Brexit calls for resignation, China trade: Wealth Economic Update May 24, 2019

U.S. and World News

  • iStock-1057358690British Prime Minister Theresa May’s last ditch effort to deliver Brexit through a deal filled with compromises with the Labour Party has failed as calls for her resignation only grew louder. The U.K. participated in European elections this week, putting a sour taste into the mouths of British politicians who had originally planned to watch this event from the sidelines. Results of the European Union elections will be announced after 10P.M on Sunday and British Conservatives are expected to suffer a dramatic defeat. Theresa May has announced that she will resign on June 7th and stated that “It is and will always remain a matter of deep regret to me that I have not been able to deliver Brexit”. The British Pound has fallen substantially amid all of the uncertainty and the process to elect a new leader will begin next week.
  • Chinese President Xi Jinping tone has shifted in regards to the trade war with the United States when he stated on Monday that China is embarking on a “new Long March, and we must start all over again!”. In addition, a propaganda song, titled “Trade War” about the U.S.-China trade war has gone viral in China. Reports say that China is exploring a retaliation move in response to the Huawei ban that will likely include cutting natural gas purchases from the United States. The Trump administration has announced a $16 billion trade aid program for American farmers who have been hurt by the trade war. Soybean farmers have been impacted the most as the value of soybean exports to China fell 74% in 2018.


Markets

  • Markets continued to fall this week. The S&P 500 fell 1.14% and closed at 2,826. The Dow Jones fell 0.63% and closed at 25,586. Year to date, the S&P is up 13.66% and the Dow Jones is up 10.78%.
  • Yields also fell further this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.12% and 2.32, respectively.
  • The spot price of WTI Crude oil plummeted this week. Prices dropped 6.34% and closed at $58.93 per barrel. Year to date, Oil prices are up 29.77%.
  • The spot price of Gold rose 0.56% this week and closed at $1,284.69 per ounce. Year to date, Gold prices are up 0.17%.

Economic Data

  • Initial jobless fell to 211,000 this week. The four-week moving average of claims fell by 5,000 to 220,000. Claims fell by 2,000 in California and Illinois.
  • Existing home sales fell 0.4% to a seasonally adjusted rate of 5.19 million units versus expectations for a 2.7% increase
  • Sales of new single-family homes fell by 6.9% in April to a seasonally-adjusted annualized rate of 673k units versus expectations for 675k units
  • Durable goods orders fell by 2.1% versus expectations for a decline of 2.0%
  • Durable goods orders ex-transport was unchanged versus expectations for a 0.1% increase
  • Core capital goods orders fell 0.9% versus expectations for a 0.3% decline

Fact of the Week

  • It would cost about $334 per person per year in Illinois to cover the funding costs for the 5 state pension funds. Illinois law current requires that the pensions funds be 90% funded by 2045. (Source: BTN Research)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

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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.

 

China, Brexit, EU: Wealth Economic Update May 17, 2019

U.S. and World News

  • china_us-1035146880Earlier this week, China announced new tariffs on $60 billion of American imports in response to the tariff increase by the United States. The Trump administration will subsidize U.S. farmers with $15 billion in aid, in addition to the Department of Agriculture’s $12 billion compensation plan that was put into place last year. President Trump has stated his intention to meet Chinese President Xi Jinping at the G20 summit in June. The United States also has banned China’s Huawei Technologies from buying U.S. technology without special approval and has restricted its equipment from being any part of U.S. telecom networks. Equipment produced by Huawei Technologies, the world’s third largest smartphone maker, is allegedly used by the Chinese to spy, however Huawei has denied those allegations.
  • Brexit drama heats up again after weeks of negotiations between Theresa May and opposition party leader Jeremy Corbyn have closed with Jeremy Corbyn telling the media that his party will oppose the deal. The Conservative Party has been enraged with Theresa May over the past month for negotiating with the Labour Party and Theresa May has finally set a timetable for her departure as prime minister in the beginning of June. Jeremy Corbyn added that the strong probability of Theresa May soon being replaced had contributed to his decision to oppose her deal.
  • As trade negotiations with China have been extended into the foreseeable future, the Trump administration has delayed tariffs on cars and auto part imports from the European Union and Japan for up to six months. In February, the Commerce Department had found that car imports and certain auto parts harm national security, leading to the planned auto tariffs. Agreements have already been made with Canada, Mexico, and Korea, while the European Union and Japan have rejected the idea.


Markets

  • Markets are lower after another volatile week. The S&P 500 fell 0.69% and closed at 2,860. The Dow Jones fell 0.61% and closed at 25,764. Year to date, the S&P is up 14.96% and the Dow Jones is up 11.48%.
  • Yields continued to fall this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.18% and 2.39, respectively.
  • The spot price of WTI Crude Oil rose this week. Prices climbed 1.67% and closed at $62.69 per barrel. Year to date, Oil prices are up 38.05%.
  • The spot price of Gold fell 0.63% this week and closed at $1,277.97 per ounce. Year to date, Gold prices are down 0.35%.

Economic Data

  • Initial jobless fell to 212,000 this week. The four-week moving average of claims rose by 5,000 to 225,000. Claims rose by 4,000 in California
  • The Philadelphia Fed manufacturing index rose 8.1 points to 16.6 versus expectations for a reading of 9.0
  • Housing starts rose 5.7% to 1,235k versus expectations for a 6.2% increase to 1,209k
  • Building permits rose by 0.6% versus expectations for a 0.1% increase
  • Import prices rose by 0.2% versus expectations for a 0.7% increase
  • Import prices ex-petroleum fell by 0.6% versus expectations for a 0.2% increase
  • Retail sales fell by 0.2% versus expectations for a 0.2% increase
  • Retail sales ex-auto & gas fell by 0.2% versus expectations for a 0.3% increase
  • Industrial production fell by 0.5% versus expectations for an unchanged reading
  • The University of Michigan’s index of consumer sentiment rose by 5.2 points to 102.4 in the preliminary report versus expectations for a reading of 97.2.

Fact of the Week

  • From its closing high of 2946 on April 30th, the S&P 500 has fallen 3.56% to 2859. Since the beginning of the bull market on 3/10/09, the market has had 12 pullbacks of at least 5%, including 6 drops at least 10% and 3 of at least 15%. (Source: BTN Research)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.

 

China, Brexit, Iran: Wealth Economic Update May 11, 2019

U.S. and World News

  • china-1053768454_370On Sunday night, just days before a Chinese trade delegation would depart for Washington to wrap up 18 months of trade negotiations, President Trump tweeted that tariffs on $200 billion of Chinese goods would rise to 25% from 10% by the end of the week, accusing China of “reneging” on its trade promises. President Trump also shared his intention to impose a 25% tariff on the remaining $325 billion of Chinese goods that aren’t currently taxed, making virtually all Chinese exports to the United States subject to a 25% tariff. The Chinese trade delegation led by Vice Premier Liu He did travel to the White House on Thursday for negotiations that ended earlier today, and the 10% tariff rate on $200 billion in Chinese goods did increase to 25% at midnight last night. China’s Commerce Ministry has announced that they will be taking countermeasures against the tariff increase, but that specifically has not yet been revealed. There have been numerous statements from officials of both countries regarding trade talk progress or lack thereof while markets respond in volatile fashion and struggle for direction, however, the only things we actually know to be true at this point is the fact that there is no done deal, and the tariff rate on $200 billion of Chinese goods has risen to 25% from 10%.
  • British Prime Minister Theresa May’s future has once again, been called into question as members of the committee are talking about a rule change that would allow another no-confidence vote to oust her. Currently, the Prime Minister is protected by a rule that does not allow more than one no-confidence vote within 12 months of the previous one that occurred in December. Committee members are growing frustrated that a timetable for Theresa May’s departure has not been set out. Both parties experienced losses in last week’s elections and a new offer is on the table, a deal that would result in a customs union-type arrangement lasting until 2022, Britain’s next general election. At that point in time, it would be decided whether to move toward a full customs union or a deal that would allow Britain to make trade deals with other countries.
  • After American sanctions on Iran have begun to cripple their economy, President Trump has offered to meet and negotiate with Iran’s leadership team about giving up their nuclear program, which was quickly rejected. The United States deployed the Abraham Lincoln carrier through Egypt’s Suez Canal and B-52 bombers to the U.S. base in Qatar yesterday as a warning to Iran. Iran’s leader, Ayatollah Tabatabai-Nejad responded by saying “Their billion dollar fleet can be destroyed with one missile” and “if they attempt any move, they will face dozens of missiles”.


Markets

  • Markets experienced volatility as a result of trade drama with China and finished the week lower. The S&P 500 fell 2.10% and closed at 2,881. The Dow Jones fell 1.96% and closed at 25,942. Year to date, the S&P is up 15.74% and the Dow Jones is up 12.15%.
  • Yields fell this week as investors fled to bonds. The 5 year and 10 year U.S. Treasury Notes are yielding 2.26% and 2.47, respectively.
  • The spot price of WTI Crude Oil ended the week relatively unchanged. Prices fell 0.37% and closed at $61.71 per barrel. Year to date, Oil prices are up 35.90%.
  • The spot price of Gold rose 0.54% this week and closed at $1,286.05 per ounce. Year to date, Gold prices are up 0.28%.

Economic Data

  • Initial jobless fell to 228,000 this week. The four-week moving average of claims rose by 7,000 to 220,000. Claims rose by 11,000 in New York and by 2,000 in Illinois.
  • The producer price index (PPI) rose by 0.2% versus expectations for a 0.3% increase
    PPI ex-food and energy rose by 0.1% versus expectations for a 0.2% increase
  • The trade deficit rose to $50.0 billion, as expected
  • Wholesale inventories fell by 0.1% versus expectations for no change
  • The consumer price index (CPI) rose by 0.32% versus expectations for a 0.4% increase and the year-over-year rate came in at 2.0% versus expectations for 2.1%
  • Core CPI rose by 0.14% versus expectations for a 0.2% increase and the year-over-year rate came in at 2.07%, in-line with expectations

Fact of the Week

  • Sell in May? Since 1989, the 6 month period beginning November 1st has outperformed the 6 month period beginning May 1st 19 out of 30 times. Total return for the 6 month periods starting November 1st were +731%, while total returns for the 6 month periods starting May 1st were only +119% over the 30 year period. (Source: BTN Research)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.

 

Iran Oil: Wealth Economic Update May 3, 2019

U.S. and World News

  • oil-509843570The sanctions imposed on Iran by the United States in November have cut Iran’s oil exports by roughly 1 million barrels per day, and after Thursday’s waivers have expired to some of Iran’s biggest customers, exports are expected to fall by another several hundred thousand barrels per day. At a time of heightened tensions, Iran’s oil minister warned that OPEC is “likely to collapse” due to unilateralism by certain members. Iran appears to be referring to Saudi Arabia’s and the United Arab Emirates’ cooperation with the United States in offsetting the reduction in supply of oil to stabilize prices, and causing substantial economic damage to Iran. Iranian Oil Minister Bijan Zangeneh told an Iranian news agency that “Iran is an OPEC member just for its interests and if certain OPEC members want to threaten and endanger Iran, Iran will not refrain from responding to them”. The next OPEC meeting is scheduled for June 25-26 in Vienna, where the members will decide whether to keep in place an oil supply limit that was established in January.


Markets

  • Markets ended the week relatively unchanged from last week. The S&P 500 rose 0.22% and closed at 2,946. The Dow Jones fell 0.14% and closed at 26,505. Year to date, the S&P is up 18.21% and the Dow Jones is up 14.37%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.32% and 2.53, respectively.
  • The spot price of WTI Crude Oil dropped this week. Prices fell 2.27% and closed at $61.68 per barrel. Year to date, Oil prices are up 35.83%.
  • The spot price of Gold fell 0.55% this week and closed at $1,279.11 per ounce. Year to date, Gold prices are down 0.26%.

Economic Data

  • Initial jobless remained unchanged at 230,000 for the week. The four-week moving average of claims rose by 7,000 to 213,000. Claims rose by 7,000 in New York, 5,000 in New Jersey, and by 2,000 in Pennsylvania.
  • Nonfarm productivity rose by 3.6% versus expectations for a 2.4% increase
  • The core PCE index rose by 0.06% versus expectations for a 0.1% increase and the year-over-year rate fell to 1.55% versus expectations for 1.70%
  • Personal income rose by 0.1% versus expectations for a 0.4% increase
  • Personal spending rose by 0.9% versus expectations for a 0.7% increase
  • The Conference Board index of consumer confidence rose by 5.0 points to 129.2 versus expectations for a reading of 126.8
  • Pending home sales rose by 3.8% versus expectations for a 1.5% increase
  • Private sector employment rose by 275,000 versus expectations for a 180,000 increase
  • The ISM manufacturing index fell 2.5 points to 52.8 versus expectations for a reading of 55.0
  • The ISM non-manufacturing index fell 0.6 points to 55.5 versus expectations for a reading of 57.0
  • Construction spending fell by 0.9% versus expectations for a flat reading
  • Factory orders rose by 1.9% versus expectations for a 1.6% increase
  • Nonfarm payrolls rose by 263,000 versus expectations for a 190,000 increase
  • The unemployment rate fell to 3.6% versus expectations for a reading of 3.8%
  • Average hourly earnings rose 0.2% versus expectations for a 0.3% increase and the year-over-year rate remained stable at 3.2%

Fact of the Week

  • On Wednesday 5/01/19, the USA began its 119th month of an economic expansion. The average length of all 33 expansions in the country since 1854 (not counting the current expansion) is 58 months(source: National Bureau of Economic Research).

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.