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Weekly Market Update for February 4, 2022

by Jim Ulland

The last week in January was the first positive week of the last four. This week also was positive with the NASDAQ +2.38% and the SP 500 up +1.55%. The market seemed to be bouncing along a bottom, and a rough bottom it was. Facebook fell over 25% after its earnings announcement and a weak forecast for 2022. Google was the exact opposite with a 32% increase in advertising revenue, a 45% increase in Cloud revenue, and a 7.5% increase in stock price. Amazon summed up the market this week by falling over 7% the day earnings were to be announced after the close and then rising 13% the next day. Amazon stock price was helped by a price rise of $20 per month on Prime and big revenue from Cloud services. Expect more volatility. Omicron, inflation, and rising interest rates are still market headwinds.

New cases of Omicron were down 45% in the last two weeks. Governments are starting to talk about relaxing restrictions. One report suggested that lockdowns had very little impact on controlling the spread of the virus. January was not as detrimental to employment as feared. The Jobs Report on Friday showed 467,000 new jobs created. Unemployment was at 4%, generally considered full employment. Hopefully, the steep drop in Omicron cases will allow more to return to work.

The fixed income market was hoping for more muted job growth. It was argued that slow job growth would keep the Fed from raising interest rates as fast as feared. After the solid jobs report, interest rates, as represented by the 10 Yr. Treasury, rose sharply. This caused more disruption in the fixed income market. We expect prices to stabilize next week and rebound by the end of the quarter. We can buy preferred stock paying over 5% because of this pullback. Since 5% is the highest current yield in the market, investors will be attracted to preferreds once markets settle. Last year the fixed income market started the year with a pullback and ended the year up 5+%. Those who took advantage of the dip were rewarded.

Next Thursday, the January CPI number will be released showing just how hot inflation has been. Crude oil topped $90 per barrel this week. Omicron kept many supply chain workers home, which caused more shortages of goods. This will end soon. A normalized supply chain will dampen inflation.

The biggest news this week was from the rating agency Morningstar. They reviewed the three-year performance of our Intelligent Fixed Income strategy run by Nat Beebe and gave it a Five Star ranking. Congratulations to Nat for this great work. We are seeing a strong inflow of funds seeking to take advantage of Nat’s expertise and the market dip.

Monday the SP 500 was up +1.89%, Tuesday +0.69%, Wednesday +0.94%, Thursday -2.44%, and Friday +0.52%.

Corporate Q4 earnings continue next week with smaller companies. Earnings so far have exceeded expectations. The Thursday CPI report will be market moving. No controversial legislation is expected to pass in the next month because one US Senator had a stroke. We wish him well. Everyone needs a break from the rather nasty political battles.

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