Weekly Market Update for October 6, 2023

by Jim Ulland

After opening down on Friday by over 1%, the NASDAQ closed the session up 1.6%. The market initially was depressed by the large number of new jobs created in September. However, on closer analysis, the Jobs Report was not as bad as the headline. The unemployment rate stayed flat at 3.8%. Also, wages went down a surprisingly favorable 0.1% from August. Compared to a year ago, wages were up 4.2%, less than what had been forecast.

Inflation news during the week was encouraging. The price of crude oil declined 9.3%. The September ISM Manufacturing Index of Prices Paid showed a 9.5% decline from August and a 15.28% decline over the last twelve months. Manufacturing remains in contraction. Tesla reduced prices, putting pressure on US EV manufacturers, most of whom are in an expensive contract dispute with the UAW.

Even with the favorable inflation news, the Fed seems ready to raise interest rates one last time before going into a long pause. Many economists feel the Fed already has done enough to slow the economy and that they risk a recession with further increases. Once the Fed finishes raising rates, fixed income security prices are expected to increase sharply. The current yield on our Intelligent Fixed Income strategy is slightly over 7.5%. We and many analysts think this is an attractive time to lock in these high rates.

The impact of higher interest rates and loan losses in banks will start to become known next Friday. Citi, JP Morgan, and Wells Fargo will announce Q3 earnings before the market opens. Earnings could be better than expected, which will give both stocks and fixed income a boost. United Health also reports Friday. The major Tech firms report two weeks later.

Next week’s headlines will be filled with the election of a new Speaker of the House, efforts to fund the government (funding runs out on 11/17), and the growing impact of the UAW strike where plants not on strike are closing due to a lack of parts and components from plants that are striking. Frost in the northern states will mark the beginning of the heating season. Weather forecasts pushed the price of natural gas up 8.5% this week. Expect more increases.

Last Friday, we wrote positively about the AI chip maker Nvidia. It was up 5% this week…it doesn’t always happen that way.

For the week, the S&P 500 was up +0.48% and the NASDAQ +1.60%. On Monday the S&P 500 was +0.01%, Tuesday -1.37%, Wednesday +0.81%, Thursday -0.13%, and Friday +1.18%. The yield on the 6-month Treasury closed at 5.59%. The 10-year Treasury was up 21bps to 4.79%.

Next week, the big news will be on Thursday, when the CPI for September is released before the market opens. The market continues to be very sensitive to this number since it reflects both the pace and direction of inflation.

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