Coronavirus, Economy, Markets: Special Wealth Update, Apr. 24, 2020

virus-1154815984_370In an effort to serve our colleagues, Old Second Wealth Management would like to inform you about several of the recent developments that have taken place since our last update:

The CDC began the discussion of reopening the country by releasing a set of guidelines for a phased-in approach. The guidelines put the power in the hands of Governors to begin to allow businesses and activities in their state (or specific counties) to progressively open back up should virus cases and hospitalizations decrease over two week periods. Restrictions become more and more relaxed as states move on to the next phase following two week periods of declining figures. The State of Illinois extended its stay-at-home order through May 30th and the data is showing that Illinois remains at least a few weeks away from beginning this progression toward re-opening.

Due to the success of the first round of funds provided by the Paycheck Protection Program (PPP) in the Cares Act, it was apparent that an additional round would be needed. In response, an additional $484 billion of stimulus has been finalized by Congress and signed by President Trump today. The legislation is focused on boosting aid to small businesses by increasing the funding authority of the PPP by $310 billion, nearly doubling the initial amount authorized. The new bill contains provisions allocating $60 billion for loans originated by community banks and credit unions. Also included are additional funding for reimbursements for hospitals and expanded COVID-19 testing.

Another event that garnered a lot of headlines was ahead of the expiration of May futures contract on WTI Crude oil, trading down to -$37/barrel before closing at $10/bbl. A confluence of factors including a glut of oil production, plummeting demand due to reduced travel and a severe shortage of remaining storage, created a scenario where it could be more economical for oil producers to PAY buyers to take delivery of the oil in May instead of storing oil for future delivery. The current WTI Oil contract is currently at $17/bbl with future contracts for July delivery trading near $21/bbl indicating uncertainty around the speed at which the economy may be back up and running.

Uncertainty remains high and volatility as measured by the VIX index continues to trade at elevated levels but equity markets have rallied over 25% off of their mid-March lows and fixed income markets have stabilized with credit spreads contracting. This reflects the fiscal and monetary policy measures that have been taken and the apparent willingness to do more if needed. It’s also likely a response to some of the positive advances on the health side of the equation. While our background is in finance and not healthcare we are cautiously encouraged by some of the potential developments in testing, treatments and ultimately a vaccine. Pharmaceutical companies and health agencies around the world are solely focused on the COVID-19 problem and we are optimistic we can conquer this disease someday soon.

As always, if you have any questions or concerns, please do not hesitate to reach out to your 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
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@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.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s