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Weekly Market Update for October 22, 2021

by Jim Ulland

Earnings news was more mixed this week than last. Negative pressure came to digital economy companies that rely on selling advertising on their sites as a business model. Earlier in the year, Apple had increased its privacy screens on the iPhone and Mac operating systems. This made it harder for Facebook, Google, and Amazon to show customers the effect of their advertising. Since these three, which dominate digital advertising, have become less able to show the effectiveness of advertising, it is harder to price it. Snap, which is a relatively small firm in this business, announced revenues and earnings noticeably below expectations. They blamed Apple and noted that the decline in advertising also was caused by the goods shortages, i.e., why advertise if you don’t have enough goods to sell already. Amazon, Facebook, and Google were down 3-5% on Friday as a result.

The financial sector continued to send positive signals. After the prior week’s blockbuster earnings from the big banks, American Express reported. Its revenues and earnings were better than expected driven by higher sales in lodging, transportation, bar and restaurants, and retail purchases. This helped boost the stocks of other credit card companies such as Visa. Banks also fared well as interest rates increased. Banks have surplus deposits which are more profitable reinvested at higher rates. Their stocks rose too.

The shortage of workers, supply chain disruptions, and inflation continue to be mentioned as major business concerns for the rest of the year. Even Fed Chair Powell now sees inflation as longer and more persistent than expected. One technique the Fed has used to keep interest rates low is to buy bonds, forcing bond prices up and their yields lower. The Fed is expected to reduce their purchases starting in November, perhaps pushing rates a little higher.

Our fixed income strategy, Intelligent Fixed Income (IFI) run by Nat Beebe, continues to have record setting performance in both the peer group of other preferred stock managers and among the entire universe of fixed income managers. Performance for the last three-year period has ranked in the top 5% of the 1180 fixed income separate account managers reporting to Morningstar. So far this year through 9/30, performance is over 5%. We have had a steady inflow of new clients as a result.

Just as investors must manage around interest rates, the country is figuring out how to manage around Covid. Covid and the Delta variant linger as one of the causes for the labor shortage and inflation. Of course, if governments and companies lay off or fire workers who do not get vaccinated, the labor shortage will grow. Giving workers who do not want to get vaccinated the option of a weekly Covid test seems to make sense. We’ll see.

Despite the market headwinds, the SP 500 had four positive days this week and set another record on Thursday. For the week, the SP 500 was up +1.64% and the NASDAQ +1.29%. Monday the SP 500 was +0.34%, Tuesday +0.74%, Wednesday +0.37%, Thursday +0.30%, and Friday -0.11%.

Next week is all about earnings, again. Google and Amazon will report and influence the tech sector. Hundreds of other companies will report as well giving a clearer picture of what to expected in Q4. Congress will be in the news as it tries to reach agreement with two moderate Senators so that the large spending and taxing package can pass. The country does not need this level of additional spending, but it may get it anyway. Stay tuned.

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