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Weekly Market Update for November 13, 2020

by Jim Ulland

The market’s love of a potentially divided government was partially over-shadowed by the growing prospect of another major “lockdown” of the economy. This spring, lockdowns crushed the economy and drove unemployment to 14%. Today unemployment is 6.9%. Half of the jobs lost last spring have returned. This week’s lockdown fears have been fueled by a sharp spike in Covid-19 cases and hospitalizations. Many hospitals have delayed elective surgeries to keep beds available for Covid patients.

The spike in Covid cases is troubling, but perhaps understandable. We all dutifully are wearing masks, washing hands, and keeping our distance. But warm weather ended and people moved activities indoors.  Hot spots for transmission include restaurants, bars, weddings, funerals, fitness centers, and probably college dorms. Minnesota’s own Dr. Michael Osterholm proposed a tight lockdown of the entire US for four to six weeks. Many economists think this would be devasting to the economy. A full lockdown was tried this spring without the lasting result of Covid control.

It was just this Monday that Pfizer and partner BioNtech announced a vaccine that is tracking to be more than 90% effective. Moderna is expected to announce results of its vaccine this month, maybe next week. Both vaccine developers have been ramping production, anticipating both good results and FDA approval. Once the vaccines start to roll out, the worst of the crisis will be behind us. Perhaps, rather than risking irreparable harm to the economy with permanently lost jobs from a tight lockdown, we should manage our way through the next six months as best we can while letting the vaccines do their work.

The economy continues to heal and grow. Unemployment filings dropped again. The number of workers already on unemployment declined by another 600,000. Consumer prices were unchanged in October. Interest rates rose mid-week and then retreated although staying higher than a week ago. They still are historically low and very favorable for our fixed income strategy IFI, which booked more strong performance.

The market feared a lockdown but still looked through to the other side of the pandemic when things will return to normal. Thus, the most beaten down sectors of this spring performed well. Hotels, airlines, retail stores, food chains, and banks were among them. The technology-related work-at-home stocks took a pause and settled slightly lower. The influence of the election on the market went into neutral as all eyes turned towards Georgia where the control of the US Senate and tax policy will be decided on January 5th in two Senate runoff races.

For the week, the Nasdaq was down -0.55%. The SP 500 was up +2.16%. Monday the SP 500 was +1.17%, Tuesday -0.14%, Wednesday +0.77%, Thursday -1.00%, Friday +1.36%.

Next week Lowe’s and Home Depot report, which will give an indication of the strength of the home improvement market. Expect election litigation to grind on.

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*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/prospective clients 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 strategies 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.