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Weekly Market Update for February 25, 2022

by Jim Ulland

By Monday of this coming week, both Covid and Russia’s war on Ukraine could be over.

Covid restrictions are ending because the politicians and government leaders understand political science better than “science science”. Most US citizens are exhausted by the Covid restrictions and are willing to accept the now diminished risk of infection so that life can return to normal. Mask mandates are being repealed or withdrawn incredibly quickly. By the time the CDC makes its new recommendations, there will be hardly any mask mandates left, except possibly in New York City where they just removed the mask mandate for school children playing outside but not inside. They must have missed the studies that showed how detrimental remote learning and masked learning have been.

The Russian invasion of Ukraine could end by Monday. One likely outcome is for Russia to capture the President of Ukraine and replace him with a Putin-selected president, who would sign a “peace treaty.” The peace treaty is likely to ensure that Ukraine will never join NATO or have any military weapons in the country. Russia will be their “protector.” The sanctions that have been placed on Russia will be slightly disruptive to the world economy and a little more so to Russia itself. Russia is the world’s largest oil and gas producer, and this is their primary source of foreign exchange. There were no sanctions on these exports. Ukrainian grain and farm products will find the way into world markets if the ports aren’t destroyed.

Covid and the Russian invasion have been a storm cloud over the market. Once completely lifted, the market should take another leg up. The economic news remains solid. Unemployment filings were very low last week and less than expected. Durable goods orders came in strong. Personal spending was up and above expectations. Consumer confidence rose. Only pending home sales dropped and that was attributed to lack of inventory rather than a reduced number of buyers.

Interest rates, as reflected in the 10 Yr Treasury, were surprisingly flat for the third week. Some uncertainty will persist since the Russian invasion could trigger a conflict with Europe and/or the US outside of Ukraine. Although this is unlikely, the Fed may moderate the pace of interest rate hikes because of it. We still expect hikes to start in March with a quarter of a percent rise.

During the first two days of the week, the market reflected a world of uncertainties, and the SP 500 was down almost 3%. The last two days of this four-day week, the SP 500 surged almost 4% as did the NASDAQ. The fixed income market showed the same resilience. Patient investors are being rewarded.

For the week, the SP 500 was up +0.82% and the NASDAQ +1.08%. Tuesday the SP 500 was -1.01%, Wednesday -1.84%, Thursday +1.50%, and Friday +2.24%.

Next week an important manufacturing index for February will be released on Tuesday. That evening is the President’s State of the Union address. Fed Chair Powell testifies before Congress on Wednesday and Thursday. Friday will be the important new jobs data for February. And sadly, during the week look for the capitulation of Ukraine.

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.

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