Coronavirus, Unemployment Benefits: O2 Wealth Economic Update, July 31, 2020

U.S. and World News

  • virus-1210596217_370New cases of the coronavirus were reported in China this week, with the mainland reporting 105 new cases on Thursday and 123 new cases on Friday. Hong Kong’s chief executive Carrie Lam announced yesterday that fall elections originally scheduled for September 6th would be postponed as the third wave is resulting in record new daily case figures. United Kingdom’s Prime Minister Boris Johnson ordered an extension of the partial lockdown throughout northern Great Britain for at least two weeks as Europe continues to see rising daily cases. The remainder of the MLB season has been called into question after nearly 20 Miami Marlins players and staff, at least two Phillies staff, and a number of Cardinals players tested positive for coronavirus, resulting in numerous cancelations.
  • As the enhanced unemployment benefits are set to expire today, pressure is mounting in Washington for an agreement on a new stimulus bill to replace American’s lost income. Currently, the Republicans stimulus plan is valued at approximately $1 trillion while the Democrats plan is valued at about $3.5 trillion. Both sides are in favor of moratorium evictions and an additional direct stimulus payment to all Americans, however, Republicans want to cut the unemployment benefits to a portion of lost wages while Democrats are seeking to keep it unchanged. Other issues that remain unresolved are funds for states and local governments and liability protections. Negotiations are set to continue throughout the weekend with the hopes that a deal will be struck by Sunday evening.

Markets

  • Markets were mostly higher this week. The S&P 500 surged 1.75% and closed at 3,271. The Dow Jones lost -0.15% and closed at 26,428. Year-to-date, the S&P 500 is up 2.38% and the Dow Jones is down -6.14%.
  • Interests rates fell lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.22% and 0.54%, respectively.
  • The spot price of WTI Crude oil rose fell week. Prices declined -2.18% and closed at $40.39 per barrel. Year to date, Oil prices are down -33.85%.
  • The spot price of Gold rose 3.82% and closed at $1,974.75 per ounce. Year to date, Gold prices are up 30.15%.

Economic Data

  • Initial jobless claims rose by 12,000 to 1.434 million and the four-week moving average of claims fell by 171,000 to 1.206 million. Claims fell by 25,000 in California, 13,000 in Florida, 11,000 in Louisiana, and by 7,000 in Texas. Claims rose by 17,000 in New York, 16,000 in Virginia, 8,000 in Nevada, and by 7,000 in Michigan.
  • Real GDP fell by -32.9% in the second quarter versus expectations for a decline of           -34.5%
  • Personal consumption fell by -34.6% versus expectations for a decline of -34.5%
  • The Core PCE inflation index fell by 1.1% versus expectations for a decline of 0.9%
  • The PCE price index rose by 0.4%, in-line with expectations and the year-over-year rate rose 0.8% versus expectations for an increase of 0.9%
  • The Core PCE price index rose by 0.2%, in-line with expectations and the year-over-year rate rose by 1.0%, in-line with expectations
  • New orders for durable goods rose by 7.3% versus expectations for an increase of 6.9%
  • Durable goods orders ex-transports rose by 3.3% versus expectations for an increase of 3.6%
  • Core capital goods orders rose by 3.3% versus expectations for an increase of 2.2%
  • Core capital goods shipments rose by 3.4% versus expectations for an increase of 2.4%
  • The Conference Board index of consumer confidence fell by 5.7 points to 92.6 versus expectations for a reading of 95.0
  • The University of Michigan’s index of consumer sentiment fell by 0.7 points to 72.5 versus expectations for a reading of 72.9
  • Retail inventories fell by -2.6% versus expectations for a decline of -2.7%
  • Wholesale inventories fell by -2.0% versus expectations for a decline of -0.5%
  • Pending home sales rose by 16.6% versus expectations for an increase of 15.0%
  • Personal income fell by -1.1% versus expectations for a decline of -0.6%
  • Personal spending rose by 5.6% versus expectations for an increase of 5.2%

Fact of the Week

In both Florida and Texas, general sales tax revenue makes up at least 60% of their total tax revenue collected, the highest percentages in the nation. General sales tax revenue makes up just 12% of Vermont’s total tax revenue. Neither Florida nor Texas has a state income tax (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.

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