China virus, Boeing: Wealth Economic Update January 31, 2020

U.S. and World News

  • Wall Street sold off to end the week and month, as investors grew increasingly fearful about the potential global economic impact of China’s spreading coronavirus. Worries were exacerbated by increasing reports of worldwide cases, with 9800 confirmed cases and 200 people dead. Delta, United and American Airlines are suspending U.S.-China flights, and the U.S. Centers for Disease Control and Prevention saying it would quarantine Americans evacuated from Wuhan, the epicenter of the outbreak.
  • iStock-1159624289After more than three years of economic uncertainty, political division and missed deadlines, the U.K. is set to leave the EU at the stroke of midnight Brussels time. A potentially volatile new chapter lies ahead: London and Brussels will try to hash out a trade deal by the end of the year as Britain enters a transition phase. On the eve of Brexit, the Bank of England opted to leave interest rates on hold at 0.75%, citing a pickup in business activity since the election of Boris Johnson and defying some market speculation that a cut was in the cards.
  • Five Katyusha rockets were fired at the fortified Green Zone in Baghdad last night, one directly hitting the U.S. Embassy building. The rare direct targeting of the compound wounded three people, adding to the bearish market turn being seen around the world. News reports also suggested that Iraqi security forces in Baghdad killed an anti-government protester, adding to the months-long civil unrest that has seen the death of 500 people since Oct. 1.

Markets

  • Markets pulled back again this week over concerns about the coronavirus. The S&P 500 lost 2.1% and closed at 3,225. The Dow Jones fell 2.5% and closed at 28,256. Year-to-date, the S&P is about flat, down 0.04% and the Dow Jones is down 0.9%.
  • Yields fell noticeably this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.31% and 1.42%, respectively.
  • The spot price of WTI Crude fell this week. Prices fell 4.8% and closed at $51.59 per barrel. Year to date, Oil prices are down 15.5%.
  • The spot price of Gold rose by 1.1% and closed at $1,589.16 per ounce. Year to date, Gold prices are up 4.7%.

Economic Data

  • Real GDP rose by 2.1% in the fourth quarter, one tenth above expectations.
  • Initial jobless claims declined to 216k, roughly as expected, and continuing claims fell by 44k further to 1,703k.
  • New home sales decreased by 0.4% to 696k in December, and the levels of home sales in prior months were revised down.
  • Pending home sales fell 4.9% in December, mirroring the pullback in new homes sales and perhaps influenced by storms in the South region.

Fact of the Week

  • Only 1 out of every 222 individual tax returns (0.45%) was subject to an audit during the US government’s fiscal year that ended 9/30/19. (source: Internal Revenue Service)

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

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China, Brexit: Wealth Economic Update November 29, 2019

U.S. and World News

  • Increased optimism of a Phase One trade deal between the U.S. and China helped to bring major averages higher in the holiday-shortened week, including a 100th new record high for the Dow Jones under the Trump Presidency. Aiding this optimism was China announcing increased penalties on violations of intellectual property rights. Data out of China showing industrial profits declining -9.9% in the last year may also lend to China’s desire to speed up this Phase One process. However, the human rights situation in Hong Kong could potentially jeopardize this progress. President Trump has signed into law Congressional legislation supporting Hong Kong’s anti-government protestors, prompting Beijing to say it would take ‘firm counter-measures’ and that attempts to interfere would be doomed to fail.
  • england-957174246_370Sporting a comfortable lead in the poll ahead of the opposition Labour Party, Boris Johnson laid out his Tory agenda ahead of the December 12th In it he pledges to bring back his Brexit Deal to parliament before Christmas and ruled out any further delays. Johnson has also promised no new taxes, contrary to his opponent Jeremy Corbyn who has proposed additional taxes to fund a major expansion of the U.K.

Markets

  • Markets rose this week on continued optimism over trade. The S&P 500 gained 04% and closed at 3,141. The Dow Jones rose 0.75% and closed at 28,051. Year-to-date, the S&P is up 27.63% and the Dow Jones is up 23.05%.
  • Yields were little changed this week. The 5 year and 10 year U.S. Treasury Notes are yielding 63% and 1.78%, respectively.
  • The spot price of WTI Crude dipped this week. Prices fell 07% and closed at $55.42 per barrel. Year to date, Oil prices are up 22.04%.
  • The spot price of Gold rose by 55% and closed at $1,463.93 per ounce. Year to date, Gold prices are up 14.15%.

Economic Data

  • Initial jobless claims declined by 15,000 to 213,000 and the four-week moving average fell by 1,000 to 220,000. Claims decreased by 4,000 in Illinois and 3,000 in California but rose by 4,000 in Texas and 2,000 in New York.
  • Third Quarter real GDP was revised up by 0.2% to 2.1% in the BEA’s second estimate. This was above expectations but the details were softer as rising inventories contributed most of the upward revision.
  • New home sales declined by -0.7% in October, slightly better than expectations. New sales decreased in the South (-15,000) and Northeast (-6,000), but rose in the West (+13,000) and Midwest (+3,000).
  • The Case-Shiller home price index rose 0.4% for September, beating expectations of 0.3%. Prices rose in 17 of 20 cities with Seattle (+0.8%), Los Angeles (+0.7%) and Phoenix (+0.6%) posting the largest increases. Home prices have risen 2.1% over the last 12 months as measured by Case-Shiller.

Fact of the Week

  • The combined size of the world’s economies as measured by gross domestic product totals $106 trillion. The combined debt of the world’s economies is $255 trillion, or 240% of the worlds’s GDP. Debt includes government debt, household debt and borrowing by non-financial companies. (Source: Institute of International Finance)

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

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Hong Kong Protests: Wealth Economic Update November 8, 2019

U.S. and World News

  • china-139085922_370On Monday, a 22-year-old Hong Kong student died after falling from a ledge of a car park during a police mission to clear an area during protests, sparking a new round of outrage against Beijing police. Reports say that the 22-year-old was trying to escape tear gas, however the exact reason for his fall are unclear. Additionally, a pro-Beijing lawmaker was stabbed in the street this week by someone impersonating a supporter. As of right now, police say that they were using tear gas to clear an area of protesters and deny any wrongdoing, but the death is creating outrage and a call for investigation by students at the city’s University of Science and Technology. Protests have become increasingly violent as Hong Kong continues to fight for Democracy with Chinese police, even after the controversial extradition bill was withdrawn in September.

Markets

  • Markets rose higher again this week. The S&P 500 gained 0.93% and closed at 3,093, an ALL TIME HIGH. The Dow Jones rose 1.37% and closed at 27,681. Year-to-date, the S&P is up 25.36% and the Dow Jones is up 20.98%.
  • Yields spiked this week amid China trade optimism. The 5 year and 10 year U.S. Treasury Notes are yielding 1.75% and 1.94%, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 2.14% and closed at $57.40 per barrel. Year to date, Oil prices are up 26.40%.
  • The spot price of Gold fell by 3.68% and closed at $1,458.15 per ounce. Year to date, Gold prices are up 13.70%.

Economic Data

  • Initial jobless claims fell by 8,000 to 211,000 and the four-week moving average remained unchanged at 215,000. Claims rose by 2,000 in Illinois and fell by 3,000 in Michigan.
  • Factory orders fell by 0.6% versus expectations for a decline of 0.5%
  • The ISM non-manufacturing index rose by 2.1 points to 54.7 versus expectations for a reading of 53.5
  • The University of Michigan’s index of consumer sentiment rose by 0.2 points to 95.7 versus expectations for a reading of 95.5
  • Wholesale inventories fell by 0.4% versus expectations for a decline of 0.3%

Fact of the Week

37% of 2,003 Americans surveyed in the 1st quarter 2019 had less than $5,000 accumulated in pre-tax retirement accounts (source: Northwestern Mutual Planning & Progress Study).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
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

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Brexit vote: Wealth Economic Update October 18, 2019

U.S. and World News

  • brexit-1050622194_370British Prime Minister Boris Johnson is set for a big day tomorrow as parliament is set to vote on a Brexit deal that the Prime Minister agreed on with the European Union on Thursday. Boris Johnson stated that he is “very confident” that the House of Commons will support the deal, which is widely expected to be a historically close vote and will determine whether there will be a deal or not before the October 31st deadline. The Northern Irish Democratic Unionist Party (DUP) stated that they are unable to support the deal as it stands, casting doubts over the passage of the deal tomorrow. If the MP’s reject the deal tomorrow, it is still possible that a vote on a “no-deal Brexit” could pass, but that is unlikely given historical votes on the this motion. The likely outcome if the Brexit deal is voted down tomorrow is that the United Kingdom will ask the European Union for another extension.


Markets

  • Markets were mixed this week after corporate earnings and Chinese economic data. The S&P 500 rose 0.55% and closed at 2,986. The Dow Jones fell 0.13% and closed at 26,770. Year-to-date, the S&P is up 20.96% and the Dow Jones is up 16.90%.
  • Yields rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.56% and 1.75%, respectively.
  • The spot price of WTI Crude moved lower this week this week. Prices fell 1.83% and closed at $53.70 per barrel. Year to date, Oil prices are up 18.26%.
  • The spot price of Gold rose by 0.11% and closed at $1,490.67 per ounce. Year to date, Gold prices are up 16.23%.

Economic Data

  • Initial jobless claims rose by 4,000 to 214,000 and the four-week moving average rose by 1,000 to 215,000. Claims increased by 5,000 in California.
  • The level of housing starts fell 9.4% to 1,256k versus expectations for a reading of 1,320k
  • Building permits fell by 2.7% versus expectations for a decline of 5.3%
  • Retail sales fell 0.3% versus expectations for an increase of 0.3%
  • Core retail sales remained unchanged versus expectations for a 0.3% increase
  • Industrial production fell by 0.4% versus expectations for a decline of 0.2%

Fact of the Week

  • In 2008, China’s economy was smaller than the economy of Japan ($4.5 Trillion vs $4.9 Trillion). In 2019, China’s economy is nearly triple that of Japan’s economy ($14.2 Trillion vs $5.2 Trillion)

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
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

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Oil, Brexit, Fed market funding: Wealth Economic Update September 20, 2019

U.S. and World News

  • oil-1090135110_370Weekend drone strikes on the heart of the Saudi oil industry forced the kingdom to shut down half its crude production, amounting to a loss of 5.7M barrels a day, or roughly 5% of the world’s daily production of crude oil. Yemen’s Iranian-aligned Houthi rebels claimed credit for the attack, saying they sent 10 drones to strike at important Aramco facilities, including the world’s largest oil processing plant and a major oil field. The disruption sent WTI futures as much as 15.5% higher overnight to $63.34, the biggest intraday percentage gain since June 22, 1998, while President Trump authorized a release of crude from the Strategic Petroleum Reserve, as necessary. For the global oil market, the 5.7M bpd Saudi halt is the single worst sudden disruption ever, surpassing the loss following the Invasion of Kuwait and Iranian Revolution.
  • The stakes couldn’t be higher given the current Brexit turmoil as Britain’s highest court begins hearing arguments today on whether the government’s decision to suspend Parliament was lawful (judges in England and Scotland previously came to contrasting conclusions). Boris Johnson argues that he asked the Queen to prorogue the lower house in order to introduce a new legislative agenda, but critics accuse him of attempting to stymie debate and push through a no-deal Brexit before an Oct. 31 deadline.
  • Policymakers have been thrown another unexpected curveball as cash available to banks for their short-term funding needs all but dried up on Monday and Tuesday. That forced the New York Fed to make an emergency injection of more than $50B, its first since the financial crisis, to bring down key short-term rates that had spiked to as high as 10%. Fed traders will be back this morning to restore calm by offering another $75B of cash to the market.


Markets

  • Markets receded slightly this week. The S&P 500 was down 0.5% and closed at 2992.03. The Dow Jones fell by 1.05% and closed at 26,935.07. Year-to-date, the S&P is up 21.04% and the Dow Jones is up 17.49%.
  • Yields came back down after a pop last week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.6% and 1.715%, respectively.
  • The spot price of WTI Crude soared after the attack in Saudi Arabia. Prices rose 5.9% and closed at $58.09 per barrel. Year to date, Oil prices are up 27.92%.
  • The spot price of Gold gained 1.87% and closed at $1,516.29 per ounce. Year to date, Gold prices are up 18.23%.

Economic Data

  • Existing home sales rose by 1.3% to a seasonally adjusted annualized rate of 5.49 million units in the August report, against consensus expectations for a 0.7% decline. August home sales rose for both single-family units (+1.2%) and condos and co-ops (+1.7%). Sales increased in three of four regions, led by the Northeast (+7.6%), and followed by the Midwest (+3.1%) and South (+0.9%). Sales declined in the West (-3.4%).
  • The level of housing starts increased to 1,364k in August above expectations for a more moderate increase. Single-family starts increased by 4.4% while the volatile multi-family category increased by 32.8%. August housing starts increased in three out of four regions, led by the Northeast (+30.5%), and followed by the Midwest (+15.4%) and South (+14.9%). Housing starts were flat in the West.
  • Building permits increased 7.7%, above expectations, with a 4.5% increase in single-family permits alongside a 13.3% increase in multi-family permits. Permits increased in the Northeast (+26.9%), Midwest (+14.5%), and South (+11.0%), and declined in the West (-7.8%).
  • Industrial production rose by 0.6% in August, against consensus expectations for a smaller increase. Manufacturing production rose by 0.5%, driven by a 0.6% increase in ex-auto manufacturing and offset by a 1.0% decline in auto manufacturing. The capex-sensitive business equipment category rebounded 1.0%. The utilities component, an input into consumption in the GDP accounts, rose 0.6% further, after rising 3.7% in July. Industrial production growth in July was revised up by 0.1pp to -0.1%.

Fact of the Week

  • The median household income (adjusted for inflation) was the highest ever recorded in the USA at $63,179. It was the third consecutive year (2016-2018) that the USA has produced an all time high in adjusted median household income. Prior to 2016, the record high was set in 1999. (Source: Federal Reserve Bank of St. Louis)

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
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

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China tariffs, Brexit: Wealth Economic Update August 24, 2019

U.S. and World News

  • Early this morning, China announced its plan to impose retaliatory tariffs on $75 billion of American goods including soybeans, automobiles, and oil as a response to the Trump administrations planned additional tariffs on Chinese imports. The new retaliatory tariffs are scheduled to take effect on September 1st and December 15th, the same schedule as the United States 10% tariff on $300 billion of Chinese goods goes into effect. This new set of retaliatory tariffs targets U.S. farms and factories, bringing the total tariff on U.S. automobile exports to 50%. The announcement comes as the G7 summit takes place in France and the Federal Reserve meeting in Jackson Hole Wyoming, two critical meetings where the trade war with China will be discussed.
  • British Prime Minister Boris Johnson traveled to Germany and France this week to continue to push his message that Brexit will not be stopped, with or without negotiations. Boris Johnson also wrote a letter to European Council President Donald Tusk stating the the Irish backstop plan is “unviable” and must be removed, hinting that if it were, it could lead to a Brexit deal being approved by parliament before the Brexit deadline. Brexiteers believe that the Irish backstop poses a threat to the independence of the U.K. from the European Union post-Brexit as the U.K. would be restricted from making trade deals with other countries. The European Union has stated that the Irish backstop is necessary for the free movement of goods, services, and people.


Markets

  • Markets plummeted this week as the trade war with China has ramped up again. The S&P 500 fell 1.42% and closed at 2,847. The Dow Jones declined by 0.98% and closed at 25,629. Year-to-date, the S&P is up 15.07% and the Dow Jones is up 11.64%.
  • Yields fell slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.41% and 1.53%, respectively.
  • The spot price of WTI Crude fell this week. Prices declined 1.72% and closed at $53.87 per barrel. Year to date, Oil prices are up 18.63%.
  • The spot price of Gold rose 0.82% and closed at $1,525.91 per ounce. Year to date, Gold prices are up 18.98%.

Economic Data

  • Initial jobless claims fell by 12,000 to 209,000. The four week moving average of claims rose by 1,000 to 215,000. Claims fell by 6,000 in California.
  • Existing home sales rose by 2.5% to a seasonally adjusted annualized rate of 5.42 million, in-line with expectations
  • Sales of new single-family homes fell by 12.8% to a seasonally adjusted annualized rate of 635k units versus expectations of 647k units

Fact of the Week

  • The bond market (as measured by the Bloomberg Barclays Aggregate bond index) has had a negative total return just 3 of the last 40 years. Those years were 1994, 1999, 2013. The year to date total return of the Bloomberg Barclays Aggregate ETF (AGG) as of close 8/22 is 8.14%. (Source: 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
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.

Brexit calls for resignation, China trade: Wealth Economic Update May 24, 2019

U.S. and World News

  • iStock-1057358690British Prime Minister Theresa May’s last ditch effort to deliver Brexit through a deal filled with compromises with the Labour Party has failed as calls for her resignation only grew louder. The U.K. participated in European elections this week, putting a sour taste into the mouths of British politicians who had originally planned to watch this event from the sidelines. Results of the European Union elections will be announced after 10P.M on Sunday and British Conservatives are expected to suffer a dramatic defeat. Theresa May has announced that she will resign on June 7th and stated that “It is and will always remain a matter of deep regret to me that I have not been able to deliver Brexit”. The British Pound has fallen substantially amid all of the uncertainty and the process to elect a new leader will begin next week.
  • Chinese President Xi Jinping tone has shifted in regards to the trade war with the United States when he stated on Monday that China is embarking on a “new Long March, and we must start all over again!”. In addition, a propaganda song, titled “Trade War” about the U.S.-China trade war has gone viral in China. Reports say that China is exploring a retaliation move in response to the Huawei ban that will likely include cutting natural gas purchases from the United States. The Trump administration has announced a $16 billion trade aid program for American farmers who have been hurt by the trade war. Soybean farmers have been impacted the most as the value of soybean exports to China fell 74% in 2018.


Markets

  • Markets continued to fall this week. The S&P 500 fell 1.14% and closed at 2,826. The Dow Jones fell 0.63% and closed at 25,586. Year to date, the S&P is up 13.66% and the Dow Jones is up 10.78%.
  • Yields also fell further this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.12% and 2.32, respectively.
  • The spot price of WTI Crude oil plummeted this week. Prices dropped 6.34% and closed at $58.93 per barrel. Year to date, Oil prices are up 29.77%.
  • The spot price of Gold rose 0.56% this week and closed at $1,284.69 per ounce. Year to date, Gold prices are up 0.17%.

Economic Data

  • Initial jobless fell to 211,000 this week. The four-week moving average of claims fell by 5,000 to 220,000. Claims fell by 2,000 in California and Illinois.
  • Existing home sales fell 0.4% to a seasonally adjusted rate of 5.19 million units versus expectations for a 2.7% increase
  • Sales of new single-family homes fell by 6.9% in April to a seasonally-adjusted annualized rate of 673k units versus expectations for 675k units
  • Durable goods orders fell by 2.1% versus expectations for a decline of 2.0%
  • Durable goods orders ex-transport was unchanged versus expectations for a 0.1% increase
  • Core capital goods orders fell 0.9% versus expectations for a 0.3% decline

Fact of the Week

  • It would cost about $334 per person per year in Illinois to cover the funding costs for the 5 state pension funds. Illinois law current requires that the pensions funds be 90% funded by 2045. (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
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.

China, Brexit, EU: Wealth Economic Update May 17, 2019

U.S. and World News

  • china_us-1035146880Earlier this week, China announced new tariffs on $60 billion of American imports in response to the tariff increase by the United States. The Trump administration will subsidize U.S. farmers with $15 billion in aid, in addition to the Department of Agriculture’s $12 billion compensation plan that was put into place last year. President Trump has stated his intention to meet Chinese President Xi Jinping at the G20 summit in June. The United States also has banned China’s Huawei Technologies from buying U.S. technology without special approval and has restricted its equipment from being any part of U.S. telecom networks. Equipment produced by Huawei Technologies, the world’s third largest smartphone maker, is allegedly used by the Chinese to spy, however Huawei has denied those allegations.
  • Brexit drama heats up again after weeks of negotiations between Theresa May and opposition party leader Jeremy Corbyn have closed with Jeremy Corbyn telling the media that his party will oppose the deal. The Conservative Party has been enraged with Theresa May over the past month for negotiating with the Labour Party and Theresa May has finally set a timetable for her departure as prime minister in the beginning of June. Jeremy Corbyn added that the strong probability of Theresa May soon being replaced had contributed to his decision to oppose her deal.
  • As trade negotiations with China have been extended into the foreseeable future, the Trump administration has delayed tariffs on cars and auto part imports from the European Union and Japan for up to six months. In February, the Commerce Department had found that car imports and certain auto parts harm national security, leading to the planned auto tariffs. Agreements have already been made with Canada, Mexico, and Korea, while the European Union and Japan have rejected the idea.


Markets

  • Markets are lower after another volatile week. The S&P 500 fell 0.69% and closed at 2,860. The Dow Jones fell 0.61% and closed at 25,764. Year to date, the S&P is up 14.96% and the Dow Jones is up 11.48%.
  • Yields continued to fall this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.18% and 2.39, respectively.
  • The spot price of WTI Crude Oil rose this week. Prices climbed 1.67% and closed at $62.69 per barrel. Year to date, Oil prices are up 38.05%.
  • The spot price of Gold fell 0.63% this week and closed at $1,277.97 per ounce. Year to date, Gold prices are down 0.35%.

Economic Data

  • Initial jobless fell to 212,000 this week. The four-week moving average of claims rose by 5,000 to 225,000. Claims rose by 4,000 in California
  • The Philadelphia Fed manufacturing index rose 8.1 points to 16.6 versus expectations for a reading of 9.0
  • Housing starts rose 5.7% to 1,235k versus expectations for a 6.2% increase to 1,209k
  • Building permits rose by 0.6% versus expectations for a 0.1% increase
  • Import prices rose by 0.2% versus expectations for a 0.7% increase
  • Import prices ex-petroleum fell by 0.6% versus expectations for a 0.2% increase
  • Retail sales fell by 0.2% versus expectations for a 0.2% increase
  • Retail sales ex-auto & gas fell by 0.2% versus expectations for a 0.3% increase
  • Industrial production fell by 0.5% versus expectations for an unchanged reading
  • The University of Michigan’s index of consumer sentiment rose by 5.2 points to 102.4 in the preliminary report versus expectations for a reading of 97.2.

Fact of the Week

  • From its closing high of 2946 on April 30th, the S&P 500 has fallen 3.56% to 2859. Since the beginning of the bull market on 3/10/09, the market has had 12 pullbacks of at least 5%, including 6 drops at least 10% and 3 of at least 15%. (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
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.

 

China, Brexit, Iran: Wealth Economic Update May 11, 2019

U.S. and World News

  • china-1053768454_370On Sunday night, just days before a Chinese trade delegation would depart for Washington to wrap up 18 months of trade negotiations, President Trump tweeted that tariffs on $200 billion of Chinese goods would rise to 25% from 10% by the end of the week, accusing China of “reneging” on its trade promises. President Trump also shared his intention to impose a 25% tariff on the remaining $325 billion of Chinese goods that aren’t currently taxed, making virtually all Chinese exports to the United States subject to a 25% tariff. The Chinese trade delegation led by Vice Premier Liu He did travel to the White House on Thursday for negotiations that ended earlier today, and the 10% tariff rate on $200 billion in Chinese goods did increase to 25% at midnight last night. China’s Commerce Ministry has announced that they will be taking countermeasures against the tariff increase, but that specifically has not yet been revealed. There have been numerous statements from officials of both countries regarding trade talk progress or lack thereof while markets respond in volatile fashion and struggle for direction, however, the only things we actually know to be true at this point is the fact that there is no done deal, and the tariff rate on $200 billion of Chinese goods has risen to 25% from 10%.
  • British Prime Minister Theresa May’s future has once again, been called into question as members of the committee are talking about a rule change that would allow another no-confidence vote to oust her. Currently, the Prime Minister is protected by a rule that does not allow more than one no-confidence vote within 12 months of the previous one that occurred in December. Committee members are growing frustrated that a timetable for Theresa May’s departure has not been set out. Both parties experienced losses in last week’s elections and a new offer is on the table, a deal that would result in a customs union-type arrangement lasting until 2022, Britain’s next general election. At that point in time, it would be decided whether to move toward a full customs union or a deal that would allow Britain to make trade deals with other countries.
  • After American sanctions on Iran have begun to cripple their economy, President Trump has offered to meet and negotiate with Iran’s leadership team about giving up their nuclear program, which was quickly rejected. The United States deployed the Abraham Lincoln carrier through Egypt’s Suez Canal and B-52 bombers to the U.S. base in Qatar yesterday as a warning to Iran. Iran’s leader, Ayatollah Tabatabai-Nejad responded by saying “Their billion dollar fleet can be destroyed with one missile” and “if they attempt any move, they will face dozens of missiles”.


Markets

  • Markets experienced volatility as a result of trade drama with China and finished the week lower. The S&P 500 fell 2.10% and closed at 2,881. The Dow Jones fell 1.96% and closed at 25,942. Year to date, the S&P is up 15.74% and the Dow Jones is up 12.15%.
  • Yields fell this week as investors fled to bonds. The 5 year and 10 year U.S. Treasury Notes are yielding 2.26% and 2.47, respectively.
  • The spot price of WTI Crude Oil ended the week relatively unchanged. Prices fell 0.37% and closed at $61.71 per barrel. Year to date, Oil prices are up 35.90%.
  • The spot price of Gold rose 0.54% this week and closed at $1,286.05 per ounce. Year to date, Gold prices are up 0.28%.

Economic Data

  • Initial jobless fell to 228,000 this week. The four-week moving average of claims rose by 7,000 to 220,000. Claims rose by 11,000 in New York and by 2,000 in Illinois.
  • The producer price index (PPI) rose by 0.2% versus expectations for a 0.3% increase
    PPI ex-food and energy rose by 0.1% versus expectations for a 0.2% increase
  • The trade deficit rose to $50.0 billion, as expected
  • Wholesale inventories fell by 0.1% versus expectations for no change
  • The consumer price index (CPI) rose by 0.32% versus expectations for a 0.4% increase and the year-over-year rate came in at 2.0% versus expectations for 2.1%
  • Core CPI rose by 0.14% versus expectations for a 0.2% increase and the year-over-year rate came in at 2.07%, in-line with expectations

Fact of the Week

  • Sell in May? Since 1989, the 6 month period beginning November 1st has outperformed the 6 month period beginning May 1st 19 out of 30 times. Total return for the 6 month periods starting November 1st were +731%, while total returns for the 6 month periods starting May 1st were only +119% over the 30 year period. (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
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.

 

Brexit, EU Trade: Wealth Economic Update April 12, 2019

U.S. and World News

  • brexit-932726508_370The European Union granted Theresa May an extension for the deadline to leave until October 31st during an emergency summit in Brussels on Wednesday. Some say, that her days are numbered as Prime Minister of the U.K as attempts to leave the European Union with a deal has been a circus. JPMorgan economist Malcolm Barr stated that “A six-month period is clearly enough for the Conservative party to contemplate a change in leadership while still allowing some time for the incoming PM to seek to negotiate with the EU”. The remaining possible scenarios are “No Brexit”, Theresa May’s deal is approved and she resigns from office, the deal fails again and an election is called, or perhaps the worst scenario, there is a “No-deal Brexit”. Goldman Sachs currently has a 10 percent probability of a no-deal Brexit.
  • As the conclusion of the trade war between the United States and China nears, the Trump administration is beginning to start another one with the European Union. U.S. Trade Representative Robert Lighthizer is calling for action over a case involving European Union subsidies to Airbus that the World Trade Organization has discovered causes “adverse effects” to U.S. products. The case has been in litigation for 14 years and has caused $11.2 billion in damage to U.S. trade. The United States is set to begin trade talks with the European Commission, who will conduct negotiations on behalf of the 28 EU member countries. Trade negotiations will begin after official approval from EU ministers is given on Monday.


Markets

  • The stock rally continued this week with the exception of the Dow Jones. The S&P 500 rose 0.56% and closed at 2,907. The Dow Jones lost 0.03% and closed at 26,412. Year to date, the S&P is up 16.63% and the Dow Jones is up 13.93%.
  • Yields surged this week once again. The 5 year and 10 year U.S. Treasury Notes are yielding 2.38% and 2.56%, respectively.
  • The spot price of WTI Crude Oil rose this week. Prices rose 1.16% and closed at $63.81 per barrel. Year to date, Oil prices are up 40.52%.
  • The spot price of Gold fell 0.08% this week and closed at $1,290.78 per ounce. Year to date, Gold prices are up 0.65%.

Economic Data

  • Initial jobless claims fell by 8,000 to 196,000 for the week to its lowest level since 1969. The four-week moving average of claims fell by 7,000 to 207,000. Claims fell by 2,000 in California and Texas.
  • The producer price index (PPI) rose by 0.6% versus expectations for an increase of 0.3%, mostly due to rising oil prices. The year-over-year measure came in at 2.2%.
  • PPI ex-food, energy, and trade services was flat versus expectations for a 0.2% increase and the year-over-year rate came in at 2.0%.
  • Factory orders fell by 0.5%, in-line with expectations
  • The consumer price index rose by 0.4%, in-line with expectations and the year-over-year rate came in at 1.9%
  • Core CPI rose by 0.2%, in-line with expectations and the year-over-year rate came in at 2.0%
  • Import prices rose by 0.6% versus expectations for an increase of 0.4%
  • The University of Michigan’s index of consumer sentiment fell 1.5 points to 96.9 in the April preliminary report versus expectations for a reading of 98.2

Fact of the Week

  • There are 30 million job opening in the United States that pay at least $55,000 a year and do not require a bachelor’s degree. (Georgetown University)

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
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.