China, Brexit, Venezuela: Wealth Economic Update Mar. 2, 2019

U.S. and World News

  • china_us-1035146880Earlier this week, President Trump extended the March 1st trade truce deadline between the United States and China, citing “substantial trade progress”. If the deadline had not been extended, the tariff rate on $200 billion in Chinese products would have been increased to 25% from 15%. Chinese equities soared over 5% on the news into bull market territory. U.S. Trade Representative Robert Lighthizer stated that it’s too early to draw conclusions on a trade deal between the two countries and that even if a deal was made, the United States would need to maintain the threat of tariffs.
  • In an effort to stop Britain from leaving the European Union without a deal, British Prime Minister Theresa May has pushed back a vote on her next Brexit deal to as late as March 12, about two and a half weeks before Britain leaves the European Union. European parliament had created rules that requires the U.K. financial services industry to abide by European Union standards after Brexit in order to keep control of market access. The U.K.’s main opposition Labour Party is also committed to having a second Brexit referendum, surprising doubters.
  • The United States is continuing to find new ways to aid economically devastated Venezuela after last weekend’s attempt to send aid resulted in two people killed and 300 people wounded. The U.S. is working with Venezuelan opposition leader Juan Guaido to pressure Nicolas Maduro to step down by means of sanctions. Vice President Mike Pence is calling on allies to freeze assets of state-owned oil company PDVSA. As a response, Venezuela is now exporting crude from India and Europe instead of the United States, however, this is predicted by analysts to be ineffective in generating profits.


Markets

  • Stocks marched higher again this week. The S&P 500 rose 0.45% and closed at 2,804. The Dow Jones gained 0.07% and closed at 26,026. Year to date, the S&P is up 12.24% and the Dow Jones is up 12.08%.
  • Yields spiked this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.56% and 2.75%, respectively.
  • The spot price of WTI Crude Oil declined this week. Prices fell 2.65% and closed at $55.74 per barrel. Year to date, Oil prices are up 22.75%.
  • The spot price of Gold fell 2.70% this week and closed at $1,293.44 per ounce. Year to date, Gold prices are up 0.85%.

Economic Data

  • Initial jobless claims rose by 9,000 to 225,000 for the week. The four-week moving average of claims fell by 7,000 to 229,000. Claims rose by 5,000 in Kentucky, 4,000 in New York, and fell by 3,000 in Washington.
  • Real GDP rose by 2.6% in the 4th quarter versus expectations of a 2.2% increase. The rise was driven by a surprise in personal consumption led by autos and financial services, offsetting the weak December retail sales figure.
  • Personal income fell 0.1% in January versus expectations for a 0.3% increase, but rose by 1.0% in December.
  • Personal spending fell by 0.5% in December versus expectations for a 0.3% decrease.
  • Wholesale inventories rose by 1.1% in December versus expectations for a 0.4% increase.
  • Housing starts fell by 11.2% in December versus expectations for a 0.1% drop. The drop was led by the multi-family category in the West and Midwest regions.
  • The Conference Board index of consumer confidence rose by 9.7 points to 131.4 in February versus expectations for a reading of 124.9.
  • Pending home sales rose by 4.6% in January versus expectations for a 1.0% increase.
  • Factory orders rose by 0.1% in December versus expectations for a 0.6% increase.
  • The University of Michigan’s index of consumer sentiment fell 1.7 points to 93.8 in February versus expectations for a reading of 95.9.

Fact of the Week

  • 69% of 1,017 adults surveyed in January 2019 believe that they will be “financially better off in 1 year,” a result that is 2 percentage pointsless than the all-time record of 71%recorded in March 1998. This survey has been conducted since August 1977. The 1998 record was achieved during a stretch for the S&P 500 that produced annual returns of at least +20% (total return) for 5 consecutive years(1995-1999) (source: Gallup).

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

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.

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