China Tariffs, Brexit: Wealth Economic Update Dec. 14, 2018

U.S. and World News

  • Trade tensions with China have eased after some constructive talks between Chinese Vice Premier Liu He, Treasury Secretary Steven Mnuchin, and Trade Representative Robert Lighthizer earlier this week. China has begun purchasing soybeans from the United States again and has announced that the retaliatory tariffs put on U.S. autos will be suspended until March 1st. The tariff rate on autos exported to China will now be reduced from 40% to 15%. March 1st remains the deadline for the trade truce established between President Trump and Chinese President Xi Jinping in Buenos Aires on December 1st. The recent development is a sign that the arrest of Huawei CFO Meng Wanzhou has not derailed trade negotiations.
  • Theresa May delayed the House of Commons vote on her Brexit deal earlier this week, as it was expected to fail with near certainty. As a result of the delay, 48 Conservative lawmakers called for her ouster. Theresa May then when on to survive the no-confidence vote and travel to Brussels to hear the European Union’s concerns regarding the deal. The Irish backstop, which is the plan to prevent a hard border in Northern Ireland, continues to be the point of disagreement. Theresa May’s own members of parliament are concerned that the Irish Backstop could keep the United Kingdom tied to the European Union’s policies and would prevent them from making trade deals.


Markets

  • Stocks fell further this week amid global uncertainty. The S&P 500 fell 1.22% and closed at 2,600. The Dow Jones declined 1.17% and closed at 24,101. Year to date, the S&P is down 0.81% and the Dow Jones is down 0.20%.
  • Yields rebounded slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.73% and 2.89%, respectively.
  • The spot price of WTI Crude Oil erased its gains from last week, losing 2.79% and closing at $51.14 per barrel. Year to date, Oil prices are down 14.92%.
  • The spot price of Gold fell 0.87% this week and closed at $1,238.47 per ounce. Year to date, Gold prices are down 4.94%.

Economic Data

  • Initial jobless claims fell by 27,000 to 206,000 this week. The four-week moving average of claims fell by 4,000 to 225,000. Claims fell by 5,000 in Pennsylvania, 3,000 in California, 3,000 in Texas, and 2,000 in Georgia.
  • Import prices fell by 1.6% in November month-over-month versus expectations for a decline of 1.0%.
  • Import prices ex-petroleum fell by 0.3% in November versus expectations for a 0.1% decline.
  • The producer price index (PPI) rose by 0.1% in November month-over-month versus expectations for no change.
  • PPI ex-food and energy rose by 0.3% in November versus expectations for a 0.1% increase.
  • The consumer price index (CPI) rose by 0.02% in November versus expectations for no change. The year-over-year rate came in at 2.18%, in-line with expectations.
  • Core CPI rose by 0.21% in November, in-line with expectations. The year-over-year rate came in at 2.21%, in-line with expectations.
  • Retail sales rose by 0.2% month-over-month in November versus expectations for a 0.1% increase.
  • Retail sales core/control rose by 0.9% in November versus expectations for a 0.4% increase.
  • Industrial production rose by 0.6% in November versus expectations for a 0.3% increase.

Fact of the Week

  • 30 years ago (1988), the Chinese economy was just 6% of the U.S. economy. 10 years ago (2008), the Chinese economy grew to 31% of the U.S. economy. Today, the Chinese economy is 63% the size of our economy. (Source: Trading Economics)

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
Mike Cava – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

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