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Weekly Market Update for October 15, 2021

by Jim Ulland

The market loved Friday 10/15. One reason is that it followed a very strong Thursday with blow-out Q3 bank earnings and unexpectedly high earnings from Minneapolis based United Health Group. The market had been in a holding pattern until Thursday waiting for the first corporate earnings to be announced. Earnings started off with a bang.

On Friday, the market was propelled upward by higher-than-expected September retail sales. It had been feared that the shortage of goods and workers would dampen consumer spending. If it was dampened, it was not by much. Amazon, the world’s biggest retailer, jumped 3.3% on the news. Goldman Sachs moved the whole banking sector another notch higher with its huge earnings announcement.

Some negative issues from the week earlier were softened. Congress lifted the debt ceiling, but only for two months, allowing us to experience that crisis again. China assured the market that the default by its biggest property developer would not topple other developers. Many are not that confident. China was not as positive about electricity. Large users had curtailments which started to sound like summer in California. US interest rates were relatively calm and down for the week giving a boost to our nationally- recognized fixed income strategy’s performance.

For the week, the market over-looked the festering problem of inflation. Headline CPI was the highest since 2008. One of the leading indicators of inflation is what level of inflation consumers expect. If consumers expect higher prices soon, they buy now. Of course, that forces prices higher and makes the expectation a self-fulfilling prophecy. Social Security checks also will be increased by 5.9% reflecting the inflationary environment.

Supply chain bottlenecks persist, aggravating inflation. The Port of Los Angeles will remain open 24/7 to move the one million containers floating offshore in the sixty-plus ships. Unfortunately, there are not enough truck drivers to take all the additional containers away, nor is there available warehouse capacity. Just keeping the port operating for more hours is unlikely to solve much. Covid mandates have the unintended consequence of reducing the labor force and add to back-ups in the supply chain. Hospitals also are experiencing worker shortages and restricting admissions.

Energy prices crept even higher triggering additional price rises from energy users like truckers. Hurricanes, government restrictions on drilling, and limitations on building pipelines have crimped supply. Expect much higher natural gas prices this winter in home heating bills.

But, on Thursday and Friday the market plowed ahead, taking the “glass is half-full” mantra. For the week, the SP 500 was up +1.82% and the NASDAQ was similar at +2.18%. Monday the SP 500 was negative 0.69%, Tuesday -0.24%, Wednesday +0.30%, Thursday +1.71%, and Friday +0.75%.

Our fixed income strategy, Intelligent Fixed Income (IFI), continues to provide shelter for those worried about equity prices. YTD our IFI strategy is up about 5%. Most of the dividends are “Qualified” thus subject to lower tax rates than interest income.

Next week is all about earnings. Expect excellent earnings news. However, the CEOs are likely to warn about the negative impacts of supply chain bottlenecks and workers shortages in coming quarters.

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