in 2023, although others feel that a recession may force them to lower rates sooner.

For the week, the 10-yr Treasury was up +26 bps to 3.75%. On Monday the S&P 500 was -0.90%, on Tuesday +0.10%, Wednesday +1.49%, Thursday -1.45%, and Friday 0.59%. For the week, the S&P 500 was –0.20% and the NASDAQ -1.94%.

Wall Street activity will be very slow next week. The markets (and our office) will be closed on Monday. Perhaps we can take Col. Quaritch’s remarks from the 2009 Avatar as hope for 2023. He says to wheelchair-bound, former Marine Jake at the outpost Pandora, “By the way, you’re going to get your legs back”.

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 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


Ulland Investment Advisors

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