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Weekly Market Update for February 5, 2021

by James Ulland

The last week in January was tough for the market. The “short-squeeze” on those with short positions in Gamestop et al infused the market with uncertainty. The vaccine distribution news was contentious. Job loss was feared from the Administration’s moratorium on oil and gas leases. And the stimulus package was in doubt. As a result, the Nasdaq was down -3.49% and the SP 500 was down -3.31%. Buyers came back in this Monday to “Buy the dip.” They bought the dip all week and pushed the SP 500 and the Nasdaq to new all-time highs.

The market narrative is unchanged. The stimulus will pass and push economic growth higher. The pace of vaccinations will increase and bring “herd immunity” by late summer. Lockdowns will be lifted. Kids will get back to school making their parents more productive. Those who have saved money by not going out will start to do so. Jobs will return from those businesses that have survived. Plus, the Fed will keep interest rates low during 2021 as promised.

This positive narrative was supported by corporate earnings announcements that were better than expected. Half of the SP 500 companies have reported Q4 2020 earnings and 86% were higher than expected. Some of the notable reports were from Amazon whose revenue was up 44% over the same quarter last year. Google (Alphabet) reported a 22% growth in revenues.

Economic news was mildly supportive as well. The number of workers filing for unemployment declined as did the unemployment rate. December factory orders rose.

Our view is that the market will move higher by fits and starts throughout 2021. This week’s performance was impressive. The Nasdaq was +6.01%. The SP 500 was +3.89%. On Monday, the SP 500 was up +1.61%, Tuesday was +1.39%, Wednesday +0.10%, Thursday +1.09%, and Friday +0.39%. Interest rates did drift up; however, our Intelligent Fixed Income strategy was modestly positive.

Next week, earnings of mid-sized companies will predominate. The stimulus package will be voted on and it is likely to pass. The impeachment trial will begin on Tuesday, February 9th and could unsettle the market.

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

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