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Weekly Market Update for March 18, 2022

by Jim Ulland

Did we see the market’s bottom on Monday? ‘Sure looks like it. On Monday, the NASDAQ hit Bear Market territory, down 20% from its high. By Friday, the NASDAQ was up 8.18% for the week including Monday’s 2% decline. All three major indices had their best week since November of 2020, the month that the first results of the Pfizer Covid vaccine were announced. Think what would happen if we had a cease fire and then a peace agreement.

The Russia/Ukraine talks are ongoing. Unfortunately, Russia’s pattern in Chechnya was to talk and bomb. Russia literally bombed Chechnya to bits, at which point whoever was alive surrendered and the country became a vassal of Russia. The difference in Ukraine is that the sanctions are very strong. Over time, Russia’s economy will be driven into a recession. On the war front, Russia is looking at either a decades long guerilla war or a peace agreement. China, which could safety-net Russia and blunt sanctions, implied that it would prefer to stay somewhat “neutral.” The market seems to sense that an end is coming. Putin knows that a muddy spring in Ukraine, which is near, makes the worst possible conditions for troop and equipment movements. Perhaps the weather also will drive him towards peace.

Other than the war and China getting another dose of Covid, the big news of the week was the Federal Reserve’s plan for interest rate increases. On Wednesday they raised interest rate by 0.25% and said six more raises of 0.25% could be expected this year. One of the Fed’s mandates is to control inflation and create price stability. The only tool they have to do this is by raising or lowering interest rates. In an economy short of goods because of a tight labor market and supply chain bottlenecks, increasing interest rates might not be as effective as hoped. Congress has no vow of price stability and runs counter to the Fed’s efforts by increasing spending, thus demand, thus higher prices.

Economic growth has not succumbed to inflation or labor shortages. In fact, corporate profits are still rising. The 2022 GDP growth estimates have been reduced but remain above the 2.1% norm. If the Fed slows the economy too much, we will have a recession. Interest rates will then decline. In fact, after the Fed’s increase on Wednesday, interest rates did decline and were flat Tuesday through Friday. This allowed a nice recovery in our fixed income strategy, Intelligent Fixed Income, which has a current yield of approximately 5.5%.

When a deal is announced, we expect a dynamic market recovery. That is why we recommend staying fully invested. Those with patience were rewarded this past week.

For the week, the SP 500 was up 6.16% and the NASDAQ +8.18%. Monday the SP 500 was down -0.74%, Tuesday +2.14%, Wednesday +2.24%, Thursday +1.23%, and Friday +1.17%.

Next week, the Fed governors and the Fed Chairman will give a total of 15 speeches. They are attempting to formulate an economic message that distills to that TV line, “We got this.” Let’s hope they do. Spring arrives Sunday, another sign of renewal. Enjoy.

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