Coronavirus, Economy, Markets: Special Wealth Update, Apr. 24, 2020

virus-1154815984_370In an effort to serve our colleagues, Old Second Wealth Management would like to inform you about several of the recent developments that have taken place since our last update:

The CDC began the discussion of reopening the country by releasing a set of guidelines for a phased-in approach. The guidelines put the power in the hands of Governors to begin to allow businesses and activities in their state (or specific counties) to progressively open back up should virus cases and hospitalizations decrease over two week periods. Restrictions become more and more relaxed as states move on to the next phase following two week periods of declining figures. The State of Illinois extended its stay-at-home order through May 30th and the data is showing that Illinois remains at least a few weeks away from beginning this progression toward re-opening.

Due to the success of the first round of funds provided by the Paycheck Protection Program (PPP) in the Cares Act, it was apparent that an additional round would be needed. In response, an additional $484 billion of stimulus has been finalized by Congress and signed by President Trump today. The legislation is focused on boosting aid to small businesses by increasing the funding authority of the PPP by $310 billion, nearly doubling the initial amount authorized. The new bill contains provisions allocating $60 billion for loans originated by community banks and credit unions. Also included are additional funding for reimbursements for hospitals and expanded COVID-19 testing.

Another event that garnered a lot of headlines was ahead of the expiration of May futures contract on WTI Crude oil, trading down to -$37/barrel before closing at $10/bbl. A confluence of factors including a glut of oil production, plummeting demand due to reduced travel and a severe shortage of remaining storage, created a scenario where it could be more economical for oil producers to PAY buyers to take delivery of the oil in May instead of storing oil for future delivery. The current WTI Oil contract is currently at $17/bbl with future contracts for July delivery trading near $21/bbl indicating uncertainty around the speed at which the economy may be back up and running.

Uncertainty remains high and volatility as measured by the VIX index continues to trade at elevated levels but equity markets have rallied over 25% off of their mid-March lows and fixed income markets have stabilized with credit spreads contracting. This reflects the fiscal and monetary policy measures that have been taken and the apparent willingness to do more if needed. It’s also likely a response to some of the positive advances on the health side of the equation. While our background is in finance and not healthcare we are cautiously encouraged by some of the potential developments in testing, treatments and ultimately a vaccine. Pharmaceutical companies and health agencies around the world are solely focused on the COVID-19 problem and we are optimistic we can conquer this disease someday soon.

As always, if you have any questions or concerns, please do not hesitate to reach out to your Relationship Manager or Investment Officer.

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.

Coronavirus, Saudi Arabia: O2 Wealth Economic Update, April 17, 2020

U.S. and World News

  • virus-1206428318_370The total number of confirmed COVID-19 cases worldwide is now over 2.1 million, 671,000 of which is in the United States. The curve has been flattening in the United States, prompting discussions among government officials regarding ways by which to open the economy. On Thursday evening, the Trump administration set out guidelines for individual states to open their economies in a series of phases. Before entering the first phase, the number of cases or reports of COVID-19 and flu-like symptoms need to show a downward trend over a two-week period. Also released Thursday evening, was a report that said Gilead Sciences drug Remdesivir was showing some effectiveness in treating patients suffering from coronavirus, giving many a sense of optimism. Lawmakers will negotiate throughout the weekend toward an emergency bill that would expand the Small Business Administration loan plan which reached its cap of $350 billion this week.
  • Saudi Arabia and its allies declared a unilateral cease-fire in the war in Yemen this week, triggered by fears that the coronavirus would spread in Yemen, the poorest country in the Middle East. At least 150 members of the Saudi royal family have contracted the coronavirus including the governor of Riyadh, who is currently in intensive care. Yemen has yet to publically announce a case of COVID-19 in the country, where an outbreak could be very difficult to contain. It is believed that this historic decision by Saudi Arabia will eventually lead to an end of the war that has lasted half a decade.

Markets

  • Markets continued to rise higher this week. The S&P 500 rose 3.1% and closed at 2,875. The Dow Jones spiked 2.2% and closed at 24,242. Year-to-date, the S&P 500 is down 10.5% and the Dow Jones is down 14.5%.
  • Yields fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.65%, respectively.
  • The spot price of WTI Crude fell further this week. Prices fell 20.3% and closed at $18.13 per barrel. Year to date, Oil prices are down 70.3%.
  • The spot price of Gold fell by 0.7% and closed at $1,684.93 per ounce. Year to date, Gold prices are up 11.1%.

Economic Data

  • Initial jobless claims fell to 5.2 million and the four-week moving average of claims rose by 1.2 million to 5.5 million. Claims rose 33,000 in North Carolina, 18,000 in Indiana, 10,000 in South Carolina, and 7,000 in Florida. Claims fell by 422,000 in California, 167,000 in Michigan, and 115,000 in Georgia.
  • The level of housing starts fell 22.3% (1.2 million units) versus expectations for a decline of 18.7% (1.3 million units)
  • Building permits fell by 6.8%, versus expectations for a decline of 10.7%
  • The Philadelphia Fed manufacturing index fell by 43.9 points to -56.6 versus expectations for a reading of -32.0
  • Industrial production fell by 5.4% versus expectation for a decline of 4.0%
  • Retail sales fell by 8.7% versus expectations for a decline of 8.0%
  • Core retail sales rose by 1.7% versus expectations for a decline of 2.0%
  • Import prices fell by 2.3% versus expectations for a decline of 3.2%
  • Import prices ex-petroleum fell by 0.1% versus expectations for a decline of 0.2%

Fact of the Week

  • The $1,200 per person stimulus payment created in the CARES Act (paid to individuals making less than $75,000 and couples making less than $150,000) is available to non-citizen immigrants working legally in the United States on H-1B and H-2A visas (source: CARES Act).

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.

Coronavirus, Oil, OPEC: O2 Wealth Economic Update, April 10, 2020

U.S. and World News

  • nurse-1210132646_370New York State now has over 160,000 confirmed cases of coronavirus, more than any other country in the world, as Governor Cuomo continues to plea for government support, asking for ventilators, masks, and other respiratory equipment to help slow the spread. The United States now has over 466,000 confirmed cases as the virus has spread from big cities to rural America and global confirmed cases have topped 1.6 million, over 100,000 of them deadly. Despite the large numbers, the curve is flattening in New York with regards to new confirmed cases. On Thursday morning, the Federal Reserve announced $2.3 trillion of additional financing for small businesses and state governments. Congress will attempt to pass additional aid for small businesses next week after an additional $250 billion failed to pass this week, as Senate Democrats were seeking more funding for hospitals and states. Dr. Anthony Fauci stated that the U.S. death toll from the coronavirus could be closer to 60,000, instead of his prediction last week that there would be 100,000 to 240,000 deaths.
  • At the conclusion of a long virtual OPEC+ meeting, the energy alliance of oil producers agreed to a historic 10 million barrel per day production cut which equates to 10% of global supply. The price of WTI crude had been trading 12% higher following the meeting, before falling 9% late at night after Mexico announced its opposition to the production cuts. This means that the production cuts will not take place until OPEC+ reaches an agreement with Mexico. Oil producing nations have urged the United States to cut production to help stop the falling prices, but have failed to reach any agreement. The Texas Railroad Commission, which has to authority to mandate production cuts in the state, will meet next week to discuss the possibility of reducing production.

Markets

  • Markets surged in the best week since 1974. The S&P 500 jumped 12.1% and closed at 2,790. The Dow Jones spiked 12.7% and closed at 23,719. Year-to-date, the S&P 500 is down 13.2% and the Dow Jones is down 16.3%.
  • Yields rose slightly while the curve steepened this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.41% and 0.72%, respectively.
  • The spot price of WTI Crude fell considerably this week. Prices fell 18.2% and closed at $23.19 per barrel. Year to date, Oil prices are down 62%.
  • The spot price of Gold rose by 3.9% and closed at $1,684.04 per ounce. Year to date, Gold prices are up 11%.

Economic Data

  • Initial jobless claims fell by 261,000 to 6.6 million and the four-week moving average of claims rose 1.6 million to 4.3 million. Claims rose by 286,000 in Georgia, 29,000 in New York, and by 28,000 in Michigan.
  • The producer price index (PPI) fell by 0.2% versus expectations for a decline of 0.4%
  • PPI ex- food, energy, and trade services fell by 0.2% versus expectations for a flat reading
  • Wholesale inventories fell by 0.7% versus expectations for a decline of 0.5%
  • The University of Michigan’s index of consumer sentiment fell 18.1 points to 71.0 in the preliminary report, the largest decline on record.
  • The consumer price index (CPI) fell by 0.4% versus expectations for a decline of 0.3% and the year-over-year rate rose by 1.5% versus expectations for an increase of 1.6%
  • Core CPI fell by 0.1% versus expectations for an increase of 0.1% and the year-over-year rate rose by 2.1% versus expectations for an increase of 2.3%

Fact of the Week

  • 68 individual stocks in the S&P 500 index were down at least 50% YTD as of the end of the 1st quarter 2020, including 7 stocks down at least 75% YTD (source: BTN Research).

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.

Coronavirus, Oil: O2 Wealth Economic Update, April 3, 2020

U.S. and World News

  • quarantine-1214116696_370President Trump has extended the federal social distancing guidelines to April 30th as the official world number of cases surpasses 1 million. Earlier this week, Dr. Anthony Fauci and top government scientists estimated that the coronavirus could kill 100,000 to 240,000 Americans, as they pledge to do everything that they possibly can to reduce that number. So far, 38 states have instituted some form of stay-at-home orders while Dr. Fauci continues to suggest that all states institute this mandate immediately. New York Governor Andrew Cuomo said this morning that “The curve continues to go up” in New York as they saw their single-largest daily increase in deaths yesterday since the outbreak began. The American economy is at a standstill with businesses shut, roads empty, and citizens in their homes as federal officials are rushing to distribute stimulus checks to taxpayers. Even after the largest emergency spending bill in U.S. history was passed last week, Congress and the Trump administration have begun to discuss details of what “Phase 4” could look like.
  • Russian President Vladimir Putin is prepared to work with Saudi Arabia and other OPEC+ members to cut production and stop the fall in oil prices. Putin stated that production cuts could be as much as 10 million barrels per day. The decision comes after a conversation on Monday between President Trump and Vladimir Putin about the collapse in oil prices. Last month, Saudi Arabia flooded the market with oil, driving prices into the ground after a disagreement with Russia on production cuts to curb the falling demand due to the coronavirus. Putin indicated that Russia would meeting with OPEC+ on April 6th to discuss production cuts.

Markets

  • Markets moved back towards the lows this week. The S&P 500 fell 2.02% and closed at 2,489. The Dow Jones lost 2.64% and closed at 21,053. Year-to-date, the S&P 500 is down 22.48% and the Dow Jones is down 25.62%.
  • Yields were relatively unchanged this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.39% and 0.61%, respectively.
  • The spot price of WTI Crude rebounded sharply this week. Prices jumped 32.31% and closed at $28.46 per barrel. Year to date, Oil prices are down 53.39%.
  • The spot price of Gold fell by 0.42% and closed at $1,621.38 per ounce. Year to date, Gold prices are up 6.86%.

Economic Data

  • Initial jobless claims rose by 3.3 million to 6.6 million and the four-week moving average of claims rose 1.6 million to 2.6 million. Claims rose by 721,000 in California, 286,000 in New York, and by 257,000 in Michigan.
  • Pending home sales rose by 2.4% versus expectations for a decline of 1.8%
  • The Conference Board index of consumer confidence fell by 10.7 points to 120.0 versus expectations for a reading of 110.0
  • Private sector employment in the ADP fell by 27,000 versus expectations for a decline of 150,000
  • The ISM manufacturing index fell 1.0 points to 49.1 versus expectations for a reading of 44.5 points
  • The ISM non-manufacturing index fell 4.8 points to 52.5 versus expectations for a reading of 43.0
  • Construction spending fell by 1.3% versus expectations for an increase of 0.6%
  • Factory orders were flat versus expectations for an increase of 0.2%
  • Nonfarm payrolls fell 701,000 versus expectations for a decline of 100,000
  • The unemployment rate rose 0.9% to 4.4% versus expectations for a reading of 3.8%
  • Average hourly earnings rose 0.4% versus expectations for an increase of 0.2% and the year-over-year rate rose by 3.1%

Fact of the Week

  • Saudi Arabia’s cost of producing a barrel of oil is $9, the lowest in the world. The cost of producing a barrel of shale oil in the United States is $23 (source: Rystad Energy).

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.

Coronavirus, Oil: O2 Wealth Economic Update, Mar. 27, 2020

U.S. and World News

  • capitol-1078283986_370Coronavirus cases across the world has eclipsed half a million and the United States has surpassed every other country in the world in number of cases, currently at about 95,000. At the epicenter of the virus, New York City Mayor Bill de Blasio projects “over half the people in this city will ultimately be infected.” In the United Kingdom, Prime Minister Boris Johnson has tested positive for coronavirus, after instating a “stay-at-home” order earlier this week. The U.S. House of Representatives was prepared for a voice vote on the $2 trillion coronavirus relief bill passed by congress earlier this week, until one lawmaker announced his opposition to the bill late last night. This announcement led to House members scrambling back to Washington to hold a recorded vote. The bill passed in the House early this afternoon and is now being sent to the President’s desk. The relief bill includes one-time direct payments to individuals, added unemployment insurance, and loans to businesses.
  • The oil price war led by Saudi Arabia has resulted in the worst crude oil crash in a generation and even lower prices are anticipated. Secretary of State Mike Pompeo urged Saudi Arabia to curb production on Wednesday as weakening global demand is compounding on the issue, but Saudi Arabia shows no signs of slowing down. The U.S. shale industry is at risk and is running out of options now as most of the U.S. economy is shut down along with Europe and India. U.S. shale producers are now asking for radical solutions such as a tariff on international oil. Yesterday, leaders of the Group of 20 met to discuss the global pandemic, but the statement made no mention of the oil crisis.

Markets

  • Markets rebounded in what was the best week since 2009. The S&P 500 jumped 10.28% and closed at 2,541. The Dow Jones rose 12.48% and closed at 21,637. Year-to-date, the S&P 500 is down 20.96% and the Dow Jones is down 23.72%.
  • Yields fell further this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.39% and 0.68%, respectively.
  • The spot price of WTI Crude tumbled further this week. Prices fell 4.77% and closed at $21.55 per barrel. Year to date, Oil prices are down 64.71%.
  • The spot price of Gold rose by 8.22% and closed at $1,621.92 per ounce. Year to date, Gold prices are up 6.89%.

Economic Data

  • Initial jobless claims rose by a record 3 million to 3.28 million and the four-week moving average of claims rose 766,000 to 998,000. Claims rose by 398,000 in Pennsylvania, 213,000 in Ohio, and by 179,000 in New Jersey.
  • Personal consumption rose by 1.8% versus expectations for an increase of 1.7%
  • New home sales came in at 765,000 versus expectations for a reading of 750,000
  • Durable goods orders rose by 1.2% versus expectations for a decline of 0.9%
  • Durable goods orders ex-transports fell by -0.6% versus expectations for a decline of -0.4%
  • Personal income rose by 0.6% versus expectations for a 0.4% increase
  • Personal spending rose by 0.2%, in-line with expectations
  • The PCE price index rose by 0.1%, in-line with expectations and the year-over-year rate rose by 1.8% versus expectations for a 1.7% increase
  • The core PCE price index rose by 0.2%, in-line with expectations and the year-over-year rate rose by 1.8% versus expectations for 1.7%
  • The University of Michigan’s index of consumer sentiment fell 6.8 points 89.1 versus expectations for a reading of 90.0

Fact of the Week

  • The United States currently has about 95,000 confirmed cases of coronavirus and a population of 327.2 million (0.029% infection rate) while Italy has about 86,500 confirmed cases and a population of 60.5 million (0.14% infection rate). The United States has a population that is 5X the size of Italy, but Italy has an infection rate that is about 6X higher than the U.S. (Source: John Hopkins).

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.

Coronavirus, Unemployment, Markets: Special Wealth Update, Mar. 26, 2020

virus-1209738265Last night, the Senate passed “phase 2” of the Virus Relief Bill which will provide free testing, expanded funding for food security programs and ensures paid sick leave.  In addition, news passed that the floor of the New York Stock Exchange (NYSE) would be closed Monday March 23rd.  THE MARKETS WILL REMAIN OPEN!  Only the NYSE floor will be closed.  Though this is not normal operating procedure, today the vast of majority of trades on the NYSE occur in an electronic format.

On March 6th, the VIX index (the markets “FEAR” index) increased to over the 50 mark for the first time since March 5th of 2009.  This fear index measures uncertainty in the market and has subsequently increased to over 80 as 5%-10% market swings have become then norm over the last few days.  These levels are consistent with what we experienced during the debt crisis.

While concerns over Covid-19 certainly contribute to this uncertainty, understand that most market participants have shifted to remote trading since March 6th.  This shift to remote trading over the last two weeks is likely as large of a contributor to market volatility as are Covid-19 headlines. The closing of the floor on the NYSE on Monday and shifting to electronic trading will certainly be a shift, but most firms have already moved trading operations to remote locations over the last two weeks.

With increased uncertainty around Covid-19 and ongoing media hysteria, markets will remain volatile.  But as market participants become more accustomed to their new remote operations, they will become more accustomed to properly evaluating the long-term outlook for investments.  This should positively impact market volatility and provide price relief for stocks.

As public officials continue to adjust the health-care response to the ever changing landscape of the Covid-19 pandemic and the Federal Reserve exercises monetary measures to provide economic support, we continue to process this new information.  “Phase 3” of the Virus Relief Bill is estimated at $1.3 trillion and has proposed direct payments to families ($500 billion) with a second round of payments if the emergency persists.  The bill would also include $50 billion in loans to the airline sector and $150 billion to distressed sectors.

In consideration of these uncertain times, we remain very cautious around short-term market moves and continue to adjust client portfolios accordingly.  Yet, the Investment Team at Old Second Wealth Management maintains a long-term perspective on evaluating the trajectory of the economy and opportunities for client portfolios. Should you have any questions please reach out to your Relationship Manager or Investment Officer.

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.

Coronavirus: O2 Wealth Economic Update, Mar. 20, 2020

U.S. and World News

  • at_home-925104536_370The coronavirus pandemic has turned life around for many people around the world, and America is beginning to share the pain that many other countries have experienced in the past couple of months. As of today, there are just over 14,000 confirmed cases of the virus in America and about 210 deaths. Schools and businesses have closed, millions of employees are working from home, and unemployment is on the rise as “social distancing” has brought the economy to a screeching halt. California, New York, and Illinois have taken unprecedented action and declared state-wide “stay-at-home” or “Shelter-in-place” orders. These laws involve all non-essential businesses to close, but do allow citizens to go out only to pick up food, medicine, or other essential items and to go outside for a walk. The laws will be enforced by issuing a misdemeanor to citizens found in violation. The U.S. government and the Federal Reserve are doing everything that they possibly can to heal the sick, stop the spread of the virus, and keep the economy afloat by taking massive fiscal and monetary stimulus measures. The Federal Reserve slashed the fed funds rate to zero and initiated a security purchases program that continues to grow by the day. The government is spending over $1 trillion on a stimulus package that includes paid family leave, enhanced unemployment insurance, payments to individuals, and corporate bailouts.

Markets

  • Markets fell further this week as economic activity slows significantly, the S&P 500 lost 14.96% and closed at 2,305. The Dow Jones dropped 17.30% and closed at 19,174. Year-to-date, the S&P 500 is down 28.30% and the Dow Jones is down 32.40%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.49% and 0.88%, respectively.
  • The spot price of WTI Crude continued to fall this week. Prices fell 21.85% and closed at $22.43 per barrel. Year to date, Oil prices are down 63.26%.
  • The spot price of Gold dropped by 1.75% and closed at $1,488.10 per ounce. Year to date, Gold prices are down 1.92%.

Economic Data

  • Initial jobless claims rose by 70,000 to 281,000 and the four-week moving average of claims rose 17,000 to 232,000. Claims rose by 14,000 in California and by 9,000 in Washington State as a result of the coronavirus.
  • The Philadelphia Fed manufacturing index fell 49.4 points to -12.7 versus expectations for a reading of 8.0
  • Retail sales fell 0.5% versus expectations for an increase of 0.2%
  • Core retail sales was flat versus expectations for an increase of 0.4%
  • Industrial production rose by 0.6% versus expectations for an increase of 0.4%
  • Housing starts fell by 1.5% to 1,599k units versus expectations for a decrease of 4.3% to 1,500k units.
  • Building permits fell 5.5% versus expectations for a decline of 3.2%
  • Existing home sales rose by 6.5% to a seasonally-adjusted-annualized rate of 5.77 million units versus expectations for an increase of 0.9%

Fact of the Week

  • The average daily percentage change in the Dow Jones since March 21, 2007 has been 0.76%. Since the beginning of March, we have only had 2 days were the Dow moved less than 2% and the average daily percentage change has been 5.66%. (Source: Macrotrends)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.

Coronavirus: Special Wealth Update, Mar. 19, 2020

Last night, the Senate passed “phase 2” of the Virus Relief Bill which will provide free testing, expanded funding for food security programs and ensures paid sick leave.  In addition, news passed that the floor of the New York Stock Exchange (NYSE) would be closed Monday March 23rd.  THE MARKETS WILL REMAIN OPEN!  Only the NYSE floor will be closed.  Though this is not normal operating procedure, today the vast of majority of trades on the NYSE occur in an electronic format.

On March 6th, the VIX index (the markets “FEAR” index) increased to over the 50 mark for the first time since March 5th of 2009.  This fear index measures uncertainty in the market and has subsequently increased to over 80 as 5%-10% market swings have become then norm over the last few days.  These levels are consistent with what we experienced during the debt crisis.

While concerns over Covid-19 certainly contribute to this uncertainty, understand that most market participants have shifted to remote trading since March 6th.  This shift to remote trading over the last two weeks is likely as large of a contributor to market volatility as are Covid-19 headlines. The closing of the floor on the NYSE on Monday and shifting to electronic trading will certainly be a shift, but most firms have already moved trading operations to remote locations over the last two weeks.

With increased uncertainty around Covid-19 and ongoing media hysteria, markets will remain volatile.  But as market participants become more accustomed to their new remote operations, they will become more accustomed to properly evaluating the long-term outlook for investments.  This should positively impact market volatility and provide price relief for stocks.

As public officials continue to adjust the health-care response to the ever changing landscape of the Covid-19 pandemic and the Federal Reserve exercises monetary measures to provide economic support, we continue to process this new information.  “Phase 3” of the Virus Relief Bill is estimated at $1.3 trillion and has proposed direct payments to families ($500 billion) with a second round of payments if the emergency persists.  The bill would also include $50 billion in loans to the airline sector and $150 billion to distressed sectors.

In consideration of these uncertain times, we remain very cautious around short-term market moves and continue to adjust client portfolios accordingly.  Yet, the Investment Team at Old Second Wealth Management maintains a long-term perspective on evaluating the trajectory of the economy and opportunities for client portfolios. Should you have any questions please reach out to your Relationship Manager or Investment Officer.

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.

Coronavirus: Special Wealth Update, Mar. 16, 2020

For the third time in two weeks, the New York Stock Exchange halted trading due to the circuit breaker of a 7% intra-day loss being breached. This comes after a sharply higher Friday trading session, another weekend of worsening headlines as it relates to the spread of the Coronavirus and significant action from the Federal Reserve and other global central banks.

iStock-1044047026Late in last Friday’s trading session, President Trump declared the Coronavirus pandemic a national emergency and announced a number of measures aimed at combatting Covid-19 and stemming the economic turmoil that has taken place over the last few weeks. The declaration opens up billions of dollars to help fight spread and Trump vowed a massive increase in the number of tests available as a result. Among other items, he announced a number of partnerships with the private sector. There’s a Google-led web portal for citizens to log their symptoms and arrange for testing if needed. Retailers such as Wal-Mart have also pledged to ramp up their supply chains in efforts to keep their shelves stocked as well as offering up portions of their stores’ parking lots for drive thru testing. Trump also announced large purchases of oil into the United States’ Strategic Petroleum Reserve in an attempt to stabilize oil prices and stockpile oil at low costs in case of supply issues in the future. Interest on all federally held student loans has been waived as well.

Over the weekend, the House passed an emergency Coronavirus bill. The bill includes free testing, expanded medical leave for small business employees (under 500 employees), paid sick leave and additional funding to state’s experience spikes in unemployment. Congressional committees are expected to work through this week’s regularly scheduled recess to continue examining what can be done to soften the health-related and economic impact of the virus.

Many states are announcing their own courses of actions. In the State of Illinois, Governor J.B. Pritzker announced that schools will be closed beginning on Tuesday. He has also announced that all restaurants and bars are to close for dine-in customers, allowing for only pick-up and delivery from these establishments.

The CDC has laid out stricter guidelines in terms of public gatherings, recommending the cancellation or postpone of events of over 50 people for the next 8 weeks. They also continue the efforts to flatten the curve by encouraging proper hygiene, social distancing and remote work when available. The Center will be releasing additional guidelines in a press conference this morning.

Sunday evening the Federal Reserve announced a 100 basis point cut to the Fed Funds Rate, bringing the overnight lending rate essentially to 0%. The statement also called for a new $700 billion round of Quantitative Easing in which the Fed will purchase $500 billion in Treasury securities and $200 billion in mortgage backed securities. It was also announced that there was coordinated action on the part of the Fed in conjunction with the central banks of Canada, England, Europe, Japan and Switzerland to enhance liquidity across the global financial system in this time of stress. This announcement was in addition to its emergency cut of 50 basis points on March 3rd and was done so ahead of and in lieu of the Federal Reserve’s regularly scheduled meeting this week. 

Markets are still dealing with a great level of uncertainty as to how this public health crisis plays out economically. With the Federal Reserve having used a great deal of their available monetary measures, it will be up to the fiscal and health-related response to largely restore confidence in the markets. As always during turbulent times like this, the Investment Team at Old Second Wealth Management continues to monitor these situations closely and how they long term trajectory of the economy. Should you have any questions please reach out to your Relationship Manager or Investment Officer.

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.

Coronavirus, OPEC Oil: O2 Wealth Economic Update Mar. 13, 2020

U.S. and World News

  • virus-1206354421_370This week, the United States response to the coronavirus began to ratchet higher as the World Health Organization declared the virus a global pandemic and community spread within the country worsened. During President Trump’s address to the nation on Wednesday night, he announced a suspension of all travel from Europe to the United States for 30 days, as the spread throughout Europe has escalated dramatically. Italy remains on a nationwide lockdown and ordered all non-essential shops and services to close, leaving only supermarkets and pharmacies open. President Trump also announced plans for deferred tax payments, payroll tax relief, and low interest business loans. All of the major sports organizations have either canceled or delayed activities, including the NCAA tournament. State governments have also taken emergency measures such canceling large public events. Grocery stores have taken measures to contain supply, with grocery retailer Kroger placing limits on the amount of sanitary products and cold medicine that customers can buy per order, as Americans rush for supplies.
  • OPEC+, the organization responsible for the regulation of oil prices, failed to agree on production cuts to combat the collapsed demand for oil prices as a result of the coronavirus. Saudi Arabia launched a price war in response to Russia’s disagreement, pumping as much oil as they have capacity for to flood the market, causing the price of oil to fall under $30 per barrel. The sharp decline in prices as a result of Saudi Arabia’s actions are a threat to the United States energy independence, as U.S. oil companies are facing a drop in production of more than 1 million barrels per day. The drop in U.S. oil production could be enough to change the United States from being a net exporter, to a net importer of oil.

Markets

  • Markets dropped in a historic week as coronavirus concerns struck fear into investors. The S&P 500 dropped 8.73% and closed at 2,711. The Dow Jones fell 10.24% and closed at 23,186. Year-to-date, the S&P 500 is down 15.73% and the Dow Jones is down 18.19%.
  • Yields ended the week higher. The 5 year and 10 year U.S. Treasury Notes are yielding 0.74% and 0.98%, respectively.
  • The spot price of WTI Crude declined significantly this week. Prices fell 19.19% and closed at $33.36 per barrel. Year to date, Oil prices are down 45.37%.
  • The spot price of Gold dropped by 9.06% and closed at $1,522.23 per ounce. Year to date, Gold prices are up 0.33%.

Economic Data

  • Initial jobless claims fell by 4,000 to 211,000 and the four-week moving average of claims rose 1,000 to 214,000. Claims fell by 3,000 in New York, 1,000 in Georgia, and by 1,000 in Michigan.
  • The producer price index (PPI) fell 0.6% versus expectations for a decline of 0.1%
  • PPI excluding food and energy fell by 0.3% versus expectations for an increase of 0.1%
  • The consumer price index (CPI) rose 0.1%, in-line with expectations and the year-over-year rate rose 2.3%, in-line with expectations
  • The Core CPI index rose 0.2%, in-line with expectations and the year-over-year rate rose by 2.4%, in-line with expectations
  • The University of Michigan’s index of consumer sentiment fell 5.1 points to 95.9 in the preliminary report versus expectations for a reading of 95.0

Fact of the Week

  • The S&P 500’s recent low was off nearly 913 points since it peaked at 3,393.52. On a point basis, over the period, the S&P 500 loss was larger than the overall value of the index when the 11-year bull market began. (Source: Applied Finance Group)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.