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.

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