Weekly Market Update for February 10, 2023

by Jim Ulland

The jobs report for January, released last Friday, brought a temporary end to the sharp market recovery. The Fed wants very slow job growth at best, rather than the robust growth of January. Higher job growth often means higher wages, which tend to drive up inflation – the Fed’s mortal enemy. Thus, this week’s market worried that the high job growth would make the Fed less inclined to stop raising interest rates. We’ll see.

Next Tuesday morning, the Consumer Price Index (CPI) for January will be released. The market hopes for a continuation of inflation’s downward trend. The market should respond very favorably if the trend continues.

This week, 95 of the S&P 500 companies reported Q4 earnings. Earnings were better than expected but the forecasts for 2023 were worse, largely because of the impact of higher interest rates. The market is nervous about earnings since lower earnings often lead to depressed stock prices.

Closer to home, the January performance for our Intelligent fixed Income strategy was remarkable. The month’s average portfolio return was over 16%, a record. The national performance ranking will come out soon and we expect to be near the top. Equity portfolio returns also were excellent, although more modest than those of our fixed income strategies. We feel equity returns will continue to lag fixed income until the Fed starts reducing interest rates, possibly near the end of the year.

For the week, the S&P 500 was down -1.11% and the NASDAQ was down -2.41%. Monday the S&P 500 was down -0.61, Tuesday +1.29%, Wednesday -1.11%, Thursday -0.88%, and Friday +0.22%. Market interest rates, as represented by the 10-yr Treasury, increased almost a quarter of a percent (21 bps) from 3.53% to 3.74% triggered by the robust jobs report. This was a headwind to fixed income security prices.

Next week, all eyes will be on Tuesday morning’s CPI report, which will set the tone for the week. More corporate Q4 earnings are also on tap. But, until then, enjoy your Super Bowl party!

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