China, Brazil election: Wealth Economic Update Nov. 3, 2018

U.S. and World News

  • China made progress this week towards making its financial markets more investor friendly. The China Securities Regulatory Commission said that it will begin increasing liquidity, reduce unnecessary interference in trading, and increase fairness in the markets for investors. President Trump ramped up trade threats if negotiations with Chinese President Xi fail, stating that the U.S. is planning tariffs on the remaining $257 billion in Chinese goods. Reports surfaced early this morning that President Trump had asked U.S. officials to draft a trade agreement with China, however, a few members of the administration later said that an agreement is not imminent.
  • brazil-676361592_370In a controversial victory, right winged presidential candidate Jair Bolsonaro won Brazil’s presidential election with 55% of the vote. The Brazilian Real gained 9.7% against the U.S. Dollar and the Bovespa stock index rose 13.5% in the last 30 days as the market predicted a Bolsonaro victory leading up to the election. Brazil has gone through years of corruption scandals, brutal elections and protests, the impeachment of a president, and negative economic growth. Bolsonaro campaigned on restoring discipline and law-and-order, putting an end to the corruption.


Markets

  • Stocks rebounded from correction levels this week as volatility remains elevated. The S&P 500 rose 2.45% and closed at 2,723. The Dow Jones gained 2.36% and closed at 25,271. Year to date, the S&P is up 3.47% and the Dow Jones is up 4.03%.
  • Yields also rebounded dramatically from their lows last week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.04% and 3.22%, respectively.
  • The spot price of WTI Crude Oil continued its slide this week, losing a whopping 6.92% and closing at $62.91 per barrel. Year to date, Oil prices are up 4.66%.
  • The spot price of Gold ended the week almost unchanged from last week, losing 0.05% and closing at $1,232.94 per ounce. Year to date, Gold prices are down 5.36%.

Economic Data

  • Initial jobless claims fell by 2,000 to 214,000 this week. The four-week moving average of claims increased by 2,000 to 214,000. Claims fell by 3,000 in California and by 2,000 in Georgia. Jobless claims still remain high in hurricane affected states.
  • The core PCE index (excluding food and energy) rose by 0.15% month-over-month in September and the year-over-year figure came in at 1.97%, in line with expectations.
  • Personal income rose by 0.2% month-over-month in September versus expectations for a 0.4% increase.
  • Personal spending rose by 0.4% month-over-month in September, in-line with expectations.
  • The Conference Board index of consumer conference rose to 137.9 versus expectations for a reading of 135.9. This is the highest level since 2000.
    Private sector employment rose 227,000 in October versus expectations for a 187,000 increase.
  • Factory orders increased by 0.7% month-over-month in September versus expectations for a 0.5% increase.
  • Nonfarm payrolls rose by 250,000 in October month-over-month versus expectations of a 200,000 increase.
    • The unemployment rate remained unchanged at 3.7%, in-line with expectations.
    • Average hourly earnings rose by 0.2% month-over-month in October and the year-over-year figure rose by 0.3% to 3.1%, a new cycle-high.
    • The trade deficit rose by $700 million to $54 billion in September, versus expectations for a $300 million increase.

Fact of the Week

  • The last time Amazon saw a 20% drawdown in stock price was in February of 2016, when its market cap was $227 Billion. In the period from September 4th to October 30th, Amazon fell nearly 25% and lost $249 Billion in market cap.

Please contact a member of the Wealth Management Department if you have any questions about this information.

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 – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

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Saudis, Turkey, Khashoggi: Wealth Economic Update Oct. 26, 2018

U.S. and World News

  • iStock-927165528Saudi Arabia’s handling of the death of Jamal Khashoggi, a journalist working for the Washington Post, is under sharp criticism as the story continues to change nearly every day. The latest announcement from Saudi prosecutors was yesterday, when they stated that the killing was in fact premeditated. This morning, President Erdogan of Turkey stated that “Turkey has other information and evidence about the killing by Saudi officials after Khashoggi entered the consulate on October 2nd, and it will eventually reveal that information”. Whether the crown prince of Saudi Arabia knew of the murder and the location of the body are the two mysteries that remain. The incident has put a strain on a long standing strong relationship with the United States and Saudi Arabia.


Markets

  • Stocks plummeted this week as volatility picked up further. The S&P 500 lost 3.93% and closed at 2,659. The Dow Jones fell by 2.97% and closed at 24,688. Year to date, the S&P is up 1.03% and the Dow Jones is up 1.67%.
  • Yields also fell sharply this week as investors piled into bonds this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.91% and 3.08%, respectively.
  • The spot price of WTI Crude Oil was down for yet another week, losing 2.32% and closing at $67.67 per barrel. Year to date, Oil prices are up 12.58%.
  • The spot price of Gold rose 0.61% this week, and closed at $1,233.95 per ounce. Year to date, Gold prices are down 5.28%.

Economic Data

  • Initial jobless claims rose by 5,000 to 215,000 this week. The four-week moving average of claims remained unchanged at 212,000. Claims rose by 4,000 in Florida and by 3,000 in Georgia as a result of Hurricane Michael.
  • Durable goods orders rose by 0.8% in September versus expectations of a -1.5% decrease. This was led by defense aircraft.
    • Durable goods orders ex-transports rose by 0.1% in September versus expectations of a 0.4% increase.
  • Core capital goods orders fell by 0.1% in September versus expectations for a 0.5% increase.
  • New home sales fell 5.5% in September to a seasonally-adjusted rate of 553,000 units versus expectations for 625,000 units. Sales fell the most in the Northeast region (-40.6%).
  • Pending home sales rose by 0.5% in September versus expectations for no change. Pending home sales rose the most in the West region (+4.5%).
  • Real GDP rose by 3.5% in the third quarter, beating expectations of a 3.3% increase.
    • Personal consumption rose by 4.0% versus expectations of 3.3%, the fastest pace since the fourth quarter of 2014.
    • The Core PCE Price index rose by 1.6% in the third quarter versus expectations for a 1.8% increase.
  • The University of Michigan’s index of consumer sentiment fell by 0.4 points to 98.6 in October versus expectations for a reading of 99.0.

Fact of the Week

  • The largest one day decline in the S&P 500 happened on “Black Monday” (10/19/87), when the index dropped 20.5%, equal to 58 points. A 20.5% drop today would be equal to 545 points. The largest one day drop so far this year was 113 points. (Source: BTN Research)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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 – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

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Interest rates, Midterms, NAFTA, Saudis: Wealth Management Special Update Oct. 26, 2018

Following a largely positive 3rd quarter during which the S&P 500 set a new all-time high, markets have moved sharply lower to begin the month of October. Gains in both the S&P and Dow have been wiped out, while the Nasdaq is clinging to a ~2% gain. The recent weakness has been heaviest in those Nasdaq/Growth stocks which have been leadership for the last few years. While there is no clear cause of the near 10% correction in stocks, there are a number of factors that may be contributing:

  • Recent communication from the Federal Reserve indicates a commitment to further rate hikes which the markets have perceived as too aggressive. To borrow from our research partner Strategas, “The level of interest rates that the economy can take is higher that the interest rate financial markets are comfortable with.” So despite an otherwise strong economy which justifies further rate increases, the markets have responded poorly to the perceived path of hikes. With the recent market downturn, implied odds of a December rate hike have fallen from over 80% to 69%, though the Fed seems intent on one more hike in 2018.
  • ballot-884243522_370October tends to be a weak time seasonally for equity markets, in particular during midterm election years. Markets don’t like uncertainty, so a midterm election that has the potential to swing the balance of power in Congress could be a source of heightened volatility. While there may be some specific industries or sectors that win or lose based on the outcomes, historically the broad market indices rally into year-end following the midterms once the results are clear.
  • Trade continues to be an issue. The USMCA agreement (updated NAFTA), which has been agreed to in principle by the U.S., Mexico and Canada, won’t be voted on until 2019 when the new Congress comes in, raising fears that its passage may be impeded if the Democrats are to take control. The tariff war with China continues on and little to no progress towards a resolution has been made.
  • The situation with Saudi Arabia has intensified and fears of isolation of that country and its potential effect on oil prices is a cause for concern.

Despite these concerns, the underlying fundamental data of the economy remains strong. Growth (GDP), employment and earnings figures continue to be solid and valuations are reasonable. With interest rates rising and the real rate of interest now positive (rates exceed inflation) for the first time since the financial crisis, companies are no long enjoying a near zero cost of capital. This results in more rationed allocations of capital and greater volatility as there is less margin for error for companies from more expensive capital and cash as an asset class is more viable. Increased volatility and lower correlations between assets is likely here to stay throughout the remainder of this cycle and benefits the active management approach.

 

Please contact a member of the Wealth Management Department if you have any questions about this information.

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 – (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.

Brexit, Saudi relations: Wealth Economic Update Oct. 19, 2018

U.S. and World News

  • Brexit negotiations have been a story of two steps forward, one step back and the discussion over the Irish border situation has been a roadblock for reaching a deal. Businesses, consumers, and investors have become increasingly concerned that more delays will only result in unresolved differences. European Union Chief Negotiator Michel Barnier stated that “A Brexit deal with the U.K. is 90% done” while debates continue over the Irish border and Theresa May attempts to create yet another delay and extend the post-Brexit transition period until 2021.
  • saudi-629324102_370Tensions rose rapidly this week between the United States and Saudi Arabia amidst the unexplained sudden disappearance of an American journalist. Secretary of State Mike Pompeo traveled to Saudi Arabia to meet with King Salman bin Abdulaziz earlier this week to discuss the issue, at which time the King denied allegations that Saudi Arabia orchestrated the disappearance of the American journalist. Reports surfaced during the week stating that Khashoggi was killed as a result of an interrogation that went wrong. President Trump stated that he wants to get to the bottom of what actually happened and if Saudi Arabia is found responsible, that the American response would be “very severe”. Saudi Arabia has shared interests with the United States that include containing Iran and sharing defense contracts.


Markets

  • Stocks were relatively unchanged from last week after another very volatile week. The S&P 500 rose 0.05% and closed at 2,768. The Dow Jones rose by 0.45% and closed at 25,444. Year to date, the S&P is up 5.10% and the Dow Jones is up 4.73%.
  • Yields climbed higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.05% and 3.19%, respectively.
  • The spot price of WTI Crude Oil continued its slide this week, losing 2.89% and closing at $69.28 per barrel. Year to date, Oil prices are up 15.26%.
  • The spot price of Gold rose 0.08% this week, and closed at $1,226.75 per ounce. Year to date, Gold prices are down 5.84%.

Economic Data

  • Initial jobless claims fell by 5,000 to 210,000 this week. The four-week moving average of claims increased by 2,000 to 212,000. Claims fell by 4,000 in North Carolina, and by 8,000 in Kentucky.
  • The Philadelphia Fed manufacturing index fell by 0.7 points to 22.2 for October versus expectations for a reading of 20.0.
  • Retail sales rose 0.1% month-over-month in September versus expectations for a 0.6% increase. The weaker than expected figure reflects lower sales at gas stations.
    • Retail sales core/control (ex-autos, gasoline, and building materials) increased 0.5% month-over-month in September versus expectations for a 0.4% increase.
  • Job openings increased to 7,136k in August versus expectations for 6,900k.

Fact of the Week

  • In 2008, Japan’s economy was larger that China’s economy ($4.9 trillion vs $4.5 trillion). China’s $12 trillion economy is now more than double that of Japan, who’s economy is $5 trillion. (Source: BTN Research)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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 – (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.

7 Retirement Savings Tips for Women

Mary Randel—Retirement Benefits Officer, Wealth Management 

As a women, saving for retirement is a challenge. On average, a woman’s life expectancy is longer than a man’s, which requires her to accumulate a higher lifetime savings balance. But, what makes saving enough even more difficult, is that many women experience career interruptions to care for children and, later, elderly parents, which reduces their lifetime earnings. Complicating matters even further is a lingering perception that retirement savings supplement Social Security benefits, rather than the other way around.

Whatever the reasons, today, more than ever, saving for retirement is truly hard work.

What Women Can Do to Meet the Challenge

Many employers, regardless of their size, offer 401k plans to help their employees save for retirement. Even if you are just starting out—or have started your own company—participating in one of these tax-deferred plans is your first line of defense for achieving the type of retirement you deserve.

Other actions women can take to feel more confident they are doing enough for their “future self” include:

  • Make no excuses! When your employer offers to match the amount you’re saving, save at least the amount needed to earn the maximum amount being matched. An offer of matched savings is better than a free lunch, unlimited personal time or a snack drawer—it’s literally free money for you to spend in retirement.
  • Regardless of your current position, save. Don’t wait until you’re earning more or have fewer financial obligations. In the long run, how much you save isn’t as important as how early you start and how consistent you are.
  • Have something in reserve. The emergency cash reserve everyone is supposed to build in their 20s becomes even more important in retirement. Be sure to save not just for day-to-day expenses but also for the unexpected things, like replacing cars and furnaces or paying for homecare providers and rehabilitative services.
  • Redefine “old.” Approach retirement planning with the mindset that you will work at least until your age of full employment under Social Security. That’s not 62. For today’s workers, it’s actually between ages 66 and 67. Taking benefits at age 62 when they first become available will severely reduce your monthly benefit for the rest of your life.
  • Invest in yourself. The healthier you are, the more options you’re likely to have regarding your retirement. Preventable health issues can lead to retiring earlier than planned, reduce your quality of life in retirement and significantly erode savings. There is also another reason to invest in yourself: Many retirees find leisure isn’t as compelling as it once seemed. Maintaining your marketable skills, along with your health, makes doing work you find meaningful, as long as you choose to, an option.
  • Plan for both of you…and each of you. Many widowed spouses are surprised when they no longer have a second Social Security check coming in each month after the death of their spouse. Retirement planning should include savings arrangements that cover the needs of the couple but also incorporate the ongoing needs of the remaining spouse.
  • Invest to achieve your goals, not to appease your fears. Being overly cautious when investing can be detrimental to successfully saving for retirement. This is why many people opt to hire a professional. Whether this means having a wealth manager step in or investing in a diversified handful of mutual funds, outsourcing the decision-making can help get you closer to your goals.

Whether you want to supplement your employer’s retirement plan by saving on your own or are an employer who wants to make it easier for your staff to plan for their retirements as well, we can help. Contact me at 630-906-5500 or at mrandel@oldsecond.com. You can also learn more about our options here. However you choose to contact us, we look forward to talking to you about how we can help you plan for the future you deserve.

Brexit, Hurricane Michael: Wealth Economic Update Oct. 12, 2018

U.S. and World News

  • Former British Prime Minister Tony Blair stated that there is a 50-50 chance of reaching another Brexit referendum as it is doubtful that Theresa May will secure a majority vote for a divorce deal with only six months until the deadline. Many issues remain unresolved before the deadline, including trade issues, security issues, regulatory uncertainty, and whether there will be a border separating Ireland. Japanese Prime Minister Shinzo Abe stated that Britain will be welcome to join the Trans-Pacific Partnership after it leaves the European Union, allowing it to retain its “global strength”.
  • hurricane-1035765586_370Rescuers have begun searching for survivors after Hurricane Michael flattened towns along the coast of the Florida panhandle. The hurricane made landfall early afternoon on Wednesday in Mexico Beach, Florida as a strong Category 4 storm with sustained winds of 155 miles per hour and knocked out power in about 1.5 million homes and businesses in the Southeast region. The storm is responsible for 12 deaths across Florida, Georgia, North Carolina, and Virginia and that number is expected to rise according to FEMA Administrator Brock Long. Offshore oil rigs in the Gulf were evacuated as the hurricane approached Florida, cutting oil production by over 40% and natural gas output by 33%.


Markets

  • Stocks plunged this week following last week’s declines. The S&P 500 fell 4.06% and closed at 2,767. The Dow Jones declined by 4.17% and closed at 25,340. Year to date, the S&P is up 5.06% and the Dow Jones is up 4.27%.
  • Yields pulled back this week after rising rapidly last week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.02% and 3.17%, respectively.
  • The spot price of WTI Crude Oil also fell dramatically, losing 3.81% this week to close at $71.51 per barrel. Year to date, Oil prices are up 18.97%.
  • The spot price of Gold rose 1.20% this week, and closed at $1,218.04 per ounce. Year to date, Gold prices are down 6.51%.

Economic Data

  • Initial jobless claims increased by 7,000 to 214,000 this week. The four-week moving average of claims increased by 3,000 to 210,000. Claims rose by 7,000 in Kentucky, and by 4,000 in North Carolina.
  • The consumer price index (CPI) rose by 0.06% in September versus expectations for a 0.2% increase. The weaker figure was driven by lower energy prices. The year-over-year rate came in at 2.27% versus 2.4% expected.
    • Core CPI rose by 0.12% in September versus expectations of a 0.2% increase. The year-over-year rate in Core CPI remains at 2.2%.
  • The producer price index (PPI) increased by 0.2% in September, in-line with expectations.
    • PPI ex-food and energy rose by 0.2% in September, in-line with expectations.
  • Import prices rose by 0.5% in September month-over-month versus expectations for a 0.2% increase. The higher than expected reading was led by the foods, feeds, and beverages category.
  • The University of Michigan’s index of consumer sentiment declined 1.1 points to 99.0 in the October preliminary reading against expectations for a reading of 100.5.

Fact of the Week

  • A greater percentage of Millennials have all of their pre-tax retirement money invested in cash and bonds (20%) than those that have all of their pre-tax retirement money invested in stocks (19%). 2,593 Millennials (ages 20-36 in 2017) were surveyed in the 4th quarter 2017 (source: Transamerica Retirement Survey).

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

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.

NAFTA, Italy, EU: Wealth Economic Update Oct. 5, 2018

U.S. and World News

  • cow-184614299_370On Sunday night, the United States and Canada reached an agreement for the revised North American Free Trade Agreement just before the deadline of October 1st. The new agreement that includes Mexico will be called the U.S.-Mexico-Canada Agreement or USMCA. Canada agreed to open its dairy market to the United States while the United States agreed to keep the dispute-resolution process in the deal which would provide Canada protection from potential tariffs imposed by the United States. President Trump calls the deal the “most important deal we’ve ever made by far” and stated that he is skeptical of congress passing the deal as a result of political motives.
  • Italy has given into pressure put on by the European Central Bank and reduced its growth forecasts. The Euro fell dramatically and the Italian 10-year yield hit a four-year high as the second largest debt laden European country was closely reaching an October 15th deadline for submitting its final budget deal. The new growth forecast for this year was cut to 1.2% from a previous estimate of 1.5% and the budget deficit target was assumed at 2.4% of GDP for 2019, 2.1% for 2020, and 1.8% for 2021. Italy’s stock market declined this morning as a result of the lower growth forecasts.


Markets

  • Stocks continued their slide this week. The S&P 500 fell 0.95% and closed at 2,886. The Dow Jones declined by 0.36% and closed at 26,447. Year to date, the S&P is up 9.44% and the Dow Jones is up 8.73%.
  • Yields rallied dramatically this week, spooking the domestic stock market. The 5 year and 10 year U.S. Treasury Notes are yielding 3.07% and 3.23%, respectively.
  • The spot price of WTI Crude Oil finished the week higher again, gaining another 1.49% this week to close at $74.34 per barrel. Year to date, Oil prices are up 23.67%.
  • The spot price of Gold rose 1.08% this week, and closed at $1,203.77 per ounce. Year to date, Gold prices are down 7.60%.

Economic Data

  • Initial jobless claims fell by 7,000 to 207,000 this week. The four-week moving average of claims remained unchanged at 207,000. Claims fell by 6,000 in North Carolina, rebounding this week after Hurricane Florence.
  • The ISM manufacturing index fell 1.5 points to 59.8 in September versus expectations for a reading of 60.0.
  • The ISM non-manufacturing index rose by 3.1 points to 61.6 in September versus expectations for a reading of 58.0.
  • Construction spending rose by 0.1% month-over-month in August versus expectations for a 0.4% increase. Private residential construction was weaker in August.
  • Private sector employment rose by 230,000 in September month-over-month versus expectations for a 184,000 gain. This was led by professional and business services.
  • Nonfarm payrolls rose by 134,000 in September month-over-month versus expectations of an increase of 185,000.
    • The Bureau of Labor Statistics noted that Hurricane Florence had an estimated impact of around 50,000-60,000 jobs. The figure was also affected by the number of employees not at work due to weather.
    • These estimates would result in an actual figure of about 190,000
    • The unemployment rate declined to 3.7% versus 3.8% expected
    • Average hourly earnings rose 0.3% month-over-month, in-line with expectations.

Fact of the Week

  • The Small Business Optimism Index reached its all-time high in August, surpassing the mark set in July 1983. The index measures small business owners expectations for hiring, business growth, and profitability. (Source: National Federation of Independent Businesses)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

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.

Mexico/Canada trade, Oil prices: Wealth Economic Update Sept. 28, 2018

U.S. and World News

  • The Trump administration is willing to move forward on a trade agreement with Mexico, excluding Canada, if Canada does not agree to grant the United States access to its dairy market. This has been a very important point for the United States throughout the negotiation process. President Trump also threatened to impose a 25% tariff on cars imported from Canada, as the administration continues to further pressure Canada. So far, Canada is not calling the bluff, and U.S. Trade Representative Robert Lighthizer expressed a negative view on current negotiations with Canada. Congress members stated that there would be very little support for a deal that excluded Canada.
  • oil-859021152_370Oil prices skyrocketed as United States sanctions on Iran are set to begin on November 4th and OPEC has agreed to keep oil production at its current levels rather than pump more. The United States promised that the oil market would be sufficiently supplied in time for the sanctions to begin. OPEC’s decision against increasing supply could force the United States to release oil from the Strategic Petroleum Reserve to keep oil prices under control.


Markets

  • Stocks pulled back this week while the S&P 500 finished its strongest quarter since December of 2013. The S&P 500 fell 0.51% and closed at 2,914. The Dow Jones lost 1.07% and closed at 26,458. Year to date, the S&P is up 10.47% and the Dow Jones is up 8.73%.
  • Yields finished the week almost unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.95% and 3.06%, respectively.
  • The spot price of WTI Crude Oil continued its surge higher another 3.90% this week to close at $73.54 per barrel. Year to date, Oil prices are up 22.34%.
  • The spot price of Gold fell 0.71% this week, and closed at $1,191.53 per ounce. Year to date, Gold prices are down 8.54%.

Economic Data

  • Initial jobless claims rose by 12,000 to 214,000 this week. The four-week moving average of claims remained unchanged at 206,000. Claims rose by 10,000 in North Carolina, 7,000 in Kentucky, and 3,000 in South Carolina and California.
  • Durable goods orders rose by 4.5% in August, exceeding expectations of a 2% increase. This increase reflected a 13% increase in transportation equipment.
    • Durable goods orders ex-transportation rose by 0.1% versus expectations of 0.4%.
  • The Conference Board index of consumer confidence rose to 138.4 in September versus expectations of a 132.1 reading. This is the highest level since 2000.
  • Sales of new single-family homes rose by 3.5% in August to a seasonally-adjusted annualized rate of 629,000 versus expectations of 630,000. The prior three months were revised down by a net 40,000. The largest increase was in the Northeast region.
  • The core PCE price index ex-food and energy rose by 0.4% month-over-month in August versus expectations of 0.1%.
    • Personal income rose by 0.3% in August versus expectations of 0.4%
    • Personal spending rose by 0.3% in August, in line with expectations
  • The University of Michigan’s index of consumer sentiment fell to 100.1 in the August final reading versus expectations of a 100.6 reading.
  • The Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to 2-2.25% at the September meeting. Jerome Powell indicated that the FOMC would continue with gradual rate hikes and did not refer to the current monetary policy as “accommodative”, which is what it was previously referred too.


Fact of the Week

  • Of 2,000 American’s surveyed, 48% thought that the market was flat over the last 10 years, while 18% thought the market was down the last 10 years. As of last Friday, September 21st, the S&P 500 had returned 163.42% on a total return basis , or 10.16% annualized. (Source: Betterment, Bloomberg)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

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 tariffs, North-South Korea: Wealth Economic Update Sept. 21, 2018

U.S. and World News

  • Earlier this week, the United States put in place a 10% tariff on $200 billion of Chinese goods, below the originally planned 25% rate. However, this rate will increase to 25% at year end, leaving more time for negotiations. China also came back with a more gentle response than expected, placing tariffs on $60 billion of United States goods and stating that they will not use currency devaluation as a means to boost their exports. It is rumored that China is planning to cut average tariff rates on imports from most of its trading partners, including the United States, as soon as next month. This move would be in line with China’s pledge to support more imports.
  • north_south_korea-187088168_370South Korean President Moon stated that during a three-day summit with Kim Jong Un this week, the North Korean leader expressed interest in having a second summit with Donald Trump in the near future to speed up denuclearization. Moon also said that Kim is now open to inspections at North Korea’s last existing facility for underground tests in Punggye-ri, where he previously would not allow inspections. The United States demands that North Korea accomplishes a “verifiable, irreversible, dismantlement” of its nuclear program before the U.S. satisfies their demand of an end to the war.


Markets

  • Stocks continued moving higher this week amid easing trade tensions. The S&P 500 rose 0.86% and closed at 2,930. The Dow Jones surged 2.25% and closed at 26,744. Year to date, the S&P is up 11.03% and the Dow Jones is up 9.88%.
  • Yields also rose much higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.95% and 3.07%, respectively.
  • The spot price of WTI Crude Oil surged 3.01% this week to close at $70.84 per barrel. Year to date, Oil prices are up 17.85%.
  • The spot price of Gold rose 0.36% this week, and closed at $1,199.18 per ounce. Year to date, Gold prices are down 7.95%.

Economic Data

  • Initial jobless claims fell by 3,000 to 201,000 this week. The four-week moving average of claims moved down by 2,000 to 206,000. Claims fell by 7,000 in California and 2,000 in Florida and South Carolina, but rose by 2,000 in New Jersey. This is the lowest level of jobless claims since 1969.
  • Housing starts rose by 9.2% in August to 1,282k versus expectations of 1,238k. Housing starts in the West region were mostly responsible for the higher than expected figure.
  • Building permits fell by 5.7% to an annualized rate of 1,229k in August versus expectations of a 0.5% increase. This was the largest drop since 2011.
  • Existing home sales were flat in August versus expectations for a 0.5% increase.


Fact of the Week

  • During the 30 years ending 8/31/2018, the best 12 month performance and the worst 12 month performance happened in a single 24 month period. The worst performance occurred from 03/01/2008 to 2/28/2009 while the best performance occurred 03/01/2009 to 2/28/2010. (Source: BTN Research)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

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 tariffs, Hurricane Florence: Wealth Economic Update Sept. 14, 2018

U.S. and World News

  • After trade discussions broke down three weeks ago, the Trump administration has invited Chinese officials for another round of negotiations. President Trump wrote in a tweet on Thursday that “We are under no pressure to make a deal with China, they are under pressure to make a deal with us”. Meanwhile, an editorial in the China Daily read “The Trump administration should not be mistaken that China will surrender to the U.S demands.” This new round of trade negotiations comes before additional tariffs of 10-25% on $200 billion of Chinese imports are being prepared by the United States. China is expected to retaliate in a similar fashion to these tariffs.
  • hurricane-480386290_370Hurricane Florence, a Category 1 hurricane, made landfall this morning on the North Carolina coast bringing sustained winds of 90 miles per hour and a life-threatening storm surge. The slow moving storm is expected hang over the Carolinas this weekend and drop catastrophic amounts of rain causing a lot of flooding. The power was knocked out in nearly 500,000 homes and hundreds were rescued this morning as the storm made landfall.


Markets

  • Stocks rebounded this week. The S&P 500 rose 1.21% and closed at 2,905. The Dow Jones rose by 0.94% and closed at 26,155. Year to date, the S&P is up 10.09% and the Dow Jones is up 7.50%.
  • Yields rose higher again this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.90% and 3.00%, respectively.
  • The spot price of WTI Crude Oil increased by 1.83% this week to close at $68.99 per barrel. Year to date, Oil prices are up 14.77%.
  • The spot price of Gold dropped 0.33% this week, and closed at $1,192.99 per ounce. Year to date, Gold prices are down 8.43%.

Economic Data

  • Initial jobless claims fell by 1,000 to 204,000 this week. The four-week moving average of claims moved down by 2,000 to 208,000. Claims rose by 5,000 in California and 2,000 in Michigan. This is the lowest level of jobless claims since 1969.
  • The consumer price index (CPI) rose 0.22% in August versus expectations for a 0.3% increase.
    • Core CPI ex-food and energy rose 0.08% in August versus expectations of a 0.2% increase. The soft reading was led by the apparel category. The year-over-year rate declined to 2.2%.
  • Wholesale inventories rose 0.6% in July versus expectations for a 0.7% increase.
  • The producer price index (PPI) declined by 0.1% versus expectations for a 0.2% increase.
    • Core PPI ex-food and energy rose 0.1% versus an increase of 0.2% expected.
  • Retail sales rose by 0.1% in August versus expectations for a 0.4% increase. The weaker sales growth was a result of lower auto sales.
    • Core retail sales rose 0.1% in August versus an increase of 0.4% expected.
  • Import prices fell 0.6% in August versus expectations for a 0.2% decline
  • Industrial production rose by 0.4% in August versus expectations of a 0.3% increase.
  • The University of Michigan’s index of consumer sentiment September preliminary reading came in at 100.8 versus expectations of 96.6.


Fact of the Week

  • In a “private letter ruling” issued on August 20th, the IRS approved the use of a program to help aid employees that have student debt. The program would allow employees that make student loan payments to still receive an employer contribution in their 401(k) as if the loan payment was a pre-tax 401(k) contribution. (Source: IRS)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.