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Weekly Market Update for January 15, 2021

by Jim Ulland

The market spent the week being pulled in different directions by the headlines. After ignoring the world’s political events for the prior month, the market started to show some concern. The impeachment of the President added anxiety to already stressed-out investors. Rumors that the Biden inauguration would be disrupted contributed more stress.  The Covid-19 virus refused to make a graceful exit and instead renewed its attack on the public at the same time as the vaccination effort was looking disorganized.

The market’s view that things would be returning to normal by June was being rethought. President-elect Biden announced that “everyone would be paying their fair share” as he rolled out his big stimulus package. “Everyone paying their fair share” is political talk for a renewed effort to raise taxes. The market is still sorting out the ramifications of the sweep in the Georgia Senate runoff elections which gave complete government power to the Democrats, although the House and Senate are closely divided. This is good news for clean tech, electric cars, renewable energy, cities with budget deficits, retailers, and landlords who may see more rent checks.

The week’s directionless market did not disrupt the widely held belief that the vaccines would eventually win the battle with the virus. Biden’s plan does propose more money for vaccinations. Johnson and Johnson said that its vaccine was more effective than previously thought. Trial results will be released next month. Meanwhile, both Pfizer and Moderna were increasing production of their vaccines, which generally will be free to the public. Pfizer said, in a limited study, that its vaccine appeared to be effective against the new strain of the Covid virus as well as the current strain. Each day more people are getting vaccinated and those infected are both recovering and developing immunity. Soon the pandemic will become manageable, perhaps by late spring. The market knows this, and we feel it will continue to trend higher.

Earnings reports for Q4 started on Friday with several big banks reporting. Loan losses were down, profits were up, but revenues were below expectations. Bank stocks declined on the news. Higher interest rates increase bank profits, but rates too were down on Friday. On Thursday, the Fed restated its intention to hold interest rates low for quite a bit longer. The yield on 10 Yr Treasuries closed lower for the week helping fixed income securities and our IFI strategy, which uses preferreds, to end the week higher.

For the week, the Nasdaq was down -1.54%. The SP 500 was -1.48%. On Monday, the SP 500 was -0.66%, Tuesday +0.04%, Wednesday +0.23%, Thursday -0.38%, and Friday -0.72%.

Last week’s concern that Alibaba, Tencent, and Baidu would be delisted was resolved without casualties. Next week will be President-elect Biden’s inauguration. Let us hope it is peaceful. Earnings reports for Q4 will begin in earnest. Bank of America, Netflix, United Health, and US Bank are some of those who will report. We expect the earnings focus to be on next quarter rather than the past one, so any forecast CEOs provide will influence the market’s direction.

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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