Middle East Peace Deal, China Trade: O2 Wealth Economic Update, August 14, 2020

U.S. and World News

  • dubai-467829216_370Yesterday, a historic diplomacy deal was agreed too between the United States, Israel, and the United Arab Emirates (UAE). The agreement marks a significant step towards peace in the Middle East and a path towards economic growth and technological innovation between the two countries. Israel and the UAE plan to sign bilateral agreements in the near future for investment, tourism, direct flights, security, telecommunications, technology, energy, healthcare, and more. Israel has also agreed to suspend its planned annexation of areas in the West Bank. Israel, the UAE, and the United States plan to work together on the expansion of diplomacy, trade, and security cooperation in the Middle East, while also sharing a common view of the threats that exist in the region.
  • Representatives from the United States and China were set to hold a video conference tomorrow for a review of the Phase 1 trade deal, until late this morning when it was announced that the meeting will be rescheduled. As part of the agreement, China agreed to purchase an additional $200 billion in goods compared to 2017, a level that was originally seen as unrealistic and that it remains far from achieving. The goal seems even more far-fetched now as a result of a significant global economic setback. Tensions have been rising between the two countries for a variety of reasons, one of them being recent U.S. actions on Chinese tech companies such as bans on TikTok and WeChat that are set to go into effect in September. Other issues that are expected to be discussed when the meeting takes place is Chinese communications firm Huawei and China’s new national security law for Hong Kong.

Markets

  • Markets rose again this week. The S&P 500 rose 0.69% and closed at 3,373. The Dow Jones rose 1.87% and closed at 27,931. Year-to-date, the S&P 500 is up 5.65% and the Dow Jones is down -0.68%.
  • Interests rates spiked this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.71%, respectively.
  • The spot price of WTI Crude oil rose this week. Prices rose 2.26% and closed at $42.17 per barrel. Year to date, Oil prices are down -30.97%.
  • The spot price of Gold dropped -4.44% and closed at $1,945.21 per ounce. Year to date, Gold prices are up 28.20%.

Economic Data

  • Initial jobless claims fell by 228,000 to 963,000 and the four-week moving average of claims fell by 158,000 to 872,000 million. Claims fell by 34,000 in New York, 25,000 in Florida, and by 23,000 in California. Claims rose by 7,000 in Nevada and by 4,000 in Kansas.
  • Job openings rose by 518,000 to 5.889 million versus expectations for 5.3 million
  • The producer price index (PPI) rose by 0.6% versus expectations for an increase of 0.3%
  • Core PPI rose by 0.3% versus expectations for an increase of 0.2%
  • The consumer price index (CPI) rose 0.6% versus expectations for an increase of 0.3% and the year-over-year rate rose 1.0% versus expectations for an increase of 0.7%
  • Core CPI rose by 0.6% versus expectations for an increase of 0.2% and the year-over-year rate rose by 1.6% versus expectations for an increase of 1.1%
  • Retail sales rose by 1.2% versus expectations for an increase of 2.1%
  • Core retail sales rose by 1.4% versus expectations for an increase of 0.8%
  • Nonfarm productivity rose by 7.3% versus expectations for an increase of 1.5%
  • The University of Michigan’s index of consumer sentiment rose by 0.3 points to 72.8 in its preliminary reading versus expectations for a reading of 72.0
  • Industrial production rose by 3.0%, in-line with expectations
  • Business inventories fell by -1.1%, in-line with expectations

Fact of the Week

  • Thursday marked 100 days since the March 23rd lows we saw in the market. The last 100 days have been the best performing 100 day period in market history, with the S&P 500 returning 50.8% over the period. The previous best was the 100 day period ending 7/30/2009, when the market returned 45.9% (Source: Strategas Research Partners)

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

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