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Weekly Market Update for June 4, 2021

by Jim Ulland

The market spent the week celebrating the end to mandatory masks and the reopening of most bars and restaurants without restrictions. Businesses announced return-to-the-office schedules. New Covid cases and deaths fell to pandemic lows.

The broader market narrative continued with fears of inflation causing concern that the Fed will raise interest rates more quickly than expected. Higher interest rates could slow the recovery. Housing would be vulnerable. At the same time, there is a concern that the economy is “too hot.” Those with this concern, including us, don’t want more stimulus fuel put on the fire. The stimulus debate is centered in Washington where a bi-partisan infrastructure bill has yet to be fashioned. Few argue that some infrastructure spending is needed, but the amount and how to pay for the spending is where the debate centers. A side debate is on the definition of infrastructure which traditionally has meant roads, bridges, and airports. Some want to expand the definition to include “human infrastructure,” a definition that can include almost anything.

The temperature of the economy was shown in this week’s unemployment filings, which were at a post pandemic low. Job growth in May was 560,000. There are still millions of jobs open which are an indicator of a tight labor market. The higher vaccination levels should make more people comfortable returning to work. Schools are announcing a return to full in-person learning, which will release more parents to the work force. The bonus unemployment payments also are starting to expire, another factor encouraging a return to work. Employers are paying more and need additional workers, as signs in store windows indicate.

Manufacturing surveys showed strong demand even with the supply shortages. Energy stocks, material production and distribution companies, ag equipment companies, banks, and auto manufacturing all boosted forecasts of production and profits. Autos also had some relief from the chip shortage by using better inventory management.

We expect stocks to grind higher with stronger earnings and revenue announcements. Interest rates have stayed surprisingly flat, but we expect them to drift higher into the end of the year. Floating rate preferreds are one of our tools to manage this situation.

The Nasdaq closed the week +0.48% higher. The SP 500 was up +0.88%. Tuesday -0.05%, Wednesday +0.14%, Thursday -0.36%, and Friday +0.88%.

Next week there will be a lot of discussion of the infrastructure bill. The May CPI will be reported on Thursday and is likely to fuel more debate on inflation.

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