Retail Sales, Tax Increases: O2 Wealth Economic Update, September 17, 2021

U.S. and World News

  • school_supplies-1255007795_370Retail sales rose 0.7% in August, rebounding from a drop in July. The 70 basis point increase was driven by schools, college campuses and offices reopening, and consumers spending more for groceries and merchandise at big-box stores. Meanwhile, initial jobless claims rose 20,000 last week to 332,000 but remained near a pandemic low. Layoffs caused by Hurricane Ida, which hit Louisiana in late August, likely contributed to the increase. As cases of vaccinated citizens increases, new masks mandates implemented by the government, and capacity restrictions in public places have a direct impact in certain areas such as restaurants, who reported flat revenue last month. Moreover, Americans in recent weeks have cut spending on travel, and multiple artists have canceled concerts. Such spending isn’t captured in retail sales statistics, which mostly covers goods such as cellphones, televisions, groceries and back-to-school goods.
  • Early this week the President Joe Biden proposed a set of tax increases and enforcements that could offset up to $3.5T in spending that is currently being proposed by House Democrats. This proposal includes an in tax rate to 26.5% from 21.0% 5.5% for corporations as well as raising the top individual rate to 39.6%. Meanwhile, the top capital gain tax rate would be raised by 5% to 25% from 20%, and a 3% surtax on people making over $5M have been proposed. With the proposed offsets to spending on the table, the debate on the Democrat proposal can now begin in earnest.

Markets

  • Markets were down this week. The S&P 500 decreased by -0.54% and closed at 4,432.99. Meanwhile, the Dow Jones was down by -0.04% and closed at 34,584.88. Year-to-date, the S&P 500 is up 19.24% and the Dow Jones is up 14.57%.
  • Yields moved very little this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.86% and 1.37%, respectively.
  • The spot price of WTI Crude increased this week. Prices increased +2.11% and closed at $71.94 per barrel. Year to date, Oil prices are up +48.26%.
  • The spot price of Gold decreased by -2.27% and closed at $1,752.83 per ounce. Year to date, Gold prices are down –7.70%.

Economic Data

  • Initial claims 332,000 for the week ended September 11, prior revised 312,000
  • CPI rose +0.3% month over month for August, median forecast +0.4%, prior +0.5%
  • Core CPI increased month over month +0.1% for August, median forecast +0.3%, prior +0.3%
  • CPI year over year rose +5.3% for August, median forecast +5.3%, prior +5.4%
  • Import prices decreased -0.3% month over month for August, +9.0% year over year vs. median forecast +0.2%, prior revised +0.4%
  • Import prices ex-petroleum -0.1% month over month for August, up +5.9% year over year vs. median forecast +0.2%, prior revised +0.3%
  • Empire manufacturing index +34.3 for September vs. median forecast +17.9, prior +18.3
  • Industrial production +0.4% for August, median forecast +0.5%, prior revised +0.8%

Fact of the Week
3.2 million Americans retired in 2020, a +56% increase over the average 2.05 million Americans who retired over the previous 8 years, i.e., 2012-2019 (source: Pew Research Center).

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

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El Salvador Bitcoin, Vaccine Mandate: O2 Wealth Economic Update, September 10, 2021

U.S. and World News

  • El Salvador made the move this week to become the first country in the world to adopt Bitcoin as legal currency. Things got off to a bumpy start, as the government was forced to take its bitcoin e-wallet offline for several hours after tens of thousands of people tried to download the app, overloading servers. President Bukele plans to spend approximately $225 million on the rollout, including distributing $30 worth of Bitcoin to the each citizen of the country. During the B-day, as crypto enthusiasts called it, many showed their support to El Salvador by each buying $30 of Bitcoin. After its recent 9% drop, the El Salvadorian government bought the dip by buying 150 extra Bitcoins, for a total of 550 Bitcoin held by the government. On the other hand, Senior Economist at the Central American Institute for Fiscal Studies, Ricardo Castañeda believes that the government is betting in a virtual casino, an amount that will not be easy to recover in case of a sustained drop.
  • iStock-1283486156President Biden announced a new plan to curb the spread of the Delta Covid variant. All employers with 100 or more employees would have to require that their workers be vaccinated or undergo at least weekly Covid-19 testing. The administration said Thursday that businesses that don’t comply can face fines of up to $14,000. As expected, private companies as well as Republican-led states are stepping up to fight against the new mandate. So far, Montana is the only state that has banned private employers from requiring their workers to get the Covid-19 vaccine, according to research by the National Academy for State Health Policy. Companies including United Airlines and Tyson are requiring all employees to be vaccinated. Others, such as Walmart, McDonald’s. and Walt Disney, have said certain groups, such as managers, need to take the shot. However, for federal employees there is no such flexibility regarding the vaccine. President Biden also announced that federal workers and contractors who work on-site must be vaccinated, without the option to be unvaccinated and tested on a weekly basis.

Markets 

  • Markets were down this week. The S&P 500 decreased by -1.67% and closed at 4,458.55. Meanwhile, the Dow Jones was down by -2.11% and closed at 34,607.46. Year-to-date, the S&P 500 is up 19.90% and the Dow Jones is up 14.57%.
  • Yields moved very little this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.81% and 1.34%, respectively.
  • The spot price of WTI Crude increased this week. Prices increased +2.27% and closed at $69.60 per barrel. Year to date, Oil prices are up +43.45%.
  • The spot price of Gold decreased by -1.91% and closed at $1,788.44 per ounce. Year to date, Gold prices are down -5.81%.

Economic Data

  • Job openings 10,934,000 for July vs. median forecast 10,049,000, prior revised 10,185,000
  • Initial claims 310,000 for the week ended September 4, median forecast 335,000, prior revised 345,000
  • Continuing claims 2,783,000 for the week ended August 28 vs. median forecast 2,740,000, prior revised 2,805,000
  • PPI increased +0.7% month over month for August, up +8.3% year over year, prior +1.0%
  • PPI ex-food, energy, and trade services rose +0.3% month over month for August, up +6.3% year over year vs. median forecast +0.6%, prior +0.9%
  • Wholesale inventories rose +0.6% for July vs. median forecast +0.6%, prior +0.6%

Fact of the Week

The Bahamas became the 1st nation to issue its official currency in digital form in 2020, i.e., a legally backed digital token developed by a central bank (source: Central Bank of The Bahamas).

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

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Hurricane Ida, Unemployment: O2 Wealth Economic Update, September 3, 2021

U.S. and World News

  • iStock-1309471243_380Major metropolitan areas across the United States have felt the brunt of the impact from Hurricane Ida. In New Orleans, in the midst of a stifling Louisiana summer, millions of residents are still without power or running water. It is estimated that these outages could last for up to a month. Meanwhile, the storm cell moved up to the Northeastern United States, causing massive flooding in the New York City and Philadelphia areas. It is estimated that as many as 45 people have been killed as a result of the flooding. The economic impacts of Ida are yet to be seen, but the oil refineries that were caught in the storm’s path expect that it may take weeks to restore operations, depending on how long it takes to bring power online. So far, the average U.S. price for a gallon of gas has risen by less than a cent, but gasoline futures rose by as much as 1.6% on Monday.
  • In August, the United States payrolls report missed expectations by a wide margin. Estimates suggested the economy would add around 733,000 jobs, yet only 235,000 jobs were added in August. Economists and policymakers point to the Delta variant to explain why job growth was so sluggish. Despite the miss, the unemployment rate still managed to tick down to 5.2%. The miss on jobs numbers has many investors questioning the timeline of the Fed’s taper of asset purchases. The Fed has indicated they want to see substantial further progress on the employment front, so it will be interesting to see if the lackluster jobs report postpones the taper.

Markets

  • Markets were mixed this week. The S&P 500 increased by +0.62% and closed at 4,535.54. Meanwhile, the Dow Jones inched down by -0.14% and closed at 35,369.09. Year-to-date, the S&P 500 is up 21.83% and the Dow Jones is up 17.01%.
  • Yields moved very little this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.78% and 1.32%, respectively.
  • The spot price of WTI Crude increased this week. Prices increased +0.77% and closed at $69.27 per barrel. Year to date, Oil prices are up +44.30%.
  • The spot price of Gold increased by +0.59% and closed at $1,828.34 per ounce. Year to date, Gold prices are down -3.71%.

Economic Data

  • U.S. employers added 235,000 jobs in August, and the unemployment rate fell to 5.2%.
  • Initial jobless claims fell to 340,000, the lowest since the pandemic began.
  • Pending home sales fell 1.8% in July, against consensus expectations for a slight increase.
  • The U.S. Case-Shiller home price index increase by 1.77% in June, roughly in line with expectations.
  • U.S. consumer confidence declined more than expected in August, down to 113.8.
  • The ISM manufacturing index increased to 59.9 against expectation for a decline in August.
  • The U.S. trade deficit declined by more than expectations in July.
  • Factory orders in the U.S. rose by 0.4% in July, slightly above consensus expectations.
  • The ISM services index decreased in line with expectation in August down to 61.7.

Fact of the Week
Regarded by some to be a hedge for inflation, gold has failed to meet that definition during the course of the last decade. Over the last 10 years, the yellow metal LOST -3.8% of its value, while inflation as measured by the Consumer Price Index rose by 21.4%. Meanwhile, the S&P 500 rose 325.6%, the Bloomberg Aggregate Bond Index rose 35.8% and Bitcoin rose 571,915% over that same time.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

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Federal Reserve, Inflation: O2 Wealth Economic Update, August 27, 2021

U.S. and World News
  • During his speech at the Fed’s annual Jackson Hole symposium  Chairman Jerome Powell reaffirmed the central bank’s emerging plan to begin reversing its easy-money policies later this year. At the Fed’s meeting late last month, the Federal Reserve stated that if the economy improved broadly as anticipated, it could be appropriate to start reducing the pace of the Fed’s $120 billion in monthly asset purchases later this year. Since that meeting, the economy has been driven by a strong employment report in July, but also the further spread of the Delta variant. Several Fed officials have said they would argue in favor of beginning to taper bond purchases ahead of the next meeting, as long as the job report remains strong moving forward. However, Mr. Powell didn’t provide a strong signal of when this process is likely to begin.
  • iStock-157311703Jerome Powell also spoke about inflation, which rose 3.6%  in July, compared to one year ago. Mr. Powell remains confident that this inflation is in fact transitory and  that responding may do more harm than good, particularly in an era where interest rates are near zero. Powell said that monetary policy decisions taken by the Federal Reserve can take up to a year, thus making decisions based on temporary factors can slow down the economy. In his review of recent inflation developments, Mr. Powell suggested inflation was likely to moderate in the coming months because prices of certain items, such as used cars, that contributed strongly to the recent price surges have begun to decline.
Markets

  •  Markets finished higher this week. The S&P 500 increased by 1.54% and closed at 4,509.37. Meanwhile, the Dow Jones increased by 0.98% and closed at 35,455.80. Year-to-date, the S&P 500 is up 21.18% and the Dow Jones is up 17.17%.
  • Yields were in a holding pattern this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.79% and 1.30%, respectively.
  • The spot price of WTI Crude increased this week. Prices increased by 4.72% and closed at $68.72 per barrel. Year to date, Oil prices are up +41.65%.
  • The spot price of Gold increased by +0.75% and closed at $1,818.85 per ounce. Year to date, Gold prices are down -4.24%.

Economic Data

  • Initial claims 353,000 for the week ended August 21, median forecast 350,000, prior revised 349,000
  • Durable goods orders -0.1% month over month in July, median forecast -0.3%, prior revised +0.8%
  • Durable goods orders ex-transport +0.7% month over month in July, median forecast +0.5%, prior revised +0.6%
  • Core capital goods orders flat month over month in July, median forecast +0.7%, prior revised +1.0%
  • Core capital goods shipments +1.0% month over month in July, median forecast +0.7%, prior +0.6%
  • New home sales +1.0% month over month for July, median forecast +3.1%, prior revised -2.6%
  • Existing home sales +2.0% for July vs. GS -2.0%, median forecast -0.5%, prior revised +1.6%

Fact of the Week

.• The United States spent $2.26 trillion during its 20-year presence in Afghanistan in fighting the Taliban, rebuilding the Afghan government and training the Afghan military (source: Brown University).

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

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Federal Reserve, China shipping: O2 Wealth Economic Update, August 20, 2021

U.S. and World News

  • According to minutes of their July 27-28 meeting, Federal Reserve officials indicated they are on track to begin winding down some of their accommodative policies. More specifically, discussions have begun about the timing and pace of scaling back the Large-Scale Asset Purchases the Federal Reserve has been conducting since the pandemic began. As the economy continues to recover and inflation readings coming in higher than expected, some officials indicated they support scaling back purchases before the year is over. The Federal Reserve has been purchasing $120 billion/month in Treasury securities and mortgage backed securities. Fed officials have made it clear that the policy action on LSAPs and interest rate hikes are separate levers, and there exists no mechanical linkage between them. The Fed meets next week for the Jackson Hole Symposium, although no further announcements on tapering are expected.
  • iStock-1165731864The world’s third-largest port, Ningbo-Zhoushan in China, remained shut this week after operations were suspended last week in response to a single Covid-19 case. The suspension of activity has put pressure on other ports like Shanghai and Hong Kong. Goods for companies attempting to transport products are expected to experience delays of up to two weeks. Supply chains have experienced significant disruptions because of Covid-19. In fact, it is estimated that about 10% of global container capacity is stuck on ships in congested ports ranging from Los Angeles, CA to the Netherlands. Beyond that, the daily freight rate for goods sailing from China to the US have more than tripled since the start of the year. Industry experts do not expect a return to normal operations until early next year.

Markets

  • Markets finished slightly down this week. The S&P 500 decreased by -0.55% and closed at 4,441.67. Meanwhile, the Dow Jones inched down by -1.00% and closed at 35,120.08. Year-to-date, the S&P 500 is up 19.26% and the Dow Jones is up 16.05%.
  • Yields were in a holding pattern this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.78% and 1.26%, respectively.
  • The spot price of WTI Crude fell this week. Prices decreased by -8.94% and closed at $62.32 per barrel. Year to date, Oil prices are up +29.32%.
  • The spot price of Gold increased by +0.13% and closed at $1,782.00 per ounce. Year to date, Gold prices are down -6.14%.

Economic Data

  • The Philadelphia Fed manufacturing index declined against August expectations to +19.4.
  • Initial jobless claims fell to 348,000, the lowest since the pandemic began.
  • Housing starts decreased by 7.0% in July while building permits increase by 2.6%.
  • July retail sales fell 1.1% month over month in July, more than expectations.

Fact of the Week
LOT OF HELP WANTED – American employers had 10.1 million job openings as of 6/30/21, an all-time record for an employment statistic that has been tracked by our government since December 2000. Domestic employers had 6.9 million job openings as of 2/29/20 at the beginning of the global pandemic (source: Department of Labor).

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Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

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Infrastructure bill, Labor market: O2 Wealth Economic Update, August 13, 2021

U.S. and World News

  • iStock-187654276-(1)This week Senate voted overwhelmingly to approve a $1 trillion infrastructure package, with nearly 70 Senators voting in favor, an uncommonly bipartisan vote. The bill’s aim is to rebuild the nation’s deteriorating roads and bridges as wells as fund new climate and broadband internet initiatives. The package now moves on to the House where it faces a much more difficult route to passage. Democratic House leaders have said they will not vote on the infrastructure plan until the Senate passes a separate $3.5 trillion social policy bill which includes spending on health care, child care and education.
  • New applications for jobless benefits declined for the third straight week, showing the labor market continues to heal despite worries about the Delta variant. The Department of Labor reported that first-time applications for unemployment benefits fell to 375,000 last week from 387,000. The labor market seems to be going through a momentum phase, as recent claims data matches with other indicators and broader economy is continuing to rebound despite the recent rise in Covid cases attributed to the Delta variant. The labor market is benefiting from the decrease in the amount of additional benefits to unemployed people. More than 75% of the reduction in continuing unemployment claims over the past two months has come from states that have ended the $300/week additional unemployment benefit and these states represent just 44% of the U.S. population

Markets

  • Markets finished slightly up this week. The S&P 500 increased +0.75% and closed at 4,468.10. Meanwhile, the Dow Jones increased by +0.93% and closed at 35,515.12. Year-to-date, the S&P 500 is up 19.91% and the Dow Jones is up 17.21%.
  • Yields were mixed this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.78% and 1.29%, respectively.
  • The spot price of WTI Crude fell this week. Prices decreased by -0.44% and closed at $67.96 per barrel. Year to date, Oil prices are up +41.03%.
  • The spot price of Gold fell by -0.88% and closed at $1,778.26 per ounce. Year to date, Gold prices are down -6.3%.

Economic Data

  • Import prices +0.3% month over month for July, +10.2% year over year vs. median forecast +0.6%, prior revised +1.1%
  • Import prices ex-petroleum +0.1% month over month for July, +6.8% year over year vs. median forecast +0.5%, prior +0.7%
  • PPI +1.0% month over month for July, +7.8% year over year vs median forecast +0.6%, prior +1.0%
  • PPI ex-food and energy +1.0% month over month for July, +6.2% year over year vs. median forecast +0.5%, prior +1.0%
  • PPI ex-food, energy and trade services +0.9% month over month for July, +6.1% year over year vs. median forecast +0.5%, prior +0.5%
  • Initial claims 375,000 for the week ended August 7 vs. median forecast 375,000, prior revised 387,000

Fact of the Week
43% of Americans under age 35 receive financial help from their parents or other family members when they purchase a home, e.g., money used for a down payment (source: Legal & General).

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Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

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China commerce, Delta virus: O2 Wealth Economic Update, August 6, 2021

U.S. and World News

  • iStock-1160497333_370In recent weeks, the Chinese government has moved to reign in some of their largest companies. They have launched probes into ride-sharing app Didi, blocked IPOs, and fined their companies for billions of dollars. Most recently, China’s antitrust regulators have announced intent to fine food-delivery company Meituan $1 billion for allegedly abusing its position in the market to stifle competition. Such behavior indicates a future in which regulation and governance can be unpredictable and heavy-handed. The government’s willingness and ability to assert itself from a regulatory standpoint has worried foreign investors and reflects an overall realignment of the relationship between private businesses and the state in China.
  • In response to the Delta variant, vaccine mandates and pauses on return-to-office plans are becoming more common. New York City, Microsoft, and United Airlines are the latest in a growing list of public and private institutions to mandate vaccination for their employees. Additionally, companies such as Amazon, Wells Fargo, and Blackrock have all postponed their return plans to October at the earliest.

Markets

  • Markets finished slightly up this week. The S&P 500 increased +0.96% and closed at 4,436.54. Meanwhile, the Dow Jones increased by +0.79% and closed at 35,208.64. Year-to-date, the S&P 500 is up 19.02% and the Dow Jones is up 16.14%.
  • Yields moved up this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.77% and 1.30%, respectively.
  • The spot price of WTI Crude fell this week. Prices decreased by -7.87% and closed at $68.13 per barrel. Year to date, Oil prices are up +41.36%.
  • The spot price of Gold fell by -2.94% and closed at $1,760.99 per ounce. Year to date, Gold prices are down -7.25%.

Economic Data

  • The US economy added 943,000 jobs in July, the best gain in 11 months and far exceeding expectations.
  • The unemployment rate fell from 5.9% down to 5.4% in the month of July.
  • Average hourly earnings are up +0.4% month-over-month for July, above expectations.
  • Wholesale inventories increased by 1.1% in June, above consensus expectations.
  • The US trade deficit increased in line with expectations to -$75.7 billion in June.
  • Initial jobless claims for the week ended July 31 were 385,000, in line with forecasts.
  • The ISM services index increased above expectations up to 64.1 for July.

Fact of the Week
56% of the existing US homes that went on the market for sale in June 2021 that have already secured a buyer were sold for more than the original asking price (source: Redfin).

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Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

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Economic Recovery, Debt Ceiling: O2 Wealth Economic Update, July 30, 2021

U.S. and World News

  • The U.S. economic recovery is still on track despite a rise in Coronavirus infections, the Federal Reserve said on Wednesday in a new policy statement. In a news conference following the release of the statement, Fed Chair Jerome Powell remained bullish on the recovery but said it would be some time before it would pull back from the economic support the U.S. Central Bank put in place in the spring of 2020. The Federal Reserve remains optimistic that the economy will not slow down its re-opening due to the new Delta variant. Powell said he will be following the job reports very closely before reducing the $120 billion in monthly bond purchases. The Fed’s policy statement did address how to wind down its bond purchases. Although there is progress prioritizing which securities to cut first, there is still concerns with the timing of the reduction. Currently, the Fed prioritizes the $80 billion in Treasuries before the $40 billion in mortgage-back securities.
  • iStock-176693569_370The U.S. debt ceiling of $22 trillion, which represents the total amount lawmakers permit the government to borrow and has been on hold for two year, will be reinstated on Sunday. The Treasury will begin its extraordinary measures to avoid breaching the limit by suspending sales of securities that helps states and municipalities invest bond proceeds. With no action from Congress imminent toward raising the debt ceiling, measures such as these will likely continue until September when it is projected that the debt ceiling will be breached despite the measures. Democrats can suspend or increase the limit by a process called budget reconciliation, which requires no Republican votes. Other possibilities would include creating a standalone bill or negotiating with Republicans on other budget items in exchange for a raise of the ceiling After Monday, Treasury has several additional options to avoid a default such as suspending new investments in several government program funds. Since 1985, the Treasury has used such measure more than 12 times and in every instance was able to avoid a government default. However, the contentious debt ceiling debate of 2011 did result in the U.S. receiving its first debt downgrade from S&P.

Markets

  • Markets finished slightly down this week. The S&P 500 decreased by -0.35% and closed at 4,395.26. Meanwhile, the Dow Jones decreased by -0.36% and closed at 34,935.47. Year-to-date, the S&P 500 is up 17.97% and the Dow Jones is up 15.30%.
  • Yields retreated a bit this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.70% and 1.23%, respectively.
  • The spot price of WTI Crude increased this week. Prices increased by +$2.31 and closed at $73.74 per barrel. Year to date, Oil prices are up 51.97%
  • The spot price of Gold fell by -0.50% and closed at $1,813.67 per ounce. Year to date, Gold prices are down -4.83%.

Economic Data

  • PCE price index increased +0.51% month over month for June vs. median forecast +0.6%
  • PCE price index rose +3.99% year over year for June vs. median forecast +4.0%
  • Core PCE price index rose +0.45% month over month for June vs. median forecast +0.6%
  • Core PCE price index increased +3.54% year over year for June vs. median forecast +3.7%
  • Personal Spending rose by +1.0% for June vs. median forecast +0.7%
  • Pending home sales decreased -1.9% month over month for June vs. median forecast flat
  • GDP increased by +6.5 for Q2 vs. median forecast +8.5%
  • Personal consumption rose by +11.8% for Q2 vs. GS +10.4%, median forecast +10.5%
  • Initial claims 400,000 for the week ended July 24 vs. median forecast 385,000, prior revised 424,000.

Fact of the Week

25% of 1,006 “soon-to-graduate” college students who were surveyed in the 1st quarter of 2021 said the 2020 pandemic caused them to change the industry they intend to work in following their college years (source: Joblist).

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Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Cyberattack, Economy, Opiods: O2 Wealth Economic Update, July 23, 2021

U.S. and World News

  • iStock-1271408351-370The Biden administration publicly blamed hackers affiliated with the Chinese government for an expansive cyberattack on Microsoft and thousands of its customers. The attack, which occurred in March, is yet another example in a growing list of cyberattacks levied against United States companies. The administration did not levy any sanctions on the Chinese government in response to the findings. This comes in contrast to the sanction levied against Russia for the SolarWinds hack and other malicious acts. Senior administration officials have said that their actions against China are intended to garner international support against this kind of behavior from Beijing. According to Microsoft’s vice president of customer security and trust, “Attributions like these will help the international community ensure those behind indiscriminate attacks are held accountable.”
  • According to the National Bureau of Economic Research, the United States officially climbed out of a recession in April 2020. Thus, the COVID-induced recession is technically the shortest on record – just two months. The U.S. economy still shrank by 3.5% year-over-year, but the contractions occurred during the first and second quarters of 2020.
  • On Wednesday, a bipartisan coalition of states attorneys general announced a $26 billion settlement with drug maker Johnson & Johnson and distributors McKesson, Cardinal Health, and Amerisource Bergen. The opioid crisis has ravaged the United States, and the money from the settlement will be used by the states to address problems created by opioid addiction, including treatment programs, education, and funding for first responders. Overdose deaths hit a record high in 2020, much of which can be attributed to fatalities caused by fentanyl, a synthetic opioid. States have 30 days to decide whether or not they are going to accept the settlement.

Markets

  • Markets finished slightly up this week. The S&P 500 increased +1.97% and closed at 4,411.81. Meanwhile, the Dow Jones increased by +1.12% and closed at 35,061.42, its first time above 35,000. Year-to-date, the S&P 500 is up 18.32% and the Dow Jones is up 15.65%.
  • Yields slide a bit this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.71% and 1.28%, respectively.
  • The spot price of WTI Crude increased this week. Prices increased by +0.67 and closed at $72.03 per barrel. Year to date, Oil prices are up 48.45%.
  • The spot price of Gold fell by -0.56% and closed at $1,801.97 per ounce. Year to date, Gold prices are down -5.09%.

Economic Data

  • Existing home sales increased by +1.4% during the month of June, just shy of the +1.7% median forecast.
  • Initial jobless claims increased against consensus expectations, totaling 419k compared to the 350k median forecast.
  • Housing starts increased by +6.3% in June, beating the median forecast of +1.2%.
  • Building permits decreased -5.1%, against expectations for a slight increase
  • The NAHB housing market index declined slightly below expectations in July but remained at a very high level.

Fact of the Week
• The current bull market for the S&P 500 is the index’s 8th bull run in the last 50 years. This bull has gained +97.6% (total return) from 3/23/20 through last Friday 7/16/21. (source: BTN Research).

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Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Inflation: O2 Wealth Economic Update, July 16, 2021

U.S. and World News

  • iStock-500080520370jpgDuring this week’s Congressional testimony, Federal Reserve Chairman Jerome Powell said recent inflation in the United States was above the levels that the Central Bank seeks, driving the confidence of the economic outlook down. Mr. Powell claimed the reason for such inflation is driven by supply constraints for a small group of goods and services that have led to rapid price increases. Powell said that the Fed does not want to overreact to a onetime increase in prices of certain goods and services such as air travel, hotel rates, and the automobiles. Although still considered transitory inflation by Jerome Powell, they are following the situation closely to make sure it doesn’t continue increasing the rest of the year. U.S consumer prices continued to accelerate in June at the fastest pace in 13 years.. Mr. Powell indicated the Fed was in no hurry to adjust its policies at the moment, but that it would have a better understanding of how the reopening was proceeding by year’s end. The Fed is also paying close attention to the jobs report as they hope the number of people looking for jobs this month increases to be able to satisfy demand in different industries where they are lacking workers. Many economists believe tighter labor markets would prompt the Fed to raise rates sooner, although the Fed insists that this elevated inflation is driven by the new trends in the workforce participation.

Markets

  • Markets finished slightly down this week. The S&P 500 decreased -0.95% and closed at 4,327.16. Meanwhile, the Dow Jones decreased by -0.52% and closed at 34,687.20 Year-to-date, the S&P 500 is up 16.11% and the Dow Jones is up 14.45%.
  • Yields slide quite a bit this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.78% and 1.29%, respectively.
  • The spot price of WTI Crude fell this week. Prices fell by -4.15% and closed at $71.45 per barrel. Year to date, Oil prices are up 47.27%.
  • The spot price of Gold rose by 0.13% and closed at $1,810.67 per ounce. Year to date, Gold prices are down -4.63%.

Economic Data

  • Initial claims 360k for the week ended July 10 vs. median forecast 350k, prior revised 386k
  • Continuing claims 3,241k for the week ended July 3 vs. median forecast 3,300k, prior revised 3,367k
  • Philadelphia Fed manufacturing index +21.9 for July vs., median forecast +28.0, prior +30.7
  • Import prices +1.0% month over month for June, up +11.2% year over year vs. median forecast +1.1%, prior revised +1.4%
  • CPI month over month increased +0.9% for June vs. median forecast +0.5%, prior +0.6%
  • Core CPI month over month +0.88% for June vs. median forecast +0.4%, prior +0.7%
  • CPI year over year +5.4% for June vs. median forecast +4.9%, prior +5.0%
  • Core CPI year over year +4.5% for June vs. median forecast +4.0%, prior +3.8%
  • PPI +1.0% (mom) for June (+7.3% yoy) vs. median forecast +0.6%, prior +0.8%
  • PPI ex-food and energy +1.0% (mom) for June (+5.6% yoy) vs. median forecast +0.5%, prior +0.7%
  • PPI ex-food, energy and trade services +0.5% (mom) for June (+5.5% yoy) vs. median forecast +0.5%, prior +0.7%
  • Manufacturing production declined by 0.1%, partly reflecting a 6.6% decline in motor vehicle and parts manufacturing
  • Retail sales +0.6% (mom) for June vs. median forecast -0.3%, prior revised -1.7%
  • Retail sales ex-autos +1.3% (mom) for June vs. median forecast +0.4%, prior revised -0.9%
  • Retail sales ex-auto & gas +1.1% (mom) for June vs. median forecast +0.5%, prior revised -1.0%

Fact of the Week
3.99 million Americans quit their jobs in April 2021, the largest monthly “quit level” recorded in US history. In addition, 24% of 2,000 American workers surveyed in late May 2021 are planning on looking for a new job in the post-pandemic world (source: Prudential’s Pulse of the American Worker Survey & Department of Labor).

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Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 844-8633 alynch@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.