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Weekly Market Update for May 10, 2024

by Jim Ulland

The Fed has put itself in somewhat of a dilemma. Chairman Powell said the Fed’s interest rate decisions will be “data-dependent”. There is a lot of inflation data set to be released next week. The Producer Price Index (PPI) is scheduled for release on Tuesday. Producer prices are usually thought of as wholesale prices. This is followed the next day by the Consumer Price Index (CPI), both from April. These are big data points for the Fed, so expect a meaningful market reaction. Lower prices lead to downward trending inflation, which is the key to reduced interest rates.

One of the important inflation components is wage growth. On Thursday, unemployment filings showed an increase. This follows the lower-than-expected job growth in April. Although corporate earnings for Q1 have been good, comments by CEOs are not as optimistic for the rest of the year. Less wage pressure should soften wage increases and help inflation numbers.

AI stocks have been very responsive to Q1 earnings releases, most of which exceeded expectations. The next big AI company to release Q1 earnings is Nvidia. This release is scheduled for 5/22 after the market closes. The AI sector seems to be holding its breath for this announcement. We expect another quarter of very strong revenue and earnings growth. There is some concern that revenues will be constrained because of limited production capacity. So, the results could surprise on the upside or downside.

The week has been relatively quiet, but positive. The S&P 500 and Nasdaq were up for their third straight week. The S&P 500 was up 1.85% and the Nasdaq was up 1.14%. Interest rates, as expressed by the 10-Year US Treasury, continued to make these low-risk securities attractive. Our favorite security in our Treasury strategy is the 6-month Treasury, which nets clients over 5% on an annualized basis. Our US Treasury strategy (IFI GOV) focuses on 3 to 9-month Treasuries. We recommend limiting cash balances in checking accounts and putting this “idle” cash into our IFI GOV strategy. Treasuries have a more favorable tax treatment than CDs and cost far less if the investor must access these funds prior to maturity.

Economic news for the week included the University of Michigan consumer confidence survey, which was the lowest since November. Washington did some saber-rattling with China and threatened tariffs on EVs, car batteries, and solar cells. Interest in EVs has dropped and demand has shifted to hybrids, which can run on electricity or gasoline. The Israel/Hamas conflict could get hotter if Israel enters Rafah.

Next week should be quiet except for the CPI headlines and market reaction. Perhaps take this respite to plant your garden.

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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