IL Coronavirus, China: O2 Wealth Economic Update, May 29, 2020

U.S. and World News

  • salon-1223523705_370Today the state of Illinois transitions to Phase 3 of Governor J.B. Pritzker’s reopening plan, while Chicago Mayor Lori Lightfoot has the city of Chicago on hold until June 3rd. Outdoor dining at restaurants and bars, hair salons, and non-essential retail businesses are set to reopen with capacity limitations, social distancing, and enhanced sanitary requirements. In addition to businesses reopening, people may begin gathering in groups of up to 10 people. Illinois is expected to move to Phase 4 of the five-phase plan in late June given all of the requirements are met. In New York, five regions are looking enter Phase 2 of their plan, while New York City is on hold until further notice. All 50 states in America are now at least partially reopened and the COVID-19 test positivity rate continues to decline.
  • Political tensions are rising between the United States and China as a result of the controversial national security law that was approved this week. Secretary of State Mike Pompeo stated that “No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given the facts on the ground.” President Trump held a press conference today announcing that certain foreign Chinese nationals would be suspended from entering the United States and that Chinese officials responsible for the Hong Kong bill would be sanctioned. Additionally, the administration will begin eliminating policy exemptions granted to Hong Kong, as a result of their lack of autonomy from China. President Trump also announced that he is terminating the relationship between the United States and the World Health Organization, claiming that they are “China centric”.

Markets

  • Markets rose significantly again this week. The S&P 500 jumped 3.04% and closed at 3,044. The Dow Jones rose 3.85% and closed at 25,383. Year-to-date, the S&P 500 is down -5.00% and the Dow Jones is down -10.06%.
  • Yields declined this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.65%, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 5.53% and closed at $35.09 per barrel. Year to date, Oil prices are down -42.53%.
  • The spot price of Gold fell -0.14% and closed at $1,732.23 per ounce. Year to date, Gold prices are up 14.17%.

Economic Data

  • Initial jobless claims fell by 315,000 to 2.1 million and the four-week moving average of claims fell by 436,000 to 2.6 million. Claims rose by 17,000 in Pennsylvania, 15,000 in Virginia, and by 14,000 in Kentucky. Claims fell by 48,000 in Florida, 43,000 in New York, and by 34,000 in California.
  • New orders for durable goods fell by -17.2% versus expectations for a -19.0% decline
  • Durable goods orders ex-transports fell by -7.4% versus expectations for a decline of -15.0%
  • Personal consumption fell -6.8% versus expectations for a decline of -7.5%
  • Personal income rose by 10.5% versus expectations for a decline of -5.9%
  • Personal spending fell by -13.6% versus expectations for a decline of -12.8%
  • The Conference Board index of consumer confidence rose by 0.9 points to 86.8 versus expectations for a reading of 87.0
  • Sales of new single-family homes rose by 0.6% to a seasonally-adjusted-annualized rate of 623,000 units versus expectations for a reading of 480,000 units.
  • Pending home sales fell -21.8% versus expectations for a decline of -17.3%
  • First-quarter real GDP growth was revised down to -5.0% versus expectations for a reading of -4.8%
  • The PCE price index fell by -0.5% versus expectations for a decline of -0.6% and the year-over-year rate rose by 0.5%, in-line with expectations
  • The core PCE price index fell by 0.4% versus expectations for decline of -0.3% and the year-over-year rate rose by 1.0% versus expectations for an increase of 1.1%
  • Wholesale inventories rose by 0.4% versus expectations for a -0.7% decline
  • The University of Michigan’s index of consumer sentiment fell by 1.4 points to 72.3 versus expectations for a reading of 74.0

Fact of the Week

  • Since bottoming on March 23rd, the S&P 500 gained 32.6% over the next 43 days through 5/20. It was the second best 43 day period for the index in that last 30 years, behind the 37.8% that the S&P 500 gained from 3/09/09 – 5/08/09 (BTN Research).

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.

China, Michigan flood: O2 Wealth Economic Update, May 22, 2020

U.S. and World News

  • The People’s Republic of China proposed a national security bill for Hong Kong which could result in Chinese intelligence agencies setting up bases there, threatening the independence and pro-democracy movement in Hong Kong. Pro-democracy lawmakers called the plans “the end of Hong Kong”, arguing that it is a violation of the “one country, two systems” agreement created when Britain returned Hong Kong to China in 1997. In the proposal, China would annex laws into Hong Kong’s mini-constitution, the Basic Law, without any local legislative scrutiny and are intended to safeguard the central government’s “overall jurisdiction” as well as Hong Kong’s “high autonomy” given Hong Kong’s “increasingly notable national security risks”. Currently, China can take no enforcement action in the city of Hong Kong, but this proposal would allow agencies to be set up in the city, expanding China’s presence. President Trump warned that the United States would react “very strongly” if China put the bill into law, and Secretary of State Mike Pompeo said that it would be the “death knell” for Hong Kong’s autonomy.
  • flood-1150729894Residents of Midland, Michigan began returning to their homes and assessing the damage from what is being called the “500-year flood” caused by a long period of heavy rain and the failure of two dams protecting the city. Nearly 11,000 people were evacuated from the city as the Tittabawassee River rose to a record 35.05 feet, much higher than the flood stage of 24 feet and left Midland underwater. Concerns over potential spread of toxic contamination arose as floodwaters overtook containment ponds at the nearby Dow chemical plant. Flood warnings remain in effect for the entire area and a forecast exists for more rain next week

Markets

  • Markets surged this week as states begin reopening. The S&P 500 spiked 3.27% and closed at 2,955. The Dow Jones jumped 3.43% and closed at 24,465. Year-to-date, the S&P 500 is down -7.77% and the Dow Jones is down -13.40%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.34% and 0.66%, respectively.
  • The spot price of WTI Crude rallied higher this week. Prices rose 13.38% and closed at $33.47 per barrel. Year to date, Oil prices are down -45.16%.
  • The spot price of Gold fell -0.50% and closed at $1,734.98 per ounce. Year to date, Gold prices are up 14.35%.

Economic Data

  • Initial jobless claims fell by 249,000 to 2.4 million and the four-week moving average of claims fell by 501,000 to 3 million. Claims rose by 59,000 in New York, 41,000 in Washington, and 36,000 in California. Claims fell by 55,000 in Georgia, 46,000 in Kentucky, and 35,000 in New Jersey.
  • The Philadelphia Fed manufacturing index rose by 13.5 points to -43.1 versus expectations for a reading of -40.0
  • The level of housing starts fell 30.2% to 891,000 versus expectations for a decline of 25.9%
  • Building permits fell by 20.8% versus expectations for a decline of 25.9%
  • Existing home sales fell by 17.8% to a seasonally-adjusted-annualized rate of 4.33 million units versus expectations for a 19.9% decline.

Fact of the Week

  • This week in 1991, Michael Jordan won his second MVP title. When Jordan first launched his iconic Air Jordan sneaker with Nike in 1984, the company put a sales goal of $3million over 2 years for the shoe. The original Air Jordan went on to sell $126 million in the first year alone. (Source: Bleacher Report)

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.

Coronavirus, Essential Heroes, Reopening: O2 Wealth Economic Update, May 15, 2020

U.S. and World News

  • essential-1215136769_370The U.S. House of Representatives will vote today on the latest stimulus bill, called the Heroes Act. This round of relief would include another $1,200 stimulus check to all Americans, $200 billion in additional funding for essential workers, and a six-month extension of the enhanced unemployment program. The $3 trillion of additional stimulus would also include funding to state and local governments, among other things. The bill is not expected to pass the Senate however, as it has been met with criticism by Republicans who believe that further stimulus is not necessary at this time. The White House responded to rumors that another stimulus check would be issued to Americans with a statement that said “As President Trump has said, we are going to ensure that we take care of all Americans so that we emerge from this challenge healthy, stronger, and with economic prosperity, which is why the White House is focused on pro-growth, middle class tax and regulatory relief.”
  • The U.S. Centers for Disease Control and Prevention issued new guidance this week with regards to businesses reopening. States that have already begun reopening, have done so without guidance from the CDC and have seen low traffic as widespread fear about the virus persists. The guidelines require bars and restaurants to encourage social distancing, space out tables, and other restrictions while transportations services should limit routes that travel through higher risk areas. The responsibility for the timing of reopening businesses will be left to the state governments, who will be encouraged to follow the guidelines issued by the CDC.

Markets

  • Markets fell this week as tensions with China have risen. The S&P 500 fell -2.20% and closed at 2,864. The Dow Jones dropped -2.60% and closed at 23,685. Year-to-date, the S&P 500 is down -10.70% and the Dow Jones is down -16.30%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.31% and 0.64%, respectively.
  • The spot price of WTI Crude spiked higher this week. Prices rose 19.50% and closed at $29.56 per barrel. Year to date, Oil prices are down -51.60%.
  • The spot price of Gold rose 2.40% and closed at $1,743.64 per ounce. Year to date, Gold prices are up 14.90%.

Economic Data

  • Initial jobless claims fell by 195,000 to 3.0 million and the four-week moving average of claims fell by 564,000 to 3.6 million. Claims rose by 59,000 in New York, 50,000 in Wisconsin, and by 42,000 in Florida. Claims fell by 108,000 in Texas, 100,000 in California, and by 62,000 in Oklahoma.
  • The consumer price index (CPI) fell by 0.8%, in-line with expectations and the year-over-year rate rose by 0.3% versus expectations for an increase of 0.4%
  • The core consumer price index (CPI) fell by 0.4% versus expectations for a decline of 0.2% and the year-over-year rate rose by 1.4% versus expectations for an increase of 1.7%
  • The producer price index (PPI) fell by 1.3% versus expectations for a 0.5% decrease
  • The core measure of the producer price index fell by 0.9% versus expectations for a decline of 0.1%
  • Retail sales fell by 16.4% versus expectations for a decline of 12.0%
  • Core retail sales fell by 15.3% versus expectations for a decline of 5.0%
  • The Empire manufacturing index came in at -48.5 versus expectations for a reading of -60.0
  • Industrial production fell by 11.2% versus expectations for a decline of 12.0%
  • The University of Michigan’s index of consumer sentiment rose 1.9 points to 73.7 versus expectations for a reading of 68.0

Fact of the Week

  • The average interest rate on a 30-year fixed rate mortgage was 3.23% as of 4/30/20, a record low for a statistic that has been tracked since 1991 (source: Freddie Mac)

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.

Coronavirus, China, Reopenin: O2 Wealth Economic Update, May 8, 2020

U.S. and World News

  • virus-1204033162_370During a press conference, Secretary of State Mike Pompeo stated that he has seen “significant evidence” that COVID-19 originated in a Chinese laboratory and alluded to the possibility of a restructuring, stating “how we restructure … supply chains to prevent something like this from ever happening again”. Another U.S. government official stated that the United States is “turbocharging” the previously put in place initiative to remove global industrial supply chains from China. Some examples of action that could be taken are tax incentives and re-shoring of subsidies for companies doing business in China. The United States is not alone in this initiative as other large trading partners such as India, Japan, and members of the European Union have set aside funds for incentives to companies doing business in China. The United States is also considering creating an “Economic Prosperity Network” (EPN) that would consist of trusted trading partners such as Japan, India, Australia, and others to work toward balancing the economic, political, and security imperatives so that there is less reliance on China for supplies.
  • Several states across the country are beginning the process of reopening their economies, while others remain under shelter-in-place orders. Governors are taking different approaches with regards to reopening business as the number of daily new coronavirus cases falls lower. Most states have already unveiled plans to open by Memorial day weekend, however, there are strict social distancing guidelines that must be followed in retail stores and restaurants. Governor Cuomo of New York, the most severely affected state, announced plans to reopen parts of the state in a lengthy 12-step process. Businesses in Georgia must continue to operate under social distancing and enhanced sanitary guidelines until May 13th, and the State of Emergency will expire on June 12th. Governor Kemp of Georgia was openly criticized by many, including President Trump, for his decision to prematurely open business within the state.

Markets

  • Markets spike higher this week. The S&P 500 jumped 3.56% and closed at 2,930. The Dow Jones rose 2.67% and closed at 24,331. Year-to-date, the S&P 500 is down -8.69% and the Dow Jones is down -14.03%.
  • The yield curve steepened this week, with short-term yields falling and long-term yields rising. The 5 year and 10 year U.S. Treasury Notes are yielding 0.32% and 0.68%, respectively.
  • The spot price of WTI Crude rose higher again this week. Prices surged 24.30% and closed at $24.59 per barrel. Year to date, Oil prices are down -59.70%.
  • The spot price of Gold rose 0.35% and closed at $1,706.41 per ounce. Year to date, Gold prices are up 12.46%.

Economic Data

  • Initial jobless claims fell by 67,000 to 3.2 million and the four-week moving average of claims fell by 861,000 to 4.2 million. Claims rose by 36,000 in New Jersey, 32,000 in Maryland, and by 19,000 in Connecticut. Claims fell by 302,000 in Florida, 69,000 in Georgia, and by 66,000 in Alabama.
  • Nonfarm productivity fell 2.5% in the first quarter versus expectations for a decline of 5.5%
  • Factory orders fell 10.3% versus expectations for a 9.7% decline
  • The ISM non-manufacturing index fell by 10.7 points to 41.8 versus expectations for a reading of 38.0
  • Private sector employment in the ADP report fell by 20.2 million versus expectations for a decline of 20.6 million
  • Nonfarm payrolls fell 20.5 million in April versus expectations for a decline of 22 million
  • The unemployment rate came in at 14.7% versus expectations for a reading of 16.0%
  • Average hourly earnings rose by 4.7% versus expectations for a 0.4% increase
  • Wholesale inventories fell by 0.8% versus expectations for a decline of 1.0%

Fact of the Week

  • In the 3 years through 3/31/20, the number of US households (both owners and renters) has increased by +5.5 million to 124.4 million. The number of owner households has increased by +5.6 million to 81.3 million while the number of renter households has declined by 0.1 million to 43.1 million (source: Census Bureau).

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.

Coronavirus, Rates: O2 Wealth Economic Update, May 1, 2020

U.S. and World News

  • piggy-1212172874_370bAs the coronavirus has spread to over 3.2 million people and resulted in over 230,000 deaths, discussions among world leaders regarding the root cause of the virus have begun. While President Trump was talking to reporters Thursday night about the progress of the trade deal he stated that it “becomes secondary to what took place with the virus”, indicating that there could be repercussions for China. The President stated during the press conference that China was spreading misinformation when the virus began to spread and even said that he saw evidence that the virus originated in a Chinese lab. The calls for an investigation from lawmakers across Europe into the root cause of the virus are being supported by Ursula von der Leyen, the head of the European Union’s executive arm. Additionally, she had indicated that she would like to see China work with her organization, and others, during the investigation. In response to widespread criticism over its handling of the virus, Chinese Vice Premier Le Yucheng stated that “China has been open, transparent and responsible in its COVID-19 response.”
  • The Federal Open Market Committee concluded the April meeting with no changes to interest rates, forward guidance, the asset purchase plan, or the credit facilities. When asked about forward guidance, Fed Chairman Jerome Powell stated that “we’re not going to be in any hurry to move rates up”. Jerome Powell noted dramatic changes in the economy, including a double-digit unemployment rate and weakening inflation in the near-term. The Fed will keep interest rates at their current levels “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

Markets

  • Markets ended the week relatively unchanged from last week in another volatile week. The S&P 500 declined -0.19% and closed at 2,831. The Dow Jones fell -0.22% and closed at 23,724. Year-to-date, the S&P 500 is down -11.83% and the Dow Jones is down -16.26%.
  • Yields rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.62%, respectively.
  • The spot price of WTI Crude rebounded sharply this week. Prices spiked 16.23% and closed at $19.69 per barrel. Year to date, Oil prices are down -67.75%.
  • The spot price of Gold fell -1.74% and closed at $1,699.57 per ounce. Year to date, Gold prices are up 12.02%.

Economic Data

  • Initial jobless claims fell by 603,000 to 3.8 million and the four-week moving average of claims fell by 757,000 to 5.0 million. Claims increased by 79,000 in Washington, 55,000 in Georgia, and by 23,000 in New York. Claims fell by 173,000 in California, 78,000 in Florida, and by 68,000 in New Jersey
  • Personal income fell by 2.0% versus expectations for a decline of 1.7%
  • Personal spending fell by 7.5% versus expectations for a decline of 5.1%
  • The PCE price index fell by 0.3%, in-line with expectations and the year-over-year rate rose by 1.3%, in-line with expectations
  • Wholesale inventories fell 1.0% versus expectations for a decline of 0.4%
  • The Conference Board index of consumer confidence fell by 31.9 points to 86.9 versus expectations for a reading of 87.0
  • Pending home sales fell by 20.8% versus expectations for a decline of 13.6%
  • Real GDP fell by 4.8% in the first quarter versus expectations for a decline of 4.0%
  • Personal consumption fell by 7.6% versus expectations for a decline of 3.6%
  • The ISM manufacturing index came in at 41.5 versus expectations for a reading of 36.0
  • Construction spending rose by 0.9% versus expectations for a decline of 3.5%

Fact of the Week

  • April of 2020 was the best month for the stock market since 1987 and the third-best since World War II with the S&P 500 gaining 12.7% and the Dow Jones Industrial Average gaining 11.1%. The S&P 500 rose 13.2% in January of 1987 and 16.3% in October of 1974. (Source: Factset)

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.