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Weekly Market Update for January 26, 2024

by Jared Plotz, Director of Research

The S&P 500 index climbed to an all-time high this week, closing in on the 4,900 level (up 1.1% on the week). It may have taken two whole years to surpass the prior peak reached in January 2022, but large-capitalization companies have been leading the stock market on a tear. While the Nasdaq has not quite achieved the same feat yet, it has been pacing the equity indices over the past year, benefiting from its high exposure to the technology sector.

Seven mega-cap companies now make up 30% of the S&P 500’s overall weight, and those companies rose over 75% as a group in 2023. Our outsized exposure to large-cap companies, particularly technology stocks, has driven strong growth in equity portfolios. Though we still like the growth prospects and valuations of many of these holdings, we have shifted some weight into small- and medium-sized entities in anticipation of some performance “catch up” in 2024 as interest rates decline.

Economic data threaded the needle. The initial gov’t estimate of Q4 US GDP showed the economy growing at a robust 3.3% annualized rate, down from Q3 but well ahead of expectations closer to 2.0%. Consumer spending was a big driver, along with exports and private investment. However, better growth didn’t lead to hotter inflation, with the PCE price index up a reasonable 2.0%. This is a favorable setup, as markets have shown a tendency to follow consumer sentiment in the post-pandemic period, notably when inflationary pressures are subsiding.

A number of notable companies reported their earnings this week. 3M declined 11% on Tuesday after organic sales fell more than expected and their forward guidance was weak. United Health declined after competitor Humana suggested the margin headwinds stemming from greater patient utilization would be a headwind for longer. Tesla declined 12% on Thursday after noting that not only had volume growth slowed, but price cuts amidst greater competition remained a headwind. IBM rose 9% on stronger revenue, with their generative AI business doubling in just three months. Credit card networks Visa & AmEx continued their double-digit EPS growth.

Things will be very busy next week: Consumer confidence for January is released Tuesday; the Federal Reserve will host a conference call on Wednesday; some manufacturing data will come Thursday; and then the January jobs report will round out Friday. But what may move markets even more is major tech company earnings, including Amazon, Apple, Meta (Facebook), Google, and Microsoft. With how much these stock prices have moved recently, the bar for revenue and earnings growth is high. Investors will also be tuned in to hear how each have been advancing their efforts around opportunities in artificial intelligence.

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 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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