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Weekly Market Update for October 23, 2020

by Jim Ulland

The major market themes were realigned this week. Now, few, if any, expect an additional stimulus package before the election. After the election, it will not be all that easy either. One side or the other in this political battle will be mad, making compromise difficult. A second major market concern, the election itself, stayed at the top of the news. The last Presidential debate is over, but, even before the debate, over a third of the electorate already had voted. The undecided voters did get exposed to sharply contrasting views, which should crystalize opinions. The real market impact will be after Election Night since the policies and positions of the two candidates are markedly different. The third major market-moving variable is the economy as reflected in Q3 corporate earnings announcements. Earnings are exceeding forecasts. Tesla, Netflix, AutoNation (the nation’s largest auto retailer), and Chipotle, for example, showed strong revenue and earnings growth. Snap, the company that owns Snapchat (the fastest way to share a moment), reported robust internet advertising sales boosting the stock prices of Facebook and Google which also rely on advertising sales.

Covid-19 was the fourth major variable driving the market. With the spike in cases, fears grew that businesses would be further restricted from reopening. Bankruptcies are now common. Restaurants soon will lose outdoor dining to winter weather and many will fail. The travel industry, including hotels and airlines, is desperate. Yet, even with all the mask wearing, hand washing, and social distancing, Covid continues to threaten the health of both the economy and the citizens. It is becoming increasingly clear that a vaccine is the only answer.

Farther in the background was the economic news. Housing sales hit a fourteen-year high. (Look for big earnings from Lowes and Home Depot). Initial unemployment claims fell by 55,000 and were the lowest since March. Those on unemployment (continuing claims) fell as well. Even with headlines telling of corporate layoffs, the number of people working is growing. Q3 GDP is set to be released next Thursday and it will show high growth. Interest rates did move up this week, maybe anticipating a lot of new deficit spending next year. Interest in our fixed income strategy, IFI, using preferreds, continued to be very strong because of its 5% return target.

With the uncertainty of both the election and the development of an effective vaccine, the market fell slightly. The Nasdaq was down -1.06% for the week. The SP 500 was down -0.53%. Monday the SP 500 was -1.63%, Tuesday +0.47%, Wednesday -0.22%, Thursday +0.52%, Friday +0.34%.

Next week tech earnings will be the biggest news makers. Big pharmaceutical companies start the week along with 3M, Visa, Microsoft, and on Thursday: Apple, Google, Facebook, and Amazon. Alibaba, the Amazon of China, ends the week on Friday with its earnings.

*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.