Weekly Market Update for September 8, 2023

by Jim Ulland

If you are trying to figure out why the market was down this week, look no further than the United Auto Workers (UAW) contract demand. The UAW wants a 40% wage increase over four years plus the restoration of some benefits negotiated away in previous contracts. A strike is likely on September 15 at one or more of the Big Three. Tesla is non-union and already has a cost advantage in the EV market. The Fed is worried about wage inflation as it tries to bring prices down by raising interest rates. The market fears that substantially higher wages will propel inflation upward and force the Fed to slow the economy more.

Wages were not the only issue depressing the market. Oil is up about 10% in the last two weeks, which has caused the airlines to flag this cost as a potential trigger for higher airfares. Higher oil prices, if maintained, will work their way into the economy through shipping and commuting costs. Insurance premiums are set to go up after above-average storm damage this season. Unemployment filings were below expectations, suggesting a continuing tight labor market, although Walmart did lower starting wages for some future workers.

Apple dragged down the tech sector as China banned the use of iPhones by government employees. This is a negative for Apple and there is fear that the ban will be expanded more broadly.

Next week, a significant release of inflation data will occur. The August CPI will be released on Wednesday, followed by the wholesale/input price index (PPI) on Thursday. Retail sales for August will also be released on Thursday. The market is likely to be very reactive to these reports. Lower inflation, as reflected in the two price indices, could give the market a healthy boost.

Although US Treasury yields went up this week, our preferred stock strategy (IFI) held its own. Market stability has been helpful. Reaching a peak in interest rates benefits all fixed income. This strategy has a current yield close to 7%.

During this holiday-shortened week, the S&P 500 was down -1.29%. The Nasdaq was down -1.93%. On Tuesday the S&P 500 was -0.42%, Wednesday -0.70%, Thursday -0.32%, and Friday +0.14%. The 10-Yr Treasury was up +8 bps to 4.26%, whereas the 6-month Treasury closed the week at 5.52%.

Next week will be dominated by the economic data releases noted above. Don’t let this distract you from trying to eke out the last bit of summer.

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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