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.

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