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Weekly Market Update for July 2nd, 2020

by Jim Ulland

The headline battle continued this week and seemed to get more intense.  It was Covid-19 vs. the economic recovery.

The Covid-19 news was particularly negative, with a spike in virus spread.  Daily front page headlines focused on this issue. When Florida, Texas, and California reopened bars, there was little adherence to social distancing.  Testing increased and the numbers of those infected with the virus increased.  Most of the infected were in the younger age groups, so the physical impact of the infections was milder than seen previously.  Fewer new patients have underlying conditions, which are more common in those from assisted care facilities.

On the other hand, the economic news was almost universally positive.  Nonfarm payrolls rebounded by 4.8 million in June on top of an upwardly revised 2.7 million gain in May.  The unemployment rate fell from 13.3% to 11.1%, better than what was expected.  Weekly jobless claims also were less than expected. Pending home sales jumped 44%. Consumer confidence rose.  June manufacturing increased more than anticipated.

Washington had a peaceful and less partisan week.  The small business support program, called the Payroll Protection Program (PPP), was extended by the Senate and the House is expected to do the same after the two-week break.  The Administration is preparing renewals and creation of additional recovery support programs.  This is occurring around the world and the stock markets have noticed

The SP 500 was up 4.6% for the week.  Monday was up + 1.47%, Tuesday +1.54%, Wednesday +0.50%, and Thursday +1.00%. The NASDAQ continued its record breaking performance, also up 4.6%. Preferred stocks, which are the dominant security in our fixed income strategy, were relatively flat as investors digested the successfully completed Stress Tests on bank health. The 10 Year Treasury yield rose from 0.64% to 0.67%, consistent with the Fed’s goal of keeping rates low.

Volatility for the week declined by 23%.  But the nature of this market is to have period of relatively high volatility. The pace of the economic recovery is uncertain, as is the time it will take to get a vaccine or treatment.  Either of these announcements would be critical factors for the recovery.

Next week, economic news is light.  However, second quarter earnings are coming which will provide forward looking views from most corporations.  Second quarter earnings are expected to be bad and generally will be dismissed.  Forward looking statements will move the market.  But that is more than a week away, so enjoy the Fourth and maybe turn off your cell phone.

*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. Clients or prospective clients 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 clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss.