Mexico/NAFTA, Brexit: Wealth Economic Update Aug. 31, 2018

U.S. and World News

  • nafta-970297784_370The United States and Mexico have struck a preliminary deal on Monday to replace NAFTA. The deal would remain in force for 16 years, with an evaluation every six years, and is expected to strengthen manufacturing in the United States. The deal includes an obligation by auto manufacturers to manufacture at least 75% of an automobile’s value in the United States, an increase from 62.5%. Also included, was a stipulation that 40-45% of auto components be manufactured by employees earning at least $16 an hour. Negotiations are still ongoing between the United States and Canada after a deal was expected by today, however, the two sides are having trouble coming together on Canada’s dairy market, among other things.
  • The United Kingdom and the European Union have extended the deadline from October 18th to the middle of November for wrapping up Brexit terms, signaling to the market that negotiations have been tough. Britain’s exit from the European Union is set for March 29th, and the longer that negotiations continue, the greater the chance that no deal will be made.


Markets

  • Stocks ended the week higher once again. The S&P 500 rose by 0.98% and closed at 2,901. The Dow Jones increased by 0.79% and closed at 25,963. Year to date, the S&P is up 9.85% and the Dow Jones is up 6.66%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.74% and 2.86%, respectively.
  • The spot price of WTI Crude Oil continued its sharp rebound this week, gaining 1.73% and closing at $69.91 per barrel. Year to date, Oil prices are up 16.30%.
  • The spot price of Gold lost 0.50% this week, and closed at $1,199.33 per ounce. Year to date, Gold prices are down 7.94%.

Economic Data

  • Initial jobless claims rose by 3,000 to 213,000 this week. The four-week moving average of claims moved down by 2,000 to 212,000. Claims rose by 2,000 in Michigan, New York, and Pennsylvania, and fell by 2,000 in California. The pace of layoffs remains very low.
  • Personal income rose by 0.3% in July month-over-month versus expectations of a 0.4% increase.
  • Personal spending increased by 0.4% month-over-month in July, in-line with expectations.
  • The core PCE price index ex-food and energy increased 0.16% month-over-month in July and the year-over-year pace rose 0.06% to 1.98%. These figures were in-line with expectations.
  • Wholesale inventories rose 0.7% in July versus expectations of a 0.2% increase.
  • The Conference Board index of consumer confidence increased to 133.4 versus expectations of 126.6. This is the highest level since the year 2000.
  • Second-quarter Real GDP growth was revised up by 0.1% to 4.2% versus expectations of a -0.1% revision to 4.0%.
  • Pending home sales fell by 0.7% in July, below expectations of a 0.3% increase. Sales declined in the South and the West, but increased in the Northeast and the Midwest.


Fact of the Week

  • In a study of five of the largest U.S. Cities (NYC, Chicago, LA, Washington D.C, and Dallas), it was found that it is cheaper for the average American to take Uber for every trip than it is to own a car. Of the 5 cities, only in Dallas was it cheaper to own a car than to take an Uber. (Source: Kleiner Perkins)

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.

China tariffs, Manafort, Cohen, Hurricane Lane: Wealth Economic Update Aug. 24, 2018

U.S. and World News

  • The amount of tariffs imposed by both the United States and China have now totaled a combined $100 billion each on a variety of products after the planned $16 billion round of United States tariffs kicked in on Chinese products this week and were immediately answered with reciprocity by China. U.S-China trade talks ended on Thursday after making no progress and China stating that they will continue to hit back at the United States as more U.S tariffs are imposed.
  • gavel-827092426_370On Tuesday, Donald Trump’s former campaign manager Paul Manafort was found guilty on eight financial related crimes. Five of the crimes were for tax fraud, two for bank fraud, and one for failing to disclose a foreign bank account. As a result, Paul Manafort faces years in prison. President Trump’s former attorney Michael Cohen plead guilty on eight counts of crimes similar to Manaforts and also admitted to paying off an adult film actress and a former Playboy model so that they would not spread the story of their alleged affairs with Trump.
  • Hurricane Lane, a Category 2 slow moving storm, has already dumped over 30 inches of rain on Hawaii’s Big Island as it makes its way north towards Maui and turns west towards Oahu. Police warned all tourists to leave Waikiki Beach and so far, about 1,500 people are in emergency shelters. Hawaii was last hit by a major storm in 1992.


Markets

  • • Stocks rose again this week, reaching record levels last seen in January. The S&P 500 rose by 0.88% and closed at 2,875, an ALL TIME HIGH. The Dow Jones increased by 0.51% and closed at 25,790. Year to date, the S&P is up 8.80% and the Dow Jones is up 5.84%.
  • Yields declined this week and the curve flattened further. The 5 year and 10 year U.S. Treasury Notes are yielding 2.72% and 2.81%, respectively.
  • The spot price of WTI Crude Oil rebounded this week, gaining 5.21% and closing at $68.61 per barrel. Year to date, Oil prices are up 14.14%.
  • The spot price of Gold gained 1.83% this week, and closed at $1,205.89 per ounce. Year to date, Gold prices are down 7.44%.

Economic Data

  • Initial jobless claims fell by 2,000 to 210,000 this week. The four-week moving average of claims moved down by 2,000 to 214,000. Claims rose by 3,000 in California and fell by 2,000 in Michigan. The pace of layoffs remains very low.
  • Existing home sales fell 0.7% month-over-month in July to a seasonally adjusted annualized figure of 5.34 million units against expectations of a 0.4% increase. Sales were the weakest in the Northeast region.
  • Sales of new single-family homes fell 1.7% in July to a seasonally-adjusted annualized rate of 627,000 units versus consensus expectations of 645,000. The previous three months were revised lower by a net 13,000. July sales fell sharpest in the Northeast region.


Fact of the Week

  • This week marked the longest bull market in history, after the market bottomed on March 9th, 2009. Or did it? The S&P 500 saw drawdowns in 2011 and 2015 in which over 60% of stocks were down at least 20%, with the 2011 instance seeing only a -19.4% in the headline index, not meeting the somewhat arbitrary -20% threshold. Meanwhile, Small Cap stocks as measured by the Russell 2000 experienced declines of -30.7% and -27.1% in 2011 and 2015 respectively. So is this really the longest bull market in history? (Source: Strategas)

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.

China tariffs, Turkey, Quarterly reports: Wealth Economic Update Aug. 20, 2018

U.S. and World News

  • Trade tensions with China have eased this week after China stated that they will send a delegation to the United States in late August to resume trade negotiations that have recently fell apart. Since trade negotiations ended a couple of months ago, billions of dollars in tariffs were imposed by the two sides and China’s stock market experienced dramatic losses. This announcement follows a complaint filed by China to the World Trade Organization earlier this week, stating that U.S tariffs on solar products are interfering in the global photovoltaic market and hurting its major solar manufacturers.
  • turkey_coin-843425198_370Crushing hopes of a potential rate hike and restrictive monetary policy action by Turkey to reverse the decline of the Turkish lira, President Erdogan said that he will not raise rates. Erdogan claimed that the lira’s decline was a result of foreign affairs and has nothing to do with Turkey’s economy. Turkey has imposed retaliatory tariffs on a variety of U.S. goods including tariffs on passenger cars that will rise by 120%.
  • President Trump said on Friday that he has asked the SEC to look into reducing the number of times public companies must report earnings from quarterly to semi-annually. Trump cited business leaders who say it could promote economic growth and longer term investment horizons as investors would be less focused on short term, and more volatile, quarterly results. A move to twice a year reporting would also bring the U.S. in line with European public companies and would reverse the quarterly mandate that the SEC has imposed since 1970.


Markets

  • Stocks rose this week on hopes that trade tensions between the U.S. and China are easing. The S&P 500 rose by 0.66% and closed at 2,850. The Dow Jones climbed by 1.48% and closed at 25,669. Year to date, the S&P is up 7.91% and the Dow Jones is up 5.36%.
  • Yields moved marginally lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.74% and 2.86%, respectively.
  • The spot price of WTI Crude Oil continued its slide this week, losing 2.57% and closing at $65.89 per barrel. Year to date, Oil prices are up 9.62%.
  • The spot price of Gold fell 2.18% this week, and closed at $1,184.17 per ounce. Year to date, Gold prices are down 9.11%.

Economic Data

  • Initial jobless claims fell by 2,000 to 212,000 this week. The four-week moving average of claims moved up by 1,000 to 216,000. Claims did not rise or fall by more than 1,000 in any single state. The pace of layoffs remains very low.
  • Housing starts rose by 0.9% in July to 1,168k versus consensus expectations for a 7.4% increase to 1,260k.
  • Building permits rose by 1.5% month-over-month to an annualized rate of 1,311k in July which was in line with expectations.
  • Retail sales increased by 0.5% month-over-month in July versus expectations of a 0.1% increase. The increase was driven by gas station sales and auto sales.
    • Retail sales ex-autos rose 0.6% versus expectations of a 0.3% increase. The increase was driven by clothing and accessory stores and department stores.
  • Industrial production rose by 0.1% in July versus expectations of a 0.3% increase.


Fact of the Week

  • The weekly initial jobless claims figure came in at 212,000 this week. The last time jobless claims were this low was 1970, when total employment was 70 million people, compared to 148 million today. (Source: U.S. Department of Labor)

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.

Iran, California wildfires, Turkey tariffs: Wealth Economic Update Aug. 10, 2018

U.S. and World News

  • The first round of sanctions on Iran by the United States has taken effect which includes a restriction on sales of the U.S Dollar to Iran’s government, trade restrictions on precious metals and industrial metals, and a ban on the purchase of Iranian sovereign debt. These new measures are expected to lead to higher prices on almost everything for Iranians. On November 5th, more severe sanctions will take effect if Iran fails to comply with U.S orders. These measures will entail an obstruction of Iran’s oil exports and tough sanctions on shipping.
  • wildfires-157384116California’s largest-ever wildfire has grown to the size of Los Angeles as dry weather, high winds, and location have made it very difficult to contain. President Trump has declared a “major disaster” in California, ordering federal funding to assist in containing the fire. The fire that currently spans over 470 square miles has burned through 283,800 acres is not expected to be fully contained by firefighters until September.
  • President Trump announced that the United States will double the tariff rate on steel and aluminum imported from Turkey, sending the Turkish lira down 20% against the U.S Dollar. This sparked a global market selloff as Turkey is in debt to many different banks. President Erdogan told Turks to sell all U.S Dollars that they own in an attempt to stabilize the plummeting Turkish currency.


Markets

  • Stocks pared their gains at the end of this week closing lower. The S&P 500 fell by 0.18% and closed at 2,833. The Dow Jones declined by 0.44% and closed at 25,313. Year to date, the S&P is up 7.16% and the Dow Jones is up 3.79%.
  • Yields were volatile this week, but also ended the week lower as investors piled into bonds. The 5 year and 10 year U.S. Treasury Notes are yielding 2.75% and 2.87%, respectively.
  • The spot price of WTI Crude Oil continued its slide this week, losing 1.11% and closing at $67.73 per barrel. Year to date, Oil prices are up 14.66%.
  • The spot price of Gold fell 0.27% this week, and closed at $1,211.67 per ounce. Year to date, Gold prices are down 6.99%.

Economic Data

  • Initial jobless claims fell by 5,000 to 213,000 this week. The four-week moving average of claims moved down by 1,000 to 214,000. Jobless claims rose by 3,000 in California and fell by 4,000 in Kentucky. The pace of layoffs remains very low.
  • The producer price index (PPI) was flat in July versus expectations of a 0.2% increase reflecting lower food and energy prices as well as lower retail margins.
    • The producer price index ex-food and energy rose 0.1% in July versus expectations for a 0.2% increase.
  • Wholesale inventories rose 0.1% in June versus expectations of no change.
  • The consumer price index (CPI) rose 0.17% month-over-month in July and the year-over-year rate rose 0.1% to 2.4%, the fastest pace in six months. Consensus expectations were for 0.2% month-over-month and 2.3% year-over-year.
    • Core CPI rose 0.24% month-over-month and 2.35% year-over-year versus expectations of 0.2% and 2.3% respectively.


Fact of the Week

  • The number of US homeowners grew 1.8 million in the 12 months ending 6/30/18. That is double the 0.9 million total homeowners added in the decade ending 6/30/17. (Source: Census Bureau)

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.

China tariffs, California wildfires: Wealth Economic Update Aug. 3, 2018

U.S. and World News

  • china-961870818The United States has proposed an increase on the tariff rate to 25% from 10% on the $200 billion of Chinese goods after the two countries made no progress with trade negotiations this week. The White House stated that the tariffs are a response to China’s unfair trade policies. U.S. Trade Representative Robert Lighthizer stated “The increase in the possible tariff rate is intended to provide the administration with additional options to encourage China to change its harmful policies and behavior and adopt policies that will lead to fairer markets and prosperity for all of our citizens”. This morning, China threatened to impose additional tariffs on $60 billion of U.S. products that would range between 5% and 25% and would hit 5,027 products if the United States proceeded with its proposal.
  • More than 38,000 people are under evacuation orders about 160 miles north of Sacramento near a city named Redding where a wildfire has already burned through 90,000 acres. The state of California has already spent a quarter of its $442.8 million annual emergency fund on fighting fires and is one month into its fiscal year and the costs are expected to rise further. The largest fire is near the city of Redding and currently is about 40% contained after destroying 1,060 homes. The National Weather Service issued warnings for critical fire weather conditions on Friday and Saturday that will bring wind gusts up to 35 mph.


Markets

  • Stocks rose higher this week. The S&P 500 increased by 0.80% and closed at 2,840. The Dow Jones rose by 0.05% and closed at 25,463. Year to date, the S&P is up 7.35% and the Dow Jones is up 4.24%.
  • Yields ended the week slightly lower than last week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.81% and 2.95%, respectively.
  • The spot price of WTI Crude Oil was relatively unchanged this week, losing 0.15% and closing at $68.59 per barrel. Year to date, Oil prices are up 14.11%.
  • The spot price of Gold fell 0.85% this week, and closed at $1,213.76 per ounce. Year to date, Gold prices are down 6.83%.

Economic Data

  • Initial jobless claims rose by 1,000 to 218,000 this week. The four-week moving average of claims moved down by 4,000 to 215,000. Jobless claims rose by 3,000 in Michigan. The pace of layoffs remains very low.
  • Pending home sales rose by 0.9% in June exceeding expectations of a 0.1% increase. Pending home sales were led by the Northeast and South regions.
  • The core PCE index (excluding food and energy) increased 0.11% month-over-month in June and the year-over-year pace fell to 1.90%, below expectations.
  • Personal income rose by 0.4% month-over-month in June, in line with expectations.
  • The Conference Board index of consumer confidence increased to 127.4 in July from a revised 127.1 in June.
  • Private sector employment rose 129k in July against expectations for a 186k gain. June was also revised up by 4k.
  • Nonfarm payrolls rose 157k in July versus consensus expectations of a 193k increase. This is the slowest pace since March. Employment growth over the prior two month was revised higher by 59k.
    • The unemployment rate fell to 3.9% in line with expectations
    • Average hourly earnings came in at 0.3% in July in line with expectations


Fact of the Week

  • Apple became the first company to reach $1 trillion in market capitalization this week. The equation for market capitalization is (number of shares outstanding X price per share).
    • Florida (GDP) = $1 trillion
    • Small cap (S&P 600 index) = $892 billion
    • Turkey (GDP) = $851 billion
    • Netherlands (GDP) = $826 billion

(Source: Statista)

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.