Archive for October, 2024

by Jared Plotz, Director of Research

Oftentimes the markets tend to follow the path of least resistance in the absence of major catalysts. That path is more often up, which has been the trend this fall following a sideways summer. But now sitting 11 days from the presidential election, just six trading days between now and then, the major indices have paused, willing to wait for greater clarity. During the week, the S&P 500 was down -0.96% while the Nasdaq rose +0.16%. On Monday the S&P 500 was down -0.18%, Tuesday -0.05%, Wednesday -0.92%, Thursday +0.21%, and Friday -0.03%.

Yields have continued their somewhat counter-intuitive, post-Fed cut climb. The 10-Year Treasury rose +16 bps to 4.24% this week, and has cumulatively risen +60 bps since the Federal Reserve’s initial (0.50%) rate cut in September. The 6-month US Treasury, a favorite of our US Treasury strategy, ended up +5bps at 4.51%. Thus far only very short-term maturity yields have come down, as economic growth has proven healthy, and inflation – though still declining – has yet to reach 2%. Despite uncooperative long-term rates, our Intelligent Fixed Income (IFI) strategy has continued rising since the Fed meeting. The current yield on IFI is still over 6.0% today.

Looking at the housing market, the average interest rate on a 30-year mortgage has been rising, to 6.54% yesterday, according to Freddie Mac. This is up from less than 6.10% a month ago, though down from 7.80% a year ago. This recent rise has created some friction in home purchases. Existing home sales posted their slowest pace in 14 years in September, while new home sales (benefitting from builder incentives) improved to their fastest pace since May of last year. Overall, activity has picked up as inventory has come to market but further improvements in long-term interest rates are likely necessary for a larger jump.

Equity portfolio holding Vertiv (which makes cooling systems for data centers) reported strong quarterly results this week, demonstrating 19% sales growth and 46% earnings growth. Both metrics were better than expected and an acceleration from the prior report. Tesla (not a core portfolio holding) also reported favorable numbers and its stock rose over 20% on the news. It is a large weight in the major indices, thus providing a boost to the market on Thursday.

Next week is “Tech week” for earnings season. Heavy hitters set to report include Alphabet (Tuesday), Microsoft & Meta (Wednesday), and Amazon & Apple (Thursday). Other notables include Electronic Arts, Visa, Intel, and Exxon Mobil. We will also get a decent helping of economic data like the FHFA House Price Index (Tuesday), the initial reading of Q3 GDP (Wednesday), Personal Consumption Expenditures (Thursday), and the October employment report (Friday).

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.

by Jared Plotz, Director of Research

Markets continued to trend upward, advancing for the sixth consecutive week. During the week, the S&P 500 was up +0.85% and the Nasdaq +0.80%. On Monday the S&P 500 was up +0.77%, Tuesday -0.76%, Wednesday +0.47%, Thursday -0.02%, and Friday +0.40%. The 10-Year Treasury, a rate indicator, closed the week at 4.08%, unchanged from last week. The 6-month US Treasury, a favorite of our US Treasury strategy, remained roughly flat at 4.46%.

Economic data was largely favorable this week. September retail sales came in better than expected, rising 0.4% sequentially from August. Initial, and continuing, claims for unemployment were both lower than forecast. Homebuilder sentiment improved, and housing starts were slightly ahead of expectations on Friday.

Additional banks released Third Quarter results this week. Bank of America, US Bank, and PNC showed stronger profits from loans, with relatively stable credit trends. Goldman Sachs and Morgan Stanley demonstrated continued momentum in investment banking and asset management fees. Trading results amongst the big investment banks have been the best on record. Banks on the whole appear to have more than adequate reserves for loan losses today, and thus improving profits on each loan as the Fed begins to cut short-term rates may boost bank earnings going forward.

Unfortunately, United Healthcare, one of our larger equity holdings, fell on Tuesday. It reported solid revenue and earnings numbers, but margins disappointed and the company had to slightly lower its full-year guidance. Taiwan Semiconductor – not a portfolio holding, but the largest contract manufacturer of Nvidia’s advanced chips – jumped 10% on Thursday when it revealed sales growth of 40% and earnings growth over 50%. The company also said that it expects Fourth Quarter sales to sequentially grow twice as fast as analysts were anticipating. Demand for AI chips remains very robust, and we think this may bode well for Nvidia’s report next month.

Next week, earnings season continues with reports by General Motors, Boston Scientific, Vertiv, and Tesla. New and existing home sales for September will be released mid-week, and then durable goods orders will come on Friday.

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.

by Jared Plotz, Director of Research

Equity markets managed to advance for a fifth straight week despite a rise in interest rates and further weather disasters. Investors are comforted by the durable economy alongside ample capacity for the Federal Reserve to reduce rates as needed. Further upside, however, is constrained by near-term political uncertainty and geopolitical risks that lend to a “wait and see” approach.

The S&P 500 rose +1.11% this week – hitting a fresh record on Friday – while the Nasdaq climbed +1.13%. The technology sector resumed some of its leadership as favorite Nvidia rose 8%. Meanwhile, defensive investments like utilities, healthcare, and gold lagged behind. On Monday, the S&P 500 dropped -0.96%, Tuesday it rallied +0.97%, Wednesday +0.71%, Thursday -0.21%, and Friday +0.61%. The 10-Year Treasury rose +11 bps to 4.08%. The 6-Month Treasury, utilized in our US Treasury strategy, ended the week flat at 4.45%.

Thursday’s report of September CPI came in “hotter” than expected. Prices rose +2.4% versus a year ago, while core inflation (ex-food/energy) rose +3.3%. We saw a sizable jump in initial weekly jobless claims, likely impacted by Hurricane Helene and last week’s port worker strike. On Friday, inflation’s sister report, the PPI, was in line with expectations but cooler than its counterpart. All-in-all, the data further eased pressure on the Fed to cut rates heavily before year-end.

Hurricane Milton made landfall near Sarasota, Florida on Wednesday evening. Widespread flooding and wind damage resulted in as many as three million people losing power. Though the overall economic damage may turn out better than the worst fears, losses will pressure the state’s already challenged property insurance market. We may also see further near-term impacts on labor markets.

JPMorgan and Wells Fargo kicked off bank earnings on Friday. Earnings were stronger than analysts predicted; investment banking results were robust; and loan credit trends were positive. Both stocks rose 4-5% on the news, while the broader bank index increased 3%. In technology news, Taiwan Semiconductor – the largest contract manufacturer of Nvidia’s advanced chips – said that their revenue rose +40% y/y in September, an improvement versus August and implying an acceleration in its Q3 growth rate versus Q2. Taiwan Semiconductor will share full Q3 numbers on October 17^th.

Next week, Third Quarter earnings season will start hitting full stride. Additional banks will report results, along with healthcare and transportation companies. Retail sales for September will be released on Thursday, along with a number of housing metrics towards the end of the week.

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.

by Jared Plotz, Director of Research

Equity markets eked out a fourth straight weekly gain despite additional uncertainties posed by tensions in the Middle East and a short-lived worker strike at major US ports. The S&P 500 rose +0.22% on the week and the Nasdaq +0.10%. On Monday, the S&P 500 gained +0.42%, Tuesday -0.93%, Wednesday +0.01%, Thursday -0.17%, and Friday +0.90%. The strongest performing sectors were Energy and Communication Services, while the weakest were Materials and Real Estate. Energy stocks were boosted as oil prices spiked due to conflict in the Middle East. Risk remains of a further supply squeeze in oil, with resulting higher prices at the gas pump.

Friday’s jobs report showed a big surprise, with nonfarm payrolls rising by 254,000 in September and both July/August numbers being revised higher. Expectations had been for gains of just 140,000-150,000. Unemployment ticked back down to 4.1% from 4.2% last month, while hourly earnings rose 4.0% from a year ago. Layoffs remain low and employers are seeking a greater number of workers. The release did not show a material impact from Hurricane Helene, which could negatively impact next month’s report. Overall, investors took solace in a view that the economy is chugging along better, even if stronger employment may lessen pressure on the Fed to cut rates fast.

45,000 US dockworkers at 36 East and Gulf coast ports went on strike Tuesday through Thursday. Their union had been seeking substantial wage increases and a ban on the introduction of additional automation processes. It was the first walkout by the employee group since 1977. These ports facilitate as much as 60% of US trade flow and JP Morgan estimated the economic costs to be roughly $4 billion per day. Fortunately, by Friday the two sides had reached a tentative agreement to avert a larger supply chain disruption through January 15. Port employers will increase wages by 62% over six years, while the issue of automation remains unresolved.

The 10-Year Treasury rose +21 bps to 3.97% this week. The 6-Month Treasury, utilized in our US Treasury strategy, ended up at 4.45%. Despite the rise in interest rates, our Preferred securities performed well, largely bucking the broader fixed income decline this week.

Next week, earnings season kicks off on Friday, with the first of the big banks releasing Q3 earnings results. We will also get September’s inflation metrics for CPI (on Thursday) and PPI (on Friday). Both metrics, along with employment data, will feed into the Fed’s next decision in November.

We send our sincere thoughts to our clients recently impacted by Hurricane Helene in the Southeast.

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.