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Weekly Market Update for March 25, 2022

by Jim Ulland

It didn’t seem like the market went up almost 2% this week, but it did.  This follows a 6% surge by the S&P 500 a week ago and an 8% spike by the NASDAQ.  The rise this week was masked by a lot of market volatility and the news dominance of the Russian invasion.  Inflation and increasing interest rates found frequent headlines as well.

The market is sensing a peace deal soon, which may explain two weeks of market recovery.  The Ukraine had some battlefield victories, one of which included blowing up a Russian warship docked at a Ukrainian port.  The ground war had fallen into a stalemate.  Ukraine even recaptured one small town.  The most significant remarks of the week came from Putin who said that the world was trying to cancel 1000 years of Russian culture.  The sanctions must be working.  The President of Turkey, who has taken a mediator role, said that peace talks were focused on six issues, four of which were near agreement.  As farm fields get muddy, making troop movements impossible, time may now be on the side of Ukraine.

The Russian invasion has hurt the Fed’s efforts to control inflation.  Oil and gas shipments are disrupted and that is shown in the price of each.  Corn and wheat are dramatically higher since Russia and Ukraine are two of the world’s largest producers.  Ports and bridges are damaged, and farmers are rightly afraid to be out in the open planting.  Metals produced in Russia like aluminum and nickel have seen prices soar.  Freight rates are up for international goods shipments. Unemployment filings for the week dropped to a very low level. Inflation will not be easy to control.

The Fed could make a big mistake in its attempt to control inflation. One problem is that it only has interest rate increases as a tool.  Moving rates up too fast could tip the economy into recession.  Home mortgages already are up a full percent.  Home sales are down, although this is partly from a lack of inventory.  The geopolitical uncertainty and higher interest rates may freeze business decisions and slow growth further. Slower growth or a recession would stabilize and then reduce interest rates.

The Russia/Ukraine talks are ongoing.  An agreement would trigger a big market recovery.  Prices too would moderate some.  We see potential for an agreement in April.  The sooner the better.

For the week, the S&P 500 was up +1.79% and the NASDAQ +1.98%. Monday the S&P 500 was down -0.04%, Tuesday +1.13%, Wednesday -1.23%, Thursday +1.43%, and Friday +0.51%.

Next week, the biggest news will be from the March net new jobs report.  If job growth starts to weaken, an economic slowdown will not be far behind.

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.

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