Market Commentary Archives

by Jared Plotz, Director of Research

Markets took a breather this week following the post-election rally last week. The S&P 500 fell -2.1%, while the Nasdaq fell -3.2%. The 10-Year Treasury, a rate indicator, closed the week at 4.44%, up +14 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended up +3 bps at 4.47%. The rise in rates pressured fixed income securities back to pre-election levels.

Part of the rise in interest rates can be attributed to this week’s inflation readings. While the consumer index (CPI) rose +2.6%, in line with expectations, the producer index (PPI) rose +2.4%, a greater-than-expected uptick. Economists have thus increased their forecasts for the Fed’s preferred inflation gauge (PCE), to be released at the end of the month. Also, Fed Chair Powell recently stated that despite “moving to a more neutral setting over time… the economy is not sending any signals that we need to be in a hurry to lower rates.” As always, time will tell what pace and magnitude the committee ultimately takes, but we remain of the view that the Fed is biased towards “easing” and has plenty of room to go.

Quarterly earnings season will soon come to a close. With 85% of S&P 500 companies having already reported, aggregate revenues have risen +5% from a year ago, while earnings have risen +7%. This week brought positive results from Block (Square) and Disney. Next week will bring reports from Walmart (Tuesday), Lowe’s (Tuesday), Nvidia (Wednesday evening), and Intuit (Thursday evening). Next week also includes data releases of October housing starts and preliminary November manufacturing activity.

Lastly, a firm update: we are delighted to announce that Nat Beebe has been elected President of Ulland Investment Advisors. Jim Ulland is taking a medical leave, although he will still serve as CEO and Chairman of the company. We hope for his speedy return. Since I have been co-managing the equities side of portfolios with Jim for a number of years, client portfolios will still be managed under a watchful eye during Jim’s recovery.

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

Election day has come and gone; the Federal Reserve executed their widely expected quarter-point rate cut; and stocks have taken off. The end of election uncertainty increased risk appetite and allowed buyers to return to the markets – after many participants had reduced exposures at the end of last month. The S&P 500 ended the week up +4.7% and the Nasdaq +5.7%, while the 10-Year Treasury fell -8 bps to 4.30%. Although a lot has happened of late, we will keep this week’s remarks brief given our quarterly client update will hit the presses next week. On Monday the S&P 500 was down -0.3%, Tuesday +1.2%, Wednesday +2.5%, Thursday +0.7%, and Friday +0.4%.

In economic news, the services sector of the economy showed improvement in October. Weekly unemployment filings were steady, and consumer sentiment appears back on the rise. On Wednesday, the Federal Reserve cut its benchmark rate by 25 bps (0.25%) to a range of 4.50-4.75% in a unanimous vote. This encouraged Preferred securities to move higher. Another quarter-point cut is expected in December.

Equity portfolio holding Axon – which not only manufactures Tasers and body cameras, but is also the “digital librarian” for thousands of public safety departments – reported strong quarterly results this week. Sales grew 32% from a year ago, while profits were up 42%. Both metrics were better than expected and the company raised its guidance for the full year. Management noted major deals signed with the Department of Homeland Security, the IRS, and Amtrak. The stock rose over 28% on Friday. Also this week, portfolio holding Nvidia rose 9% after being selected to replace Intel as the sole chipmaker in the Dow Jones Industrial Average index. We remain positive on the fundamentals of their business, and it remains one of our largest equity holdings.

Next week we salute our Veterans on Monday. Federal Offices and bond markets will be closed, but our office and the equity markets will be open. Tuesday will return to normal. Another week of quarterly earnings brings reports from the likes of Home Depot, Cisco, Hewlett Packard, and Disney. It will be the last heavy week of releases, after which earnings will trickle with Lowe’s on the 19^th and Nvidia on the 21^st. Economic releases will include October’s inflation readings of CPI & PPI mid-week, with retail sales and a few manufacturing data points 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

It wasn’t just ghosts and goblins looking to frighten people yesterday. The markets also aimed to spook investors this Halloween: The S&P 500 dropped 1.9% and the Nasdaq dropped 2.8%, leading October to finish as just the second down month of the year (S&P 500 -1.0%, Nasdaq -0.5%). The Thursday turmoil was partly due to concerns regarding the furious pace of capital spending by the large tech companies in the AI arms race. Investors are enthusiastic about the technology’s potential and burgeoning demand, while at the same time nervous whether the heavy investments will meet associated profit expectations. On the bright side, equity markets rebounded on Friday and sit only a stone’s throw from their all-time highs. The S&P 500 closed the week -1.4%, the Nasdaq -1.5% (now 2.5% and 2.9% from highs, respectively).

The initial reading of third-quarter GDP topped expectations, rising at a 2.8% annual rate, only a slight step down from Q2’s 3.0% rate. Increased consumer spending, notably in prescription drugs and automobiles, along with greater exports and federal spending, contributed to the surprise. Meanwhile, personal consumption expenditures (PCE), closely watched by the Fed as a gauge on inflation, rose 2.1% y/y in September, as expected. Lastly on the economic front, the “noisy” employment report – with negative impacts from the hurricanes and strikes – showed just 12,000 jobs added in October. Collectively, these metrics gave way to a +14 bps rise in the 10-Year Treasury, to 4.38%, and pressured fixed income securities lower this week.

Stock reactions to Big Tech earnings varied, despite results generally showing strong revenue and profit growth. Alphabet (aka Google) demonstrated growth in its Cloud division accelerating to 35% y/y (vs. 29% in Q2). Gemini, their AI chatbot, is now incorporated into all their major products and has over two billion monthly users. Though Microsoft’s Cloud offering also accelerated growth to 34% y/y, shareholders were disappointed after the company guided growth to slow to 31-32% next quarter. Meta (Facebook) grew revenues 19% y/y and daily active users 5% to 3.3 billion. Amazon grew sales 11% y/y, with earnings rising over 50% as cloud (AWS) profits led the way. Lastly, Apple showed resilient growth amongst hardware products, particularly iPhones (up 6%), with continued expansion in its services ecosystem. During the week, Alphabet’s stock rose +3.4%, Microsoft -4.2%, Meta -1.1%, Amazon +5.4%, and Apple -3.7%.

This week brought the jobs report and Big Tech earnings. Next week brings Election Day on Tuesday and the Fed’s November FOMC meeting on Thursday. The current consensus view is that the Fed will cut interest rates by 0.25% at each of the next two meetings. Either way, we believe we are firmly planted in a rate-reduction cycle, which should prove to be beneficial for fixed income securities. Companies reporting quarterly results next week include Super Micro on Tuesday, Axon on Wednesday, as well as a host of energy, materials, and industrials companies.

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

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.