Coronavirus, Trump in India: Special Wealth Economic Update Feb. 28, 2020

U.S. and World News

  • medicine-1090255620_370Investors across the world have started to panic as new cases of the coronavirus have started to flare up outside of China. The virus has spread to 49 countries, with epidemics emerging in Iran, Italy and South Korea, where the number of people diagnosed with the virus is growing at a rapid pace. The World Health Organization held a press conference this morning where they declared that the virus poses a “very high” risk at a global level and earlier this week the Center of Disease Control warned that the coronavirus is “likely” to spread across the United States. The CDC reported on Wednesday the first case of “community spread” within the United States when a California man contracted the virus without having any prior travel links or contact with any people diagnosed with the virus. In a press conference Wednesday night, President Trump told reporters that the risk to Americans was “very, very low” and placed Vice President Mike Pence in charge of the U.S. response. Last night, Switzerland announced a ban on all events over 1,000 people and Saudi Arabia stated that foreign visitors to Mecca is no longer allowed as countries are increasingly taking stronger measures to prevent the spread.
  • President Donald Trump traveled to India earlier this week to continue ongoing trade negotiations with Indian Prime Minister Narendra Modi. The President and Modi have agreed to “promptly” conclude trade negotiations that could potentially lead to a bilateral U.S. – India trade deal. During the trip, the United States secured a sale of $3 billion in military equipment to India. The two countries have been communicating for months regarding tariff rates, farm goods, medical devices, and digital trade. President Trump stated earlier this week that “India is probably the highest tariff nation in the world”.

Markets

  • Coronavirus fears gripped markets this week triggering steep declines. The S&P 500 fell 11.44% and closed at 2,954. The Dow Jones dropped 12.26% and closed at 25,409. Year-to-date, the S&P is down 8.24% and the Dow Jones is down 10.51%.
  • Yields dropped to record lows this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.94% and 1.16%, respectively.
  • The spot price of WTI Crude fell this week. Prices dropped 15.19% and closed at $45.27 per barrel. Year to date, Oil prices are down 25.86%.
  • The spot price of Gold fell by 3.55% and closed at $1,585.00 per ounce. Year to date, Gold prices are up 4.46%.

Economic Data

  • Initial jobless claims rose by 8,000 to 219,000 and the four-week moving average of claims rose 1,000 to 210,000. Claims rose by 4,000 in Illinois and New York.
  • Personal consumption rose by 1.7%, in-line with expectations
  • New orders for durable goods fell by 0.2% versus expectations for a decline of 1.4%
  • Durable goods ex-transports rose by 0.9% versus expectations for an increases of 0.2%
  • Core capital goods orders rose by 1.1% versus expectations for an increase of 0.1%
  • Core capital goods shipments rose by 1.1% versus expectations for no change
  • The Conference Board index of consumer confidence rose 0.3 points to 130.7 versus expectations for a reading of 132.2
  • Sales of new single-family homes increased by 7.9% to a seasonally-adjusted annualized rate of 764k units versus expectations for a reading of 718k
  • Pending home sales rose by 5.2% versus expectations for an increase of 3.0%
  • Personal income rose by 0.6% versus expectations for an increase of 0.4%
  • Personal spending rose by 0.2% versus expectations for an increase of 0.3%
  • The PCE price index rose by 0.1% versus expectations for an increase of 0.2% and the year-over-year rate rose 1.7% versus expectations for an increase of 1.8%
  • The core PCE price index rose by 0.1% versus expectations for an increase of 0.2% and the year-over-year rate rose by 1.6% versus expectations for an increase of 1.7%
  • The University of Michigan’s index of consumer sentiment rose 0.1 points to 101.0 versus expectations for a reading of 100.7

Fact of the Week

The S&P 500 and the Dow Jones posted their largest one-week losses since 2008. Despite this fall, the S&P is up 6.1% over the last year. (Source: Bloomberg)

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.

Coronavirus, Market Corrections: Special Wealth Economic Update Feb. 27, 2020

coronavirus-1126464350_370Markets across the globe have sold off rapidly this week as a result of uncertain impacts of the coronavirus (COVID-19). At the time of this writing, the S&P 500 is down over 10% from its high which is an official indication of a market correction. The S&P 500 was up 30.5% in 2019 and an additional 5% through February 19th of this year. The market reaction is a result of a multitude of companies including Apple and Microsoft that announced they would miss their fiscal year 2020 revenue and earnings figures as a result of supply chain disruptions and lower demand. Many other companies have stated that they simply do not know what the impact will be to their financials due to the rapidly changing circumstances and uncertainty around the virus. Markets typically react negatively to high levels of uncertainty and this situation is no different.

For some comparison, during the peak of the SARS outbreak in 2003, the S&P 500 fell 14.1% and subsequently rallied 26.2%. Similarly, during the peak of the Ebola outbreak in 2014, the S&P 500 fell 5.4% and subsequently rallied 11.4%. These past instances are representative of market overreactions to transitory events that do not directly affect the underlying fundamentals of companies. In addition, history shows us that the economic impacts of these pandemics tend to be much smaller than the markets indicate in the short term.

We at Old Second Wealth Management remain focused on long term investing, and market volatility predicated on exogenous events often create opportunities to invest. If you have any questions or concerns, please do not hesitate to reach out to you Old Second Relationship Manager or Investment Officer.

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.

Coronavirus, Russia/Syria: Wealth Economic Update Feb. 21, 2020

U.S. and World News

  • virus-1202030778_370Apple is the first major U.S. company to announce that they will not meet their revenue projections for the current quarter as a result of the coronavirus outbreak, now called COVID-19. China announced that they would consider direct cash infusions and mergers to bail out its airline industry, which is estimated to be hit by losses of $28 billion in 2020. Data releases from China this morning show that Chinese car sales fell by 92% so far in the month of February. As of this morning, there have been more than 76,000 cases, and 2,247 deaths according to the World Health Organization. China had also reported 271 infections among prisoners, raising additional questions about the spread of the virus. Outside of China, there are 1,152 cases across 26 countries, including eight deaths. Coronavirus cases have increased rapidly in South Korea and Iran recently, with the number of cases in South Korea doubling overnight to 204. World health officials announced that there are 18 new cases and four deaths in Iran within just two days. Two clinical trials are currently underway to test treatments for the virus and preliminary results are expected to be released in three weeks.
  • This morning, the United Nations warned that the conflict in northwest Syria could “end in a bloodbath”, calling for a ceasefire. There were reports of civilians fleeing a Russian-led Syrian attack in large numbers, but Russia has denied these reports. Syrian troops have been working to eliminate rebel strongholds in northwest Syria with the help of Russian war planes and has left an estimated 400,000 Syrians dead, millions displaced, and landscapes destroyed. Approximately 1 million people, mostly women and children, have fled these areas seeking asylum north of the Turkish border. The front lines of the offensive, which includes frequent bombardments, is moving very close to areas packed with the displaced civilians. Turkey has indicated that it cannot handle any more refugees and that it will use military power to stop the Syrian offensive.

Markets

  • Markets pulled back this week. The S&P 500 lost 1.22% and closed at 3,338. The Dow Jones fell 1.36% and closed at 28,992. Year-to-date, the S&P is up 3.58% and the Dow Jones is up 1.94%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.32% and 1.47%, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 1.95% and closed at $53.34 per barrel. Year to date, Oil prices are down 12.64%.
  • The spot price of Gold rose by 3.77% and closed at $1,643.71 per ounce. Year to date, Gold prices are up 8.33%.

Economic Data

  • Initial jobless claims rose by 4,000 to 210,000 and the four-week moving average of claims fell 3,000 to 209,000. Claims rose by 2,000 in California.
  • The Philadelphia Fed manufacturing index rose by 19.7 to 36.7 versus expectations for a rise of 11.0
  • Housing starts fell by 3.6% to a seasonally-adjusted-annualized rate of 1,567k versus expectations for a decline of 11.2%
  • Building permits rose by 9.2% versus expectations for an increase of 2.1%
  • The producer price index rose by 0.5% and the year-over-year rate rose by 2.1% versus expectations for an increase of 0.1%
  • Existing home sales fell by 1.3% to a seasonally-adjusted-annualized rate of 5.46 million units versus expectations for a decline of 1.8%

Fact of the Week

The House passed HR # 2534 on 12/5/19. The bill explicitly defines and prohibits “insider trading”. There is currently no federal statute that explicitly prohibits “insider trading” ( Source: Insider Trading Prohibition Act)

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.

Coronavirus, Oil Prices: Wealth Economic Update Feb. 14, 2020

U.S. and World News

  • Researchers across the world are quickly working to develop a vaccine for the coronavirus that has infected more than 64,000 and has killed 1,380, more than double the figures from last week. About 80% of patients infected with the coronavirus show mild symptoms of the common cold, while about 15% end up with a pneumonia and 3% to 5% need intensive care, a World Health Organization official told reporters. Health and Human Services Secretary Alex Azar told CNBC that the American public’s risk of getting infected with the coronavirus is “very low”, but that could change “rapidly”. The primary issue with the coronavirus is the transmissibility, measured by the R0, with a measure of R1 indicating that an infected person would transmit it to one other person throughout the course of the infection. According to a variety of sources, the coronavirus is around an R4, while the common flu is R1.3 and SARS was R2. The virus is expected to negatively affect the Chinese economy in the first quarter as economists are estimating a growth rate around 4%, compared to pre-virus forecasts around 6%.
  • Global oil demand is set to see its first quarterly decline in more than 10 years as a result of the coronavirus and major cities being locked down in China. The International Energy Agency cut its 2020 growth forecast by 365,000 barrels per day to 825,000. Areas other than China have also been affected, with the Mobile World Congress located in Barcelona being canceled this month. Last week, OPEC+ recommended an output cut of 600,000 barrels per day, adding to the existing production cut of 1.7 million barrels per day.

Markets

  • Markets continued higher this week. The S&P 500 gained 1.65% and closed at 3,380. The Dow Jones rose 1.17% and closed at 29.398. Year-to-date, the S&P is up 4.86% and the Dow Jones is up 3.34%.
  • Yields were relatively unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.42% and 1.59%, respectively.
  • The spot price of WTI Crude rebounded this week. Prices rose 3.74% and closed at $52.20 per barrel. Year to date, Oil prices are down 14.51%.
  • The spot price of Gold rose by 0.87% and closed at $1,584.06 per ounce. Year to date, Gold prices are up 4.40%.

Economic Data

  • Initial jobless claims rose by 2,000 to 205,000 and the four-week moving average of claims fell remained unchanged at 212,000. Claims did not increase or decrease by more than 1,000 in any particular state.
  • The consumer price index (CPI) rose by 0.2%, in-line with expectations and the year-over-year rate rose by 2.5%, versus expectations for an increase of 2.4%
  • Core CPI rose by 0.2%, in-line with expectations and the year-over-year rate rose by 2.3% versus expectations for an increase of 2.2%
  • Retail sales rose by 0.3%, in-line with expectations
  • Core retail sales rose by 0.1%, versus expectations for a rise of 0.3%
  • Industrial production fell by 0.3% in January versus expectations for a decline of 0.2%
  • The University of Michigan’s index of consumer sentiment rose by 1.1 points to 100.9 in the preliminary report versus expectations for a reading of 99.5

Fact of the Week

  • Fidelity announced that a record 441,000 retirement accounts on that they manage have balances of $1 Million or more, an all-time high. The average retirement account at fidelity has a balance of $112,300. (Source: CNBC)

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.