Hurricane Zeta, COVID: O2 Wealth Economic Update, Oct. 30, 2020

U.S. and World News

  • Hurricane Zeta made landfall in Louisiana late Wednesday afternoon as a strong Category 2, leaving over 2.6 million people without power across seven states. The hurricane quickly weakened to a Tropical Storm, but maintained that strength as it traveled northeast into the Carolinas. Zeta is the 11th named storm and 6th hurricane to make landfall in the United States this year, a seasonal record. As a result of the hurricane, at least six people died, power lines and trees were knocked down, houses were destroyed, and streets were flooded. Close to 2,000 National Guard personnel are assisting with the cleanup work in Louisiana.
  • iStock-1214300376_370Coronavirus cases and hospitalizations across the United States are at their highest levels since May, prompting some states to announce new restrictions on businesses. Global daily deaths came in at more than 7,000 twice this week, bringing the 7-day average higher. Europe continues to struggle with rapidly spreading infections as a full lockdown goes into effect today in France and will last until the end of November. France is working towards a plan that will limit the economic fallout from the lockdown, targeting a contraction in GDP of roughly half the 30% drop that was seen during the first one. Regeneron has stopped enrollment in its trial for its antibody therapy used by President Trump, for patients with serious cases, after a safety issue warning from a third party. Eli Lilly also ceased enrollments into its program after research indicated that patients were unlikely to recover from the treatment in the late stages of infection.

Markets

  • Markets slipped this week. The S&P 500 dropped -5.62% and closed at 3,270. The Dow Jones fell -6.47% and closed at 26,504. Year-to-date, the S&P 500 is up 2.77% and the Dow Jones is down -5.38%
  • Yields rose this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.38% and 0.87%, respectively.
  • The spot price of WTI Crude fell this week. Prices fell -10.61% and closed at $35.62 per barrel. Year to date, Oil prices are down -41.66%.
  • The spot price of Gold fell by -1.26% and closed at $1,878.10 per ounce. Year to date, Gold prices are up 23.78%.

Economic Data

  • Initial jobless claims fell to 751,000 and the four-week moving average of claims fell by 25,000 to 788,000. Claims fell by 12,000 in Texas, 9,000 in Florida, and by 8,000 in California. Claims rose by 10,000 in Michigan, 6,000 in Illinois, and by 3,000 in Virginia.
  • Real GDP rose by 33.1% versus expectations for an increase of 32.0%
  • Personal consumption rose by 40.7% versus expectations for an increase of 38.9%
  • The core PCE inflation index rose by 3.5% annually versus expectations for an increase of 4.0%
  • Sales of new single-family homes fell by -3.5% to a seasonally-adjusted annualized rate of 959,000 units versus expectations for an increase of 1.4%
  • Pending home sales fell by -2.2% versus expectations for an increase of 2.9%
  • The FHFA house price index rose by 1.5% versus expectations for an increase of 0.7%
  • New orders for durable goods rose by 1.9% versus expectations for an increase of 0.5%
  • Durable goods orders ex-transports rose by 0.8% versus expectations for an increase of 0.4%
  • Core capital goods orders rose by 1.0% versus expectations for an increase of 0.5%
  • Core capital good shipments rose by 0.3% versus expectations for an increase of 0.4%
  • The Conference Board index of consumer confidence fell by 0.4 points to 100.9 versus expectations for a reading of 102.0
  • The University of Michigan’s index of consumer sentiment rose by 0.6 points to 81.8 versus expectations for a reading of 81.2
  • Retail inventories rose by 1.6% versus expectations for an increase of 0.5%
  • Wholesale inventories fell by -0.1% versus expectations for an increase of 0.4%
  • Personal income rose by 0.9% versus expectations for an increase of 0.4%
  • Personal spending rose by 1.4% versus expectations for an increase of 1.0%

Fact of the Week

  • The price of lumber increased nearly 50% from 4/30/20 to 8/31/20, the largest 4-month increase ever in the cost of lumber based upon data maintained since 1949. The rally was driven by an acute supply shortage stemming from widespread production cuts due to pandemic-related demand concerns that proved to be short-lived and missed the positive catalysts for home construction and improvement that emerged. (source: Bureau of Labor Statistics, Bloomberg Intelligence).

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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