by Jared Plotz, Director of Research

Volatility has picked up. The Chicago Board Options Exchange maintains an index that tracks stock market volatility, known as the “VIX.” The index remained low and range-bound largely for the entirety of the first half of 2024. It spiked notably in late July around the time that President Biden dropped out of the election race. It remained a bit higher in the second half of the year with a few spikes, the most recent being this week. Oftentimes, the market becomes more of a “stock-picker’s market” when volatility rises. It can be argued that as the correlation between equities declines (i.e. not all stocks going up in unison), the value of an investment manager’s research and discretion (“picks”) increases. We will see if this trend gathers steam in 2025.

During the week, the S&P 500 slumped -1.99%, while the Nasdaq fell -1.78%. On Monday the S&P 500 was +0.38%, Tuesday -0.39%, Wednesday -2.39%, Thursday -0.09%, and Friday +1.09%. Sectors that outperformed the broader move included Technology and Utilities, while laggards included Energy and Real Estate. The 10-Year Treasury, a rate indicator, closed the week at 4.53%, up +13 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended down -3 bps at 4.29%. The rise in longer-term rates has pressured fixed income securities of late.

The week’s big news was the Federal Reserve meeting on Wednesday. The rate-setting committee lowered its benchmark rate by 25 basis points, as was widely expected. The more noteworthy development was the group’s updated economic projections, which they adjust on a quarterly basis. In 2025, real GDP is now anticipated to expand by 2.1%, a small improvement from 2.0% in September’s forecast. Inflation, as measured by the personal consumption expenditure index (PCE), is anticipated to rise by 2.5%, a notable uptick from 2.1% prior. And two rate cuts are now forecast for 2025, down from four cuts a quarter ago and the three cuts investors had penciled in. Despite the higher expected economic growth, the mix of higher inflation and fewer rate cuts contributed to the rise in the 10-Year Treasury and the pullback in stocks Wednesday/Thursday. The group will next meet during the last week of January.

Elsewhere in economics land, November retail sales were stronger than expected (+0.7% from October) while manufacturing readings were weaker. Housing starts and building permits were mixed. The final reading of GDP for the third quarter moved up to +3.1% (annualized rate), from 2.8%, suggesting the economy remains strong. Lastly, the third major inflation reading of the November month showed that PCE rose at a more tepid pace. That data point contributed to the market’s bounce back on Friday.

Wall Street activity will be slowed by the holiday next week. The markets, and our office, will close at noon central on Tuesday before trading resumes Thursday morning. Economic readings and regulatory decisions will also be rather quiet. We wish a safe, warm, and happy holiday to you and yours next week!

Before we go, we’d like to highlight the Minnesota Star Tribune’s feature on Jim Ulland that was published yesterday, and which we sent via email. If you missed it, the link to the feature on the Star Tribune website is HERE.

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

We have been overwhelmed by the heartfelt replies to the Jim Ulland tribute we sent out last Friday. The immense amount of support and kind words shown for the Ulland family and UIA’s staff has been remarkable. The memories, the stories, and the ways that Jim touched various people’s lives are such a pleasure to hear. Jim will always hold a dear place in our hearts and minds, and he will be deeply missed.

The major stock indices moved a bit sideways this week. The S&P 500 fell -0.64%, while the Nasdaq rose +0.34%. Sectors that outperformed the broader move included communication services and consumer discretionary, while laggards included materials, utilities, and real estate. The 10-Year Treasury, a rate indicator, closed the week at 4.40%, up +35 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended down -3 bps at 4.32%.

On the economic front, two readings of November inflation were published ahead of the Federal Reserve’s meeting next week. The consumer reading (CPI) showed prices rising 2.7% versus a year ago, while the producer reading (PPI) registered a rise of 3.0%. Both rates of price growth were a bit faster than previous readings, with used automobiles one of the larger culprits of the uptick. The third inflation reading, personal consumption expenditures (PCE), will not be released until after the Fed’s rate-setting group convenes.

The Federal Reserve’s decision next Wednesday headlines what should be a busy week of economic news. It is widely expected that the benchmark Fed Funds Rate will be cut by 25 bps, before the group likely skips any rate adjustment in January. Along with the decision, the Federal Open Market Committee will update their economic projections for the coming years. On Tuesday, retail sales for November will be reported, in addition to industrial and manufacturing production. Also on Wednesday, we will get housing starts and building permits for November. Finally on Friday comes the PCE reading.

We wish you all well this 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.

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)

by Jared Plotz, Director of Research

It was a chilly morning to return to the office after hunkering down inside for Thanksgiving dinner and some football yesterday. But while the wind chill here in Minneapolis makes it feel close to zero degrees, the markets remain warm. Equities drifted higher during this holiday-shortened trading week. The S&P 500 and the Nasdaq both rose by +1.1%. Likewise on the fixed income front, falling interest rates – the 10-Year Treasury fell -22 bps to 4.19%  – boosted security values on the week and for the month. This caps off what has been the best month of the year for the major equity indices. During November, the S&P 500 increased +5.7% and the Nasdaq +6.2%.

Turning to the economy, completed new home sales declined worse than expected in October, but pending home sales were on the rise. This type of dynamic has not been uncommon amidst a period of bouncing interest rates. Durable goods orders were a touch light, while personal consumption expenditures (the Fed’s preferred inflation gauge) rose by 2.3% y/y, up from a 2.1% rate in September. The early read on holiday retail sales has been positive. Data from Salesforce showed that online sales growth was tracking at a faster pace this year than last. And Adobe Analytics reported an 8.8% rise in Thanksgiving-Day shopping versus a year ago. We should have a more robust read of the start to the holiday season by next Friday.

Tariffs were the big story this week after the incoming presidential administration suggested they will impose an additional 10% tariff on goods from China and 25% tariffs on Mexico and Canada next year. It is unclear whether such tariffs would violate current trade agreements between the countries. However, concerns related to the tariff headlines began easing on Wednesday after the incoming administration held conversations with leaders from Canada & Mexico. The investment community largely interpreted the announcements as hardline negotiating rhetoric.

Next week brings more manufacturing data early in the week and the big employment report for November on Friday. The latter could be a deciding factor of whether, or by how much, the Federal Reserve will cut their benchmark rate when they meet the week before Christmas. Currently, investors expect another 25 bps (quarter-point) reduction. We hope your Thanksgiving included time with some of the people that matter most. Have a nice weekend!

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.