Coronavirus: O2 Wealth Economic Update, Mar. 20, 2020

U.S. and World News

  • at_home-925104536_370The coronavirus pandemic has turned life around for many people around the world, and America is beginning to share the pain that many other countries have experienced in the past couple of months. As of today, there are just over 14,000 confirmed cases of the virus in America and about 210 deaths. Schools and businesses have closed, millions of employees are working from home, and unemployment is on the rise as “social distancing” has brought the economy to a screeching halt. California, New York, and Illinois have taken unprecedented action and declared state-wide “stay-at-home” or “Shelter-in-place” orders. These laws involve all non-essential businesses to close, but do allow citizens to go out only to pick up food, medicine, or other essential items and to go outside for a walk. The laws will be enforced by issuing a misdemeanor to citizens found in violation. The U.S. government and the Federal Reserve are doing everything that they possibly can to heal the sick, stop the spread of the virus, and keep the economy afloat by taking massive fiscal and monetary stimulus measures. The Federal Reserve slashed the fed funds rate to zero and initiated a security purchases program that continues to grow by the day. The government is spending over $1 trillion on a stimulus package that includes paid family leave, enhanced unemployment insurance, payments to individuals, and corporate bailouts.

Markets

  • Markets fell further this week as economic activity slows significantly, the S&P 500 lost 14.96% and closed at 2,305. The Dow Jones dropped 17.30% and closed at 19,174. Year-to-date, the S&P 500 is down 28.30% and the Dow Jones is down 32.40%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.49% and 0.88%, respectively.
  • The spot price of WTI Crude continued to fall this week. Prices fell 21.85% and closed at $22.43 per barrel. Year to date, Oil prices are down 63.26%.
  • The spot price of Gold dropped by 1.75% and closed at $1,488.10 per ounce. Year to date, Gold prices are down 1.92%.

Economic Data

  • Initial jobless claims rose by 70,000 to 281,000 and the four-week moving average of claims rose 17,000 to 232,000. Claims rose by 14,000 in California and by 9,000 in Washington State as a result of the coronavirus.
  • The Philadelphia Fed manufacturing index fell 49.4 points to -12.7 versus expectations for a reading of 8.0
  • Retail sales fell 0.5% versus expectations for an increase of 0.2%
  • Core retail sales was flat versus expectations for an increase of 0.4%
  • Industrial production rose by 0.6% versus expectations for an increase of 0.4%
  • Housing starts fell by 1.5% to 1,599k units versus expectations for a decrease of 4.3% to 1,500k units.
  • Building permits fell 5.5% versus expectations for a decline of 3.2%
  • Existing home sales rose by 6.5% to a seasonally-adjusted-annualized rate of 5.77 million units versus expectations for an increase of 0.9%

Fact of the Week

  • The average daily percentage change in the Dow Jones since March 21, 2007 has been 0.76%. Since the beginning of March, we have only had 2 days were the Dow moved less than 2% and the average daily percentage change has been 5.66%. (Source: Macrotrends)

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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