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Weekly Market Update for January 8, 2021

by Jim Ulland

What a tumultuous start to the year. The Democrats took control of the U.S. Senate by virtue of a double victory in Georgia and now control the House, the Presidency, and the Senate. The day following that election, there was a major protest at the US Capitol with loss of life. By week’s end several of President Trump’s cabinet officers had resigned and Speaker Pelosi was calling for another impeachment vote in the House. Through it all, the market powered on as if nothing unusual was happening. The market was focused on governors who were easing their lockdowns and vaccines that were being distributed more rapidly. Additionally, Pfizer’s vaccine which was judged by the company to be effective against new strains of the Covid virus.

The market feels that additional stimulus will be enacted by Congress. An infrastructure bill is now expected and likely to be bipartisan. All of this is encouraging for a recovery in corporate profits and GDP growth. Because none of the new expected stimulus spending is paid for, there is some concern about deficits triggering inflation and pushing interest rates higher. Some interest rate movement is beneficiary for our portfolios. The credit quality of banks improves as they earn more on idle deposits. Bank issued preferred stock is the core security in our fixed income strategy. Slightly higher rates mean that new issues will pay more. That said, the Fed is likely to prevail with its “lower for longer” policy approach to interest rates. Should rates continue to trend higher, we will reposition more of the portfolio to floating rate preferreds from fixed rate. This week our fixed income portfolios were negative with the rising rates. We view this as likely to be temporary.

Major market indices hit all-time highs this week. To do so, the market had to fight the headwind of the first monthly (November) job loss since April. The reimposition of lockdowns was too intense for job levels to hold. China-US tensions escalated as the State Department supported the delisting on US exchanges of several important Chinese companies such as Alibaba and Tencent, both investments in our equity portfolios. The Treasury Department opposed the delisting. Crude oil prices were higher on the news of a production cut from Saudi Arabia.

For the week, the Nasdaq was up +2.43%. The SP 500 was +1.83%. On Monday, the SP 500 was 1.48%, Tuesday +0.71%, Wednesday +0.57%, Thursday +1.48%, and Friday +0.55%.

Two weeks from now President-elect Biden will be sworn in. Prior to that, new cabinet officers will be announced. So far Biden has assembled many from his prior vice-presidential staff and from the Obama team. Lockdowns should continue to be reduced and the pace of vaccinations should increase. These are the factors feeding a positive market. We continue to see value in both equities and fixed income and encourage those with cash on the sidelines to put it to work.

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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Ulland Investment Advisors

4550 IDS Center · Eighty South Eighth Street · Minneapolis MN 55402 · Telephone: 612-312-1400 · Facsimile: 612-204-3464