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Weekly Market Update for March 10, 2023

by Jim Ulland

One law that Washington frequently presents to the public is the law of unintended consequences. The Federal Reserve, in its zeal to control inflation, raised interest rates at the fastest speed in memory. They argued that higher rates would slow the economy and reduce inflation. We saw the unintended consequences at the end of this week at Silicon Valley Bank.

Silicon Valley Bank, the 16th largest in the US, was a California bank that served the Tech industry. The smaller technology companies and their venture capital partners held sizable deposits at the bank. The bank took the deposits and invested in US Treasuries and other highly secure securities. Unfortunately, when they invested, interest rates were low. As the Fed dramatically increased rates, the value of the low-rate securities fell. This would not have mattered much if the bank could have held the securities to maturity, since they would have gotten all their money back. However, the tech depositors got nervous this week and started pulling out their deposits rapidly. To pay the depositors, the bank had to sell it holdings of US Treasuries at depressed values and could no longer hold them to maturity. As a result of the substantial losses, the bank failed today.

The only good news on this Fed blunder and the unintended consequences, represented by the bank failure, is that the Fed is likely to do only modest increases in rates going forward. A rapid pace could destabilize more companies in the financial sector.

The Fed is still faced with controlling inflation. The next data point is the February Consumer Price Index (CPI) which will be released on March 14. The following week, the Fed meets for its latest interest rate action. The market hates the turmoil experienced this week. For the week the S&P 500 was down -4.55% and the NASDAQ -4.71%. Our fixed income strategy, IFI, was down hard as well, however, the current yield from the strategy is now over 7%.

Our US Treasury strategy is paying almost 5%. We are focusing on Treasuries with 12 months or shorter maturity. These trade very near full value even if sold prior to maturity.

Monday the S&P 500 was up +0.07%, Tuesday -1.53%, Wednesday +0.14%, Thursday -1.85%, and Friday -1.45%. Next week, the big news will be the Tuesday CPI Report.

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