Weekly Update Archives

In lieu of our regular weekly market update, this week’s post features the Quarterly Client Letter:

Reflecting upon another prosperous year for the markets and our strategies, we’d be remiss not to say our office is still grieving. Jim was a shining light to those who knew him – always a glass half full. He will continue to be deeply missed. In case you missed it, please see our website for our Tribute to Jim, as well as the Minnesota Star Tribune’s feature on Jim’s life.

The economy remains in good shape. Fourth-quarter real U.S. GDP (preliminary) suggested economic activity grew for an eleventh-consecutive quarter, at a 2.3% annualized pace. Full-year 2024 appears to have grown by 2.8%, compared to 2.9% in 2023. This latest reading is in line with expectations for growth to decelerate to 2.1% in 2025. Meanwhile, the labor market is healthy, including steady job and wage growth with low unemployment near 4%. The Federal Reserve will remain data-dependent with regard to how quickly it may further reduce benchmark rates, but they do plan to continue lowering rates, a benefit for major markets.

For the equity side of portfolios, the fourth quarter saw the S&P 500 rise 2.1% and the Nasdaq climb 6.2%, even as the 10-year Treasury yield jumped 77 bps to 4.58%. A healthy economy and labor market are leading economists to pencil in earnings growth of 10-15% for the S&P 500 over this coming year. Consumer, business, and investor confidence remains high. Throw in the potential for lower taxes, less regulation, and a growth-friendly business environment, and one can paint a favorable picture for what the next year could bring to equities. But risks are always present.

One risk is that the AI leaders have been very large contributors to overall market performance. The AI impact on the real economy is still in the early stages, with potential for significant productivity gains across a wide swath of industries. Yet January brought more than one hiccup to this space. If additional challenges present themselves, it’s possible CEOs may rein in data center spending. A second risk is valuations – the price investors are willing to pay for an earnings stream – which are historically high. A third concern is inflation, particularly the unknown effect of future policy actions. Tariffs and fiscal deficits have the potential to be inflationary – a concern the Federal Reserve noted in their most recent meeting minutes.

When the dust finally settled in 2024, our Intelligent Fixed Income (IFI) strategy was near the top of nearly all U.S. Fixed Income choices. Buoyed by an improving economic backdrop and recovering security prices, the strategy posted solid double-digit total return gains for clients. This compares to paltry returns in the Bloomberg Aggregate Bond index (+1.25% in 2024).

Intelligent Fixed Income is off to a strong start here in 2025. We have seen a flurry of new issues in the preferred market, including several big bank preferreds. For example, JP Morgan (6.50% Fixed-to-Float), Goldman Sachs (6.85% Fixed-to-Float) and Citigroup (6.95% Fixed-to-Float) all issued preferreds. One major benefit of a boutique like Ulland Investment Advisors is our ability to quickly add a new issue to a portfolio in a meaningful way. Our goal is to make sure our clients achieve the desired allocation without compromising price or liquidity.

With the current IFI strategy income rate around 6.50%, and potential price appreciation if interest rates fall, we expect another solid year on the fixed income side. We still anticipate further rate cuts by the Federal Reserve in 2025 and 2026. Over the next 24 months we expect the Fed to land close to their neutral rate, which we estimate to be around 3.50%. We expect the 10-year Treasury to move closer to 4.25% by the end of 2025. As always, we will have both hands on the wheel if things materially change with regard to this outlook.

Intelligent Fixed Income GOV remains an attractive choice for clients with idle cash. This strategy uses primarily 3–12-month U.S. Treasuries to generate a meaningful return with minimal volatility. We are targeting a 4% return in this strategy and, as a reminder, the income is exempt from state income tax. We have seen strong interest from investors looking for higher returns than low-yielding bank choices and better state income tax treatment than CDs.

Despite the economic and political uncertainties we remain optimistic about both equities and fixed income. The economy remains strong, company earnings estimates have been rising, sentiment remains favorable, and policymakers seem intent on being supportive. We will continue monitoring risks and have been shifting portfolio weights in the new year, incorporating some hedged products that participate on the upside but reduce the downside magnitude. While markets may prove choppy, we see reasons to cautiously position for further growth.

As always, please reach out with any questions you may have.

Nat Beebe, CFA

Jared Plotz, CFA

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 at 612.312.1400 or visiting www.ullandinvestment.com.

by Jared Plotz, Director of Research

The Nasdaq Composite Index closed above a notable threshold of 20,000 this week – quite the climb from its 6,860 close during the March 2020 Covid-induced lows! What does this tell us? Markets can climb much higher for much longer than may seem likely at any point in time. And oftentimes opportunities are at their best when the environment feels the worst. Currently, the economy and investor confidence are robust, but risks are always present, and we keep our ears tuned to shifts in the narrative.

AI-related stocks continued to recoup losses from their January selloff. The S&P 500 rose +1.5% this week, while the Nasdaq gained +2.6%. Portfolio holding Meta (Facebook) has strung together 20 consecutive days of positive stock gains, possibly the record for an S&P 500 company. The 10-Year Treasury yield, an interest rate indicator, closed at 4.48%, down -1 basis point from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended up +2 bps at 4.35%. Our Preferred securities were up.

Tariffs and inflation remained the market’s topic du jour this week. The president’s administration announced plans for “reciprocal tariffs” on countries that tax or limit markets for US goods this week. European countries that utilize value-added taxes could be subject, as well as countries utilizing subsidies, currency manipulation or other tariff equivalents. The Commerce Secretary is said to be looking at actions on a country-by-country basis, with tariffs possibly being implemented in April. The delay for studies to be conducted, as well as an opening for impacted countries to negotiate, was a relief to investors.

Recent inflation readings came a bit “hotter,” with core CPI rising at a 3.3% rate in January and PPI rising by 3.6%. These remain above the Federal Reserve’s goal of 2%, seeing headwinds from shelter and travel. A silver lining was more muted impact from categories that feed into the PCE index – the Fed’s preferred measure of inflation, that will next be released on February 28. Semi-annual testimony on monetary policy from Fed Chair Powell suggested the rate-setting group is not in a hurry to adjust, and thus will hold rates steady until inflation takes another meaningful step lower. He also highlighted it is too soon to consider the impact of tariff changes.

Next week, Monday is Presidents’ Day. The markets and our office will be closed. The holiday-shortened week will be quieter on the economic front while the steady flow of quarterly earnings reports continues. We will see some housing data, including the latest building permits, housing starts, and existing home sales. Walmart and Medtronic are amongst those companies on the earnings docket, while portfolio names Nvidia, Axon, and Intuit come the following 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

Another sideways move for the markets left the major indices roughly unchanged versus a week ago. The S&P 500 declined -0.2% this week, while the Nasdaq fell -0.5%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.49%, down -6 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended up +3 bps at 4.33%. The recent reversal in longer-dated Treasury yields has helped fixed income securities, including Preferreds.

Uncertainty surrounding tariffs remains a key unknown for the markets and economists. Stocks fell a week ago after news that tariffs on Canada, Mexico, and China could take effect within days. Then early this week such tariffs on Canada and Mexico were delayed for a month, leading the markets to sigh in relief. The additional 10% tariff on Chinese goods went ahead as planned.

Job openings (JOLTS) for January came in at 7.6 million, a decline from over 8 million in December. Similarly, the employment report for January undershot the prior month. Employers hired a fewer-than-expected 143,000 workers; however, previous months were revised higher and the unemployment rate ticked down to 4.0%. Labor remains strong, with tight supply.

Earnings reports from the big technology companies continued this week. Equity portfolio holdings Google and Amazon announced higher-than-expected profits for Q4. Both companies told investors that they plan to spend heavily in 2025 to expand their data center businesses – with Google estimating investments of $75 billion and Amazon expecting $100 billion. The high values took some investors by surprise, though both companies noted that demand currently exceeds supply.

Next week brings quarterly results from a hodgepodge of companies, including McDonald’s, Humana, CVS Health, Deere, and Palo Alto Networks. On Monday, China’s retaliatory tariffs on some US goods should take effect, including tariffs on coal, LNG, oil, and larger machinery/cars. The NFIB Small Business Index is released Tuesday, CPI inflation on Wednesday, PPI inflation on Thursday, and retail sales for December on Friday. Declining inflation is hoped for by both stock and bond investors, as well as consumers.

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.

From the UIA Team

Following a Thanksgiving week filled with family time for many, it is with heavy hearts that we share the sad news of our founder Jim Ulland’s passing. We would first and foremost like to send our thoughts and prayers to the Ulland family, including his wife Kris, and his children Olivia (Farris Hussain) Argañaraz and Matias (Hayley Jones) Argañaraz. Thank you for sharing your amazing husband and father all these years. We are eternally grateful and blessed to have had Jim in our lives. As we mourn Jim, we wanted to use our medium this week as a tribute to him.

Born in Duluth, Jim received degrees from Carleton College and the University of Pennsylvania’s Wharton School of Finance before starting an extensive political, educational, and business career – oh, and don’t forget Christmas tree farmer.

By the time Jim founded Ulland Investment Advisors (UIA) in 1997, he had already served as Minority Leader of the Minnesota Senate, a college professor, a senior leader at large banks and investment firms, and as Minnesota’s Commissioner of Commerce. Elected to the State House at the ripe age of 27, everyone knew Jim was destined for big things right out of the gate. His gift of finding common ground and instantly connecting with individuals extended into the investment world. Simply put, people have always been drawn to Jim Ulland.

Jim loved to invest in companies exhibiting strong growth, especially at reasonable prices. He sought those with innovative technologies, disrupting legacy industries. His most recent favorite, Nvidia – which he routinely mentioned in this newsletter – is a perfect example of Jim’s ability to catch a trend early and ride the winner. Jim’s investment style not only proved fruitful for clients over many a bull market, but his resolve and calm served as a sea anchor in the winds, holding strong in the bear market storms. Jim was always steady at the helm, no surprise given his Coast Guard service, which he often enjoyed sharing over a Minneapolis Club lunch (don’t forget the side of Durkee’s mustard and just a splash of coffee). Internally, he always led with a calm and steady hand. Control what you can control, and focus on the longer term. Jim always had an optimistic view on the market and life, and an ability to transfer that to clients as well.

Ulland hits stride with money-management venture 30 Nov 1999, Tue Star Tribune (Minneapolis, Minnesota) Newspapers.com
Jim was passionate about Carleton College and his impact on generations of Carls is clear. Jim was always quick to mention that he was the hockey goalie at Carleton. During Jim’s freshman year, he was introduced to the team as a member of the world-famous Duluth East Greyhounds. What the team failed to know was that Jim was the team manager. No problem, Jim would rise up and lead the Knights in net. The pinnacle of his college hockey career was when the team defeated Wisconsin. As later recalled in a note by Captain Fred Bagley, the Knights were led by the “heroic” Jim Ulland in net, saving 40 shots on goal.

Jim’s love for Carleton led to a steady stream of interns to the firm, of whom all cut their teeth under his wing. In fact, all partners in the firm were at one time interns at UIA. From Wall Street to the NBA hardcourt, Jim has left his mark.

While there are too many investment lessons learned from Jim over the decades to mention, we will stand fast to the knowledge we have acquired under his tutelage. As we carry the UIA torch that Jim lit many years ago, we hope to embody his collaborative spirit, his passion for work, and his close connection to clients, as well as to forever remember the impact he had on the community. Clients can be reassured they remain in very good hands with the UIA team, but regrettably we will all miss the dashing smile of Jim Ulland.

Please forward this email to others who knew Jim, particularly those touched by the full life he lived. A celebration of life will be held in June, details of which we will share as we get closer. Jim’s obituary can be viewed here.

Jim always enjoyed watching the peregrine falcons from his desk at the IDS Center. We know that his spirit will be soaring high above us all as we remember the impact he made.

Thank you, Jim!

Ulland Investment Advisors Team

Nat Beebe, President (18 years at UIA)

James Skjong, Dir. of Trading, Compliance & Operations (20 years at UIA)

Jared Plotz, Dir. of Research, Portfolio Manager (8 years at UIA)

Vini Crusius d’ Avila, Research Associate (3 years at UIA)

Sarah Stokes, Client Service Associate (3 years at UIA)