Italy, China tariffs, North Korea: Wealth Economic Update June 4, 2018

U.S. and World News

  • italy-469253936_360Italian President Sergio Mattarella blocked the formation of an anti-establishment government earlier this week, sparking fears of a snap election and roiling European markets. The left-wing 5-Star Movement and the right-wing League tried to appoint economist and anti-European Union politician Paolo Savona as finance minister. The two eventually formed an agreement to form a new coalition government, appointing economics professor Giovanni Tria as finance minister. Italy’s departure from the European Union remains a possibility in the future as the 5-Star Movement and the League both want to leave the European Union.
  • Washington has moved forward with its proposal of 25% tariffs on $50 billion of Chinese goods and restrictions on Chinese investment in U.S. high-tech industries. The United States has also announced import tariffs on steel and aluminum from the European Union, Mexico, and Canada, which will be met with retaliatory tariffs on various U.S. goods including jeans, bourbon, motorcycles, whiskey, orange juice, metals, and other food products. Canada is challenging the U.S. tariffs under NAFTA Chapter 20 and the dispute settlement process through the World Trade Organization, which threatens the success of NAFTA negotiations.
  • President Trump stated that a summit with North Korean leader Kim Jon Un will take place, as previously scheduled, on June 12th in Singapore after a high level official from North Korea visited the White House today for the first time since 2000. The goal of the summit will be to rid North Korea of its nuclear arms, and what will be provided in exchange is up for negotiation. President Trump stated that he expects a number of summits to take place before all of the issues are settled.

Markets

  • The markets ended mixed this week. The S&P 500 gained 0.54% this week and closed at 2,734.62. The Dow Jones fell 0.38% and closed at 24,635.21. Year to date, the S&P is up 3.12% and the Dow Jones is up 0.69%.
  • Yields also experienced above average volatility this week and ended the week slightly lower. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.75% and 2.90%, respectively.
  • The spot price of WTI Crude Oil fell another 3.26% this week and closed at $65.67 per barrel. Year to date, Oil prices are up 9.25%.
  • The spot price of Gold fell by 0.66% this week, closing at $1,293.77 per ounce. Year to date, Gold prices are down -0.70%.

Economic Data

  • Initial jobless claims fell 13,000 this week to 2221,000. The largest declines were in California and Kentucky. The four-week moving average moved higher by 2,000 to 222,000. The pace of layoffs still remains very low.
  • Personal income rose 0.3% in April, meeting expectations• Consumer spending rose 0.6% in April, exceeding expectations of a 0.3% increase.
  • Consumer confidence rose to 128.0 in May, matching expectations.
  • Pending home sales fell 1.3% in April versus expectations of a 0.4% increase. The decline was led by sales in the Midwest region.
  • Nonfarm payroll growth rose by 223,000 in May versus expectations of a 190,000 increase. Job gains were led by the retail, construction, and leisure and hospitality sectors.
    • The unemployment rate ticked lower to 3.8% from 3.9%.
    • The labor force participation rate fell to 62.7%
    • Average hourly earnings increased 0.30% in May versus expectations of a 0.20% increase and the year-over-year rate increased to 2.7%.

Fact of the Week

  • 58 publicly-held US companies produced at least $1 billion of sales per week in 2017, up from 39 companies that accomplished that level of weekly sales in 2007. Just 1 domestic company generated more than $1 billion of sales per day during 2017 (source: Fortune).

Please contact a member of the Wealth Management Department if you have any questions about this information.

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 Demski – (630) 966-2430 mdemski@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

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