Coronavirus, OPEC Oil: O2 Wealth Economic Update Mar. 13, 2020

U.S. and World News

  • virus-1206354421_370This week, the United States response to the coronavirus began to ratchet higher as the World Health Organization declared the virus a global pandemic and community spread within the country worsened. During President Trump’s address to the nation on Wednesday night, he announced a suspension of all travel from Europe to the United States for 30 days, as the spread throughout Europe has escalated dramatically. Italy remains on a nationwide lockdown and ordered all non-essential shops and services to close, leaving only supermarkets and pharmacies open. President Trump also announced plans for deferred tax payments, payroll tax relief, and low interest business loans. All of the major sports organizations have either canceled or delayed activities, including the NCAA tournament. State governments have also taken emergency measures such canceling large public events. Grocery stores have taken measures to contain supply, with grocery retailer Kroger placing limits on the amount of sanitary products and cold medicine that customers can buy per order, as Americans rush for supplies.
  • OPEC+, the organization responsible for the regulation of oil prices, failed to agree on production cuts to combat the collapsed demand for oil prices as a result of the coronavirus. Saudi Arabia launched a price war in response to Russia’s disagreement, pumping as much oil as they have capacity for to flood the market, causing the price of oil to fall under $30 per barrel. The sharp decline in prices as a result of Saudi Arabia’s actions are a threat to the United States energy independence, as U.S. oil companies are facing a drop in production of more than 1 million barrels per day. The drop in U.S. oil production could be enough to change the United States from being a net exporter, to a net importer of oil.

Markets

  • Markets dropped in a historic week as coronavirus concerns struck fear into investors. The S&P 500 dropped 8.73% and closed at 2,711. The Dow Jones fell 10.24% and closed at 23,186. Year-to-date, the S&P 500 is down 15.73% and the Dow Jones is down 18.19%.
  • Yields ended the week higher. The 5 year and 10 year U.S. Treasury Notes are yielding 0.74% and 0.98%, respectively.
  • The spot price of WTI Crude declined significantly this week. Prices fell 19.19% and closed at $33.36 per barrel. Year to date, Oil prices are down 45.37%.
  • The spot price of Gold dropped by 9.06% and closed at $1,522.23 per ounce. Year to date, Gold prices are up 0.33%.

Economic Data

  • Initial jobless claims fell by 4,000 to 211,000 and the four-week moving average of claims rose 1,000 to 214,000. Claims fell by 3,000 in New York, 1,000 in Georgia, and by 1,000 in Michigan.
  • The producer price index (PPI) fell 0.6% versus expectations for a decline of 0.1%
  • PPI excluding food and energy fell by 0.3% versus expectations for an increase of 0.1%
  • The consumer price index (CPI) rose 0.1%, in-line with expectations and the year-over-year rate rose 2.3%, in-line with expectations
  • The Core CPI index rose 0.2%, in-line with expectations and the year-over-year rate rose by 2.4%, in-line with expectations
  • The University of Michigan’s index of consumer sentiment fell 5.1 points to 95.9 in the preliminary report versus expectations for a reading of 95.0

Fact of the Week

  • The S&P 500’s recent low was off nearly 913 points since it peaked at 3,393.52. On a point basis, over the period, the S&P 500 loss was larger than the overall value of the index when the 11-year bull market began. (Source: Applied Finance Group)

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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