Receive Weekly Market Updates via Email

shadow

Weekly Market Update for March 11, 2022

by Jim Ulland

The market is a hostage to war headlines. On Wednesday, the President of Ukraine said he was willing to discuss neutrality and not to seek NATO membership. The SP 500 went up 2.57% and the Nasdaq 3.59%. On Thursday evening, Putin said, there were “certain positive shifts” in the talks and the pre-market was up over 1%. That quickly faded as Russia intensified its bombing of new Ukrainian towns. The very strong market on Wednesday suggested that the market could spring back once a peace agreement is reached.

Everyone knows that inflation has hit the economy hard. That was quantified on Thursday when the February CPI was announced. Prices were up 7.9% over the last twelve months, the fastest annual pace since 1982, forty years ago. The Fed’s effort to reduce inflation could depress economic growth. The Fed’s primary tool to slow inflation is raising interest rates. The Fed is expected to announce its first raise of 0.25% next Wednesday. At least three more raises are predicted for 2022.

If economic growth slows, corporate profits will also. Reduced profits will make it harder for the stock market to recover. Fixed income securities, including our highly rated Intelligent Fixed Income strategy, have been hurt by this combination of inflation, higher interest rates, and potentially slower growth.

For the financial markets to recover, the first imperative is a peace deal. This will stop the deterioration in the world’s supply chains. Supply chain disruption is an important cause of price increases. A peace deal also will reduce fear that is in the market. Many worry that Putin could use nuclear weapons on the Ukraine, or even possibly Europe and the US. That fear could be responsible for as much as 5% of the market’s decline. Congress too must show spending restraint. More spending creates more demand. More demand raises prices. Higher prices force the Fed to raise interest rates faster. And faster rate increases will slow the economy, perhaps forcing a recession.

It is impossible to determine when a peace deal will be reached. When a deal is announced, we expect a strong market recovery. That is why we have stayed almost fully invested. For those in cash, the snapback is likely to be missed. It is hard to be patient as the market worries its way lower. For those who take a longer view and ask where the market will be in six months, the answer is “probably higher.” It seems like an eternity to get there, but day by day we will.

Other news in the market was over shadowed. Amazon’s decision to split its shares 20-for-1 was followed by a jump in its stock price. Unemployment filing stayed low. The Iranian talks bogged down under more demands for concession by Russia, the mediator. Many think any deal Iran will accept will be bad for the West if it brings Iran closer to having nuclear weapons and cash for funding terrorists.

For the week, the SP 500 was down -2.9% and the NASDAQ -3.5%. Monday the SP 500 was down -2.95%, Tuesday -0.72%, Wednesday +2.57%, Thursday -0.43%, and Friday -1.3%.

Next week, the big news will be from the Fed. It is likely to raise interest rates by 0.25% Wednesday. Although this is expected, the language in the announcement will be market moving since it may indicate the pace of future raises. Other than the Fed, next week will be all about Russia’s invasion and the progress of peace talks. Our thoughts are with the beleaguered Ukrainians.

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

 

shadow
 

Ulland Investment Advisors

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