Weekly Market Update for September 15, 2023

by Jim Ulland

The United Auto Workers (UAW) went on strike this week. Their last wage proposal was for a 36% increase over slightly more than four years. The Big Three auto firms are offering around a 20% increase. The strike could go on for weeks. Another test for consumer spending will be the resumption of student loan payments, which are set to resume in October. The price of gasoline, which economists view as similar in impact to a tax, went up 10.5% in August and more since. All these factors reduce consumer spending, which makes up over 60% of the economy. The Fed may finally get the slowdown it seeks to dampen inflation.

The negative consumer news seemed all the market needed to have a bad Friday, although our fixed income strategy was up modestly. It has a yield above 7% and plenty of appreciation potential, thus the attraction. For the week, the S&P 500 managed to just about break even, down only -0.16%. The NASDAQ was also negative at -0.39%. Interest rates, as reflected in the yield on 10-Yr Treasuries, increased by 7 bps to 4.33%, putting an additional headwind in front of the economy. Both 3M and Harley Davidson said they already were seeing weak growth.

The favorable multi-month decline in prices stalled out in August. The CPI was reported on Wednesday and showed an annualized rise in prices of 3.7% vs. 3.2% in July. If you take out the volatile food and energy prices, the downward trend continued. Unfortunately, energy prices might keep on rising. Both Russia and the Saudis extended their coordinated production cut until 12/31/23. At the same time, China, which has the largest share of demand growth, announced further measures to stimulate its economy. The potential additional demand from China comes during a period of low inventories in the US, thus price pressure.

Next week, the major news will be from the Fed. The press conference, announcing any interest rate change, will be on the second day of their two-day meeting, 9/20. No change is expected. The Fed has signaled it will pause rate increases for now to see if the economy and inflation slow.

During this week, the S&P 500 was up +0.67% on Monday, Tuesday -0.57%, Wednesday +0.12%, Thursday +0.84%, and Friday -1.22%. The yield on the 6-month Treasury closed unchanged at 5.52%.

Next week will be dominated by the Fed. Other market-moving news could come from an auto strike settlement, which is not expected.

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.

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