China Tariffs, Gas Prices/Canada: Wealth Economic Update Dec. 7, 2018

U.S. and World News

  • china-943639230_370.jpgFollowing the meeting in Buenos Aires between President Trump and President Xi Jinping of China, President Trump agreed to delay a planned increase in the tariff rate on $200 billion of Chinese goods by 90 days while China agreed to begin purchasing agricultural, energy, and industrial commodities from the United States. The deal was initially met with skepticism by markets, however, China has begun preparations to begin importing soybeans and liquefied natural gas. Yesterday, the CFO of Chinese company Huawei was arrested for a violation of United States sanctions that prohibit doing business with Iran. The incident is not estimated to have any effect on trade negotiations between the United States and China.
  • In an effort to combat rapidly falling oil prices, Canada has unexpectedly announced an output cut of 325 thousand barrels per day, setting the precedent for other major oil producing nations to follow suit. Later in the week, Saudi Energy Minister Khalid al-Falih stated that no OPEC deal was a real risk, just before Russia and OPEC members were to meet to discuss further production cuts. After Thursday’s summit concluded with no deal, OPEC met again to agree on 1.2 million barrels per day of production cuts. The deal is viewed as a victory United States oil producers as they are able to enjoy rising oil prices without having to cut production.


Markets

  • In another volatile week, stocks reversed course and headed sharply lower. The S&P 500 plummeted 4.55% and closed at 2,633. The Dow Jones lost 4.44% and closed at 24,389. Year to date, the S&P is up 0.40% and the Dow Jones is up 0.95%.
  • Yields continued their slide this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.70% and 2.86%, respectively.
  • The spot price of WTI Crude Oil rose higher this week, gaining 2.75% and closing at $52.33 per barrel. Year to date, Oil prices are down 12.94%.
  • The spot price of Gold rose 1.46% this week and closed at $1,248.60 per ounce. Year to date, Gold prices are down 4.16%.

Economic Data

  • Initial jobless claims fell by 4,000 to 231,000 this week. The four-week moving average of claims rose by 4,000 to 228,000. Claims rose by 4,000 in California, 2,000 in Illinois, 2,000 in Iowa, 2,000 in Texas, and 2,000 in Wisconsin.

     

  • Private sector employment rose by 179,000 in November versus expectations for a 195,000 gain.

     

  • The trade deficit rose $0.9 billion to -$55.5 billion in October versus expectations for a reading of $-55 billion.

     

  • The ISM manufacturing index rose by 1.6 points to 59.3 in November versus expectations for a reading of 57.5.

     

  • The ISM non-manufacturing index rose by 0.4 points to 60.7 versus expectations for a reading of 59.0.

     

  • Factory orders fell by 2.1% month-over-month in October versus expectations for a 2.0% decline.

     

  • Construction spending fell by 0.1% in October versus expectations for an increase of 0.4%.

     

  • Nonfarm payrolls rose by 155,000 in November month-over-month versus expectations for an increase of 198,000. The lower-than-expected reading was led by slower growth in construction, leisure, and hospitality.

     

    • The unemployment rate held steady at 3.7%, in-line with expectations.

       

    • The labor force participation rate remained at 62.9%

       

    • Average hourly earnings rose by 0.2% month-over-month in November versus expectations for an increase of 0.3%.

Fact of the Week

  • Credit card debt in the US peaked in May 2008 before the global real estate crisis at $1.02 trillion. It then hit a low of $832 billion in April 2011. As of August 2018, US credit card debt climbed back to a record level of $1.04 trillion. (Source: Federal Reserve)

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.

Advertisements

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.

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.

NAFTA, Japan Typhoon: Wealth Economic Update Sept. 10, 2018

U.S. and World News

  • The United States and Canada met to further negotiate a new NAFTA deal once again this week after talks broke down last Friday. President Trump threatened to entirely terminate NAFTA if Congress interferes with these negotiations. While the President certainly has the power to do this given a six month notice, the decision would present many legal challenges. Prime Minister of Canada Justin Trudeau is also taking a tough stance through negotiations stating that “No NAFTA is better than a bad NAFTA deal for Canadians and that’s what we are going to stay with”.
  • osaka_japan-481541250_370bOn Wednesday, Western Japan was hit with the most powerful typhoon that the country has seen in 25 years. Typhoon Jebi hit the city of Osaka with sustained winds of 100 miles per hour killing 11 people, injuring 470, and leaving over a million homes without power. Kansai Airport, a major airport for the tourist cities of Osaka, Kyoto, and Kobe still remains closed after vicious waves sent a large tanker into a bridge connecting the airport to the mainland. It is not yet known when the damaged and flooded airport will be reopened, raising concerns about the impact on tourism and the economy. On Thursday, Northern Japan was hit with a strong earthquake, closing another major airport. 22 were killed, 38 were missing, and roughly 3 million homes were without power after the earthquake.


Markets

  • Stocks fell this week. The S&P 500 dropped by 0.98% and closed at 2,872 The Dow Jones dropped by 0.14% and closed at 25,917. Year to date, the S&P is up 8.79% and the Dow Jones is up 6.51%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.82% and 2.94%, respectively.
  • The spot price of WTI Crude Oil decreased by 2.85% this week to close at $67.81 per barrel. Year to date, Oil prices are up 12.81%.
  • The spot price of Gold dropped 0.35% this week, and closed at $1,196.93 per ounce. Year to date, Gold prices are down 8.13%.

Economic Data

  • Initial jobless claims fell by 10,000 to 203,000 this week. The four-week moving average of claims moved down by 2,000 to 210,000. Claims fell by 3,000 in Michigan and 2,000 in Texas, but rose 2,000 in Indiana. This is the lowest level of jobless claims since 1969.
  • Private-sector employment rose by 163,000 in August versus expectations of a 200,000 gain. Job growth in the private sector was held back by education and health, leisure and hospitality, and construction.
  • The ISM manufacturing index increased to 61.3 in August from 58.1 in July versus expectations for a reading of 57.6. This is the highest level since May of 2004.
  • The ISM non-manufacturing index rose 2.8 points to 58.5 versus expectations of a 56.8 reading. The ISM reports indicate a higher pace of growth.
  • The trade deficit rose to $50.1 billion in July versus expectations of -$50.2 billion.
  • Nonfarm payrolls increased 201,000 in August month-over-month versus expectations of a 190,000 increase. The previous two months were revised lower by a net 50,000.
    • The unemployment rate remained at 3.9% versus expectations of a tick down to 3.8%.
    • Average hourly earnings rose by 0.4% in August versus expectations of a 0.2% increase. The year-over-year rate increased by 0.2% to 2.9%.


Fact of the Week

  • Amazon has gained nearly $400 billion in market cap this year, on its way to becoming the second trillion dollar company, behind Apple. The $400 billion Amazon has gained year to date is nearly equal to the market caps of Walmart, Costco, and Target combined.

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.

Mexico/NAFTA, Brexit: Wealth Economic Update Aug. 31, 2018

U.S. and World News

  • nafta-970297784_370The United States and Mexico have struck a preliminary deal on Monday to replace NAFTA. The deal would remain in force for 16 years, with an evaluation every six years, and is expected to strengthen manufacturing in the United States. The deal includes an obligation by auto manufacturers to manufacture at least 75% of an automobile’s value in the United States, an increase from 62.5%. Also included, was a stipulation that 40-45% of auto components be manufactured by employees earning at least $16 an hour. Negotiations are still ongoing between the United States and Canada after a deal was expected by today, however, the two sides are having trouble coming together on Canada’s dairy market, among other things.
  • The United Kingdom and the European Union have extended the deadline from October 18th to the middle of November for wrapping up Brexit terms, signaling to the market that negotiations have been tough. Britain’s exit from the European Union is set for March 29th, and the longer that negotiations continue, the greater the chance that no deal will be made.


Markets

  • Stocks ended the week higher once again. The S&P 500 rose by 0.98% and closed at 2,901. The Dow Jones increased by 0.79% and closed at 25,963. Year to date, the S&P is up 9.85% and the Dow Jones is up 6.66%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.74% and 2.86%, respectively.
  • The spot price of WTI Crude Oil continued its sharp rebound this week, gaining 1.73% and closing at $69.91 per barrel. Year to date, Oil prices are up 16.30%.
  • The spot price of Gold lost 0.50% this week, and closed at $1,199.33 per ounce. Year to date, Gold prices are down 7.94%.

Economic Data

  • Initial jobless claims rose by 3,000 to 213,000 this week. The four-week moving average of claims moved down by 2,000 to 212,000. Claims rose by 2,000 in Michigan, New York, and Pennsylvania, and fell by 2,000 in California. The pace of layoffs remains very low.
  • Personal income rose by 0.3% in July month-over-month versus expectations of a 0.4% increase.
  • Personal spending increased by 0.4% month-over-month in July, in-line with expectations.
  • The core PCE price index ex-food and energy increased 0.16% month-over-month in July and the year-over-year pace rose 0.06% to 1.98%. These figures were in-line with expectations.
  • Wholesale inventories rose 0.7% in July versus expectations of a 0.2% increase.
  • The Conference Board index of consumer confidence increased to 133.4 versus expectations of 126.6. This is the highest level since the year 2000.
  • Second-quarter Real GDP growth was revised up by 0.1% to 4.2% versus expectations of a -0.1% revision to 4.0%.
  • Pending home sales fell by 0.7% in July, below expectations of a 0.3% increase. Sales declined in the South and the West, but increased in the Northeast and the Midwest.


Fact of the Week

  • In a study of five of the largest U.S. Cities (NYC, Chicago, LA, Washington D.C, and Dallas), it was found that it is cheaper for the average American to take Uber for every trip than it is to own a car. Of the 5 cities, only in Dallas was it cheaper to own a car than to take an Uber. (Source: Kleiner Perkins)

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.

NAFTA: Wealth Economic Update Jan. 16, 2018

U.S. and World News

  • NAFTA-655951028Negotiators have set a March deadline to rewrite NAFTA (North American Free Trade Agreement) amid an increasingly contentious process between the U.S., Mexico and Canada. This also comes amid reports of Canadian officials believing President Trump could pull the U.S. out of the deal altogether. Regarding the timeline, Trump told the Wall Street Journal that he was a ‘little flexible’ on it given Mexico’s July 1 presidential election. On the topic of the border wall between the U.S. and Mexico, Trump said, “They can pay for it indirectly through NAFTA…We make a good deal on NAFTA, and, say, I’m going to take a small percentage of that money and it’s going toward the wall. Guess what? Mexico’s paying.” The next round of negotiations will be taking place in Montreal in two weeks.

Markets

  • Markets continued their upward move to start 2018. The S&P rose 1.61%, closing at a new All-Time High of 2,786. The Dow Jones gained 2.02% for the week, also closing at a new All-Time High of  25,803.
  • Interest rates generally rose again this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.35% and 2.55%, respectively.
  • The spot price of WTI Crude Oil rose by 4.66% this week, closing at $64.30 per barrel.
  • The spot price of Gold ended the week up by 1.37%, closing at $1,337.64 per ounce.

Economic Data

  • Initial jobless claims were up 11,000 from last week, coming in at a three-month high of 261,000. The largest increases were in California (10k), Pennsylvania (3k) and Wisconsin (3k). The four week moving average for claims rose to 251,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.15% in December, beating expectations of 0.1%. A 1.2% drop in energy prices partially offset a 0.2% rise in food prices. Headline inflation rose 2.1% in 2017.
    • Core CPI (excludes food and energy) rose 0.3% in December, higher than the expected 0.2%. During 2017, Core CPI rose 1.8%.
  • Retail sales rose 0.4% in December, a bit below consensus expectations of 0.5%. The largest December gains were at nonstore retailers (+1.2%) and building materials stores (+1.2%) while sales declined at clothing (-0.3%) and sporting goods (-1.6%) stores.

Fact of the Week

  • During the 2000-2002 bear market, the S&P 500 hit a bear market low on October 9, 2002. The headline in USA Today the following morning (10/10/02) was, “Where’s the bottom? No end in sight.” The S&P rose 102% from that point on until peaking five years later in 2007.

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
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@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.

 

Keystone, Interest Rates: Wealth Economic Update Feb. 17, 2017

U.S. and World News

  • oil_socialPresident Trump met with Canadian Prime Minister Justin Trudeau this week for their first face-to-face meeting. The major topic of discussion was the NAFTA trade deal that Trump has vowed to update and renegotiate. The two leaders also discussed Trump’s decision to conditionally approve the Keystone XL pipeline which begins in Alberta’s oil sands. Coming out of the meeting, Trump said that the trade situation with Canada is already “less severe” than it is with Mexico. Canada sends 75% of its exports to the United States, accounting for 20% of Canada’s GDP.
  • Janet Yellen delivered her semi-annual testimony to Congress this week and touched on a number of topics, including the pace of interest rate hikes in the near future. On that note, she stated that, “I would say every meeting would be live,” indicating that the next hike could come as soon as the Fed’s March meeting. The markets are now pricing in a little over a 1 in 3 chance that the Fed raises rates in March.

Markets

  • Markets rose this week with continued low volatility. The S&P 500 gained 1.60% and closed at 2,351 which is an All-Time High. The Dow Jones followed suit by rising 1.88% and closing at 20,624. Year to date, the S&P is up 5.31% and the Dow is up 4.76%.
  • Interest rates were little changed this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.90% and 2.42%, respectively.
  • The spot price of WTI Crude Oil was down 0.91% this week, closing at $53.37 per barrel. Year to date, Oil prices have dipped 0.65%.
  • The spot price of Gold increased by 0.11% this week, closing at $1,235.00 per ounce. Year to date, Gold prices are up 7.63%.

Economic Data

  • Initial jobless claims rose 5,000 from last week, coming in at 239,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 245,000 which is very close to a new 40-year low.
  • Retail sales increased by 0.4% in January, beating expectations of 0.1%. Retail sales ex-autos rose by 0.8%. Gains were broad-based across categories, with the largest increases coming from sporting goods (1.8%), electronics (1.6%), restaurants/bars (1.4%) and department stores (1.2%).
  • The headline Consumer Price Index (measure of inflation) increased by 0.6% in January, beating expectations of 0.3%. This was mostly the result of a 4.0% increase in energy prices during the month. Over the last 12 months, headline CPI has risen 2.5%.
    • Core CPI (excludes food and energy) increased by 0.3% during January, more than the 0.2% forecasted. In the last year, core prices have risen 2.3%.

Fact of the Week

  • 54% of student loan borrowers have either defaulted or failed to pay down even $1 of principal on their outstanding debt over the last 7 years. Until an error was discovered in the government calculations last month, it was believed that the percentage was much lower, at 34%. (Source: Education Department)

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@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.

 

Wealth Management Economic Update October 27, 2015

U.S. and World News

  • The People’s Bank of China surprised global markets on Friday by cutting its benchmark lending and deposit rates by 0.25%. The measure was taken to try to stimulate borrowing and spending without squeezing banks’ ability to profit from the spread of the two rates. The PBOC also cut banks’ reserve-requirement ratios by 0.5% to further pump liquidity into the economy. The move by the central bank comes after China reported growth of 6.9% in the 3rd quarter, which while beating estimates of 6.8%, was its slowest pace of growth since the global financial crisis.
  • Gaining over 40% of the popular vote, Justin Trudeau of the Liberal Party has been elected the Prime Minister of Canada, ousting Conservative PM Stephen Harper after nine years in power. Trudeau has pledged to run a large budget deficit over the next three years to invest in infrastructure and try to stimulate Canada’s economy that has suffered from the steep decline of oil prices.
  • At a policy meeting in Malta this week, European Central Bank President Mario Draghi signaled his willingness to increase stimulus to try to spur economic growth in the Eurozone but stopped short of announcing any new policy measures. Draghi said, “We are ready to act if needed…and we are open to the full menu of monetary policy.” Global markets reacted positively to the statements which also caused a significant drop in the euro.Embed from Getty Images

Markets

  • Equity markets continued to advance upwards this week. The S&P 500 ended the week up 2.09%, closing at 2,075. Similarly, the Dow Jones increased 2.56% and closed at 17,647. Year to date, the S&P is up 2.45% and the Dow is up 0.93%.
  • Yields in the Treasury markets moved a bit higher this week. The 10 year Treasury bond now yields 2.09% while the 5 year Treasury bond now yields 1.42%.
  • The spot price of WTI Crude Oil declined this week. Prices fell by 6.33% closing at $44.70 per barrel. In 2015, WTI Oil prices are down 24.81%.
  • The spot price of Gold decreased this week, losing 1.09% and closing at $1,164.45 per ounce. Year to date, gold prices are down 1.68%.

Economic Data

  • Initial jobless claims came in at 259,000 which was an increase from the prior week’s figure of 255,000. The Labor Department noted that there were no special factors that affected the claims figure. The four week moving average for claims now stands at 263,000, which is a new low for this economic cycle.
  • Housing starts increased by 6.5% in September, solidly beating consensus expectations. The gains were largely driven by an 18.3% increase in starts for the more volatile multi-family structures, while single-family starts increased only 0.3%.
  • Existing home sales rose by 4.7% in September, beating consensus expectations. The increase followed a dip in August and was entirely due to purchases of single-family homes, which rose 5.3%. The median price of existing home sales was up 6.6% from a year earlier.

Fact of the Week

  • According to the Bureau of Labor Statistics, the average American worker will hold 9.9 jobs between the ages of 25 and 48, for an average of 2.4 years per job.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@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.

*Image of Japanese Prime Minister Shinzo Abe. Author: 多摩に暇人. License: GNU Free Documentation License, also filed under Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license. (See, https://commons.wikimedia.org/wiki/File:Shinzo_Abe.jpg).