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Weekly Market Update for August 18, 2023

by Jim Ulland

Historically, August has not been a strong month for the market. That has been true so far this month. The S&P 500 is down -4.78% and the Nasdaq is down -7.36%. Included in those numbers is this week, with the S&P 500 down -2.11% and the Nasdaq down -2.59%. Over the last 33 years, August has been negative about 50% of the time. Unfortunately, September is about the same. December, on the other hand, has been positive 76% of the time. This is one of the few reasons to hope for winter!

The market was also influenced by the thinking that good news is bad. This argument suggests that relatively solid retail sales from Walmart, Target, and Home Depot, as well as stronger Q3 GDP estimates, may “force” the Fed to resume increasing interest rates. The next Fed meeting is September 19-20. The market felt the July rate increase of 0.25% was the last. Should the Fed raise rates again, the notion that inflation was coming under control would be brought into doubt.

US Treasury yields are at a 16-year high. This is good news for those who want a safe income of 5% (we have a strategy to do this). Yet not all is rosy in the US economy. The higher Treasury yields are putting pressure on housing, pushing mortgage interest rates to 7%. China, one of our largest trading partners, is experiencing very slow growth and the bankruptcy of a large real estate developer. There also is a potential for a strike of the auto workers. Payments are set to resume on student loans, which will reduce discretionary spending. Profits will be squeezed at banks as they pay more for deposits. This is likely to result in credit quality downgrades by the rating agencies, another drag on the market and the economy.

We think there will be plenty of volatility in the next few months. Locking in these high interest rates now will generate higher income over the next decade so timing does not have to be precise. When the economy slows, the Fed is highly likely to reduce interest rates and the income opportunity will diminish.

Besides the attractive short-term rate on US Treasuries of over 5%, preferred stock pays dividends from 6.5%-8% with the potential for appreciation. Although the prices of these securities fluctuate, the dividends are highly predictable and drive meaningful income. During the past decade, there have only been rare times when you could lock in this level of income.

During this second quiet summer week, the S&P 500 was up on Monday by +0.58%, Tuesday -1.16%, Wednesday -0.76%, Thursday -0.77%, and Friday -0.01%. The 10-Yr Treasury was up +9 bps to 4.25%, whereas the 6-month Treasury closed the week at 5.40%.

Next week there is an economic conclave at Jackson Hole. Fed Chairman Powell will speak, but little new policy is expected. The market news will come from Nvidia on Wednesday. They are expected to say their production is sold-out until early next year. Their chips are the most popular for AI performance. The stock should be active on the news.

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