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Weekly Market Update for January 6, 2023

by Jim Ulland

The New Year started with a bang, and most of the bang was in fixed income. The last weeks of 2022 were plagued with tax-loss selling, which forced prices lower. When the year ended, so did tax-loss selling. Without the selling pressure, the attractive yields in fixed income were compelling for investors. Our Intelligent Fixed Income strategy (IFI) was paying about 7%. By the end of the week, the prices of the securities in this strategy were up over 5%.

Equities also started the year with gains, but more modest than those in fixed income. Forecasters think a recession is likely, which will be a headwind for corporate profits. Stock prices are sensitive to earnings, so stock prices will have trouble sustaining rallies until the Fed stops raising interest rates. We expect this to occur sometime in the spring.

The Fed is looking for signs that inflation has both peaked and started trending down. Today, the new jobs report for December was released. Job growth was not as slow as the Fed would have liked; however, wage increases were less than expected. It is tough to get to the Fed’s target of 2% inflation if wages are growing at 5%. The December report had wages growing at 3.6%, a lot more favorable than 5%. Inflation data also improved in Germany and France. Here, gasoline prices were down. Natural gas responded to warmer weather here and in Europe and fell to pre-Covid levels. Used car prices were lower, as were home prices. Medical care even showed price declines. The Fed is looking for a trend, and one is emerging. Some Fed Regional Presidents have publicly noted this: St Louis Fed’s Bullard said that Fed policy is getting closer to being sufficiently restrictive. We think it is already very restrictive.

For the most cautious investors, we recommend our new US Treasury strategy (IFI-GOV) which invests in Treasuries with a maturity of three years or less. After our fee, the net to clients currently is over 4%. Ironically, Treasuries with a six-month maturity pay the most. Thus, when compared to CDs, investors get better yields and a more favorable tax treatment.

For the week, the 10-yr Treasury was down -32bps to 3.56%. Monday was a holiday. The S&P 500 was down Tuesday -0.40%, Wednesday +0.75%, Thursday -1.16%, and Friday +2.28%. For the week, the S&P 500 was +1.45% and the NASDAQ +0.98%.

The news next week will focus on the CPI report Thursday (will the downward trend continue?). The market will be very reactive to the number. At the end of the week, Q4 earnings will start with the big banks and United Health Group on Friday.

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