TikTok, China, Stimulus: O2 Wealth Economic Update, August 7, 2020

U.S. and World News

  • President Trump signed a pair of executive orders targeting TikTok and WeChat. The action references national security concerns and (starting in 45 days) bars any transactions with the apps’ China-based owners – ByteDance and Tencent Holdings. While TikTok said it will pursue all remedies available, including American courts, it also faces a Sept. 15 deadline before its services are banned in the U.S.
  • Talks broke down between Democrats and the White house over a new stimulus deal, after closed door talks between Republicans and Democrats came to a stand still. Democrats offered to cut their previously $3.4 trillion deal down to $2.4 trillion, asking republicans to come up from their $1 Trillion dollar package. Republicans refused, and Secretary Mnuchin called the $2.4 trillion price tag a “non-starter”.

Markets

  • Markets were higher this week. The S&P 500 surged 2.49% and closed at 3,351. The Dow Jones gained 3.88% and closed at 27,433. Year-to-date, the S&P 500 is up 4.92% and the Dow Jones is down -2.5%.
  • Interests rates rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.23% and 0.56%, respectively.
  • The spot price of WTI Crude oil rose this week. Prices rose 2.3% and closed at $41.22 per barrel. Year to date, Oil prices are down -32.49%.
  • The spot price of Gold rose 3.02% and closed at $2,035.55 per ounce. Year to date, Gold prices are up 34.16%.

Economic Data

  • Factory orders increased 6.2% in June, above expectations.
  • Initial jobless fell by 249k to 1.186 million, versus median forcast of 1.4 million.
  • Nonfarm payrolls rose 1.8 million, well above the expected 1.5 million.
  • Average hourly earnings increase 0.2% in July, better than the expectation for a continued decline.

Fact of the Week

  • Patrick Mahomes made headlines last week the Kansas City Royals announced he had become a part owner in an undisclosed deal. Mahomes, aged 24, had just signed a record setting contract with the Kansas City Chiefs for $503 million. However, Mahomes is not the youngest team owner in the nation. That title belongs to Serena Williams 2 year old daughter Alexis, who was listed as part of a 30 person ownership group for LA’s new National Women’s Soccer League Team (Source: Yahoo Sports)

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

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Coronavirus, Unemployment Benefits: O2 Wealth Economic Update, July 31, 2020

U.S. and World News

  • virus-1210596217_370New cases of the coronavirus were reported in China this week, with the mainland reporting 105 new cases on Thursday and 123 new cases on Friday. Hong Kong’s chief executive Carrie Lam announced yesterday that fall elections originally scheduled for September 6th would be postponed as the third wave is resulting in record new daily case figures. United Kingdom’s Prime Minister Boris Johnson ordered an extension of the partial lockdown throughout northern Great Britain for at least two weeks as Europe continues to see rising daily cases. The remainder of the MLB season has been called into question after nearly 20 Miami Marlins players and staff, at least two Phillies staff, and a number of Cardinals players tested positive for coronavirus, resulting in numerous cancelations.
  • As the enhanced unemployment benefits are set to expire today, pressure is mounting in Washington for an agreement on a new stimulus bill to replace American’s lost income. Currently, the Republicans stimulus plan is valued at approximately $1 trillion while the Democrats plan is valued at about $3.5 trillion. Both sides are in favor of moratorium evictions and an additional direct stimulus payment to all Americans, however, Republicans want to cut the unemployment benefits to a portion of lost wages while Democrats are seeking to keep it unchanged. Other issues that remain unresolved are funds for states and local governments and liability protections. Negotiations are set to continue throughout the weekend with the hopes that a deal will be struck by Sunday evening.

Markets

  • Markets were mostly higher this week. The S&P 500 surged 1.75% and closed at 3,271. The Dow Jones lost -0.15% and closed at 26,428. Year-to-date, the S&P 500 is up 2.38% and the Dow Jones is down -6.14%.
  • Interests rates fell lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.22% and 0.54%, respectively.
  • The spot price of WTI Crude oil rose fell week. Prices declined -2.18% and closed at $40.39 per barrel. Year to date, Oil prices are down -33.85%.
  • The spot price of Gold rose 3.82% and closed at $1,974.75 per ounce. Year to date, Gold prices are up 30.15%.

Economic Data

  • Initial jobless claims rose by 12,000 to 1.434 million and the four-week moving average of claims fell by 171,000 to 1.206 million. Claims fell by 25,000 in California, 13,000 in Florida, 11,000 in Louisiana, and by 7,000 in Texas. Claims rose by 17,000 in New York, 16,000 in Virginia, 8,000 in Nevada, and by 7,000 in Michigan.
  • Real GDP fell by -32.9% in the second quarter versus expectations for a decline of           -34.5%
  • Personal consumption fell by -34.6% versus expectations for a decline of -34.5%
  • The Core PCE inflation index fell by 1.1% versus expectations for a decline of 0.9%
  • The PCE price index rose by 0.4%, in-line with expectations and the year-over-year rate rose 0.8% versus expectations for an increase of 0.9%
  • The Core PCE price index rose by 0.2%, in-line with expectations and the year-over-year rate rose by 1.0%, in-line with expectations
  • New orders for durable goods rose by 7.3% versus expectations for an increase of 6.9%
  • Durable goods orders ex-transports rose by 3.3% versus expectations for an increase of 3.6%
  • Core capital goods orders rose by 3.3% versus expectations for an increase of 2.2%
  • Core capital goods shipments rose by 3.4% versus expectations for an increase of 2.4%
  • The Conference Board index of consumer confidence fell by 5.7 points to 92.6 versus expectations for a reading of 95.0
  • The University of Michigan’s index of consumer sentiment fell by 0.7 points to 72.5 versus expectations for a reading of 72.9
  • Retail inventories fell by -2.6% versus expectations for a decline of -2.7%
  • Wholesale inventories fell by -2.0% versus expectations for a decline of -0.5%
  • Pending home sales rose by 16.6% versus expectations for an increase of 15.0%
  • Personal income fell by -1.1% versus expectations for a decline of -0.6%
  • Personal spending rose by 5.6% versus expectations for an increase of 5.2%

Fact of the Week

In both Florida and Texas, general sales tax revenue makes up at least 60% of their total tax revenue collected, the highest percentages in the nation. General sales tax revenue makes up just 12% of Vermont’s total tax revenue. Neither Florida nor Texas has a state income tax (source: Census Bureau).

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, China: O2 Wealth Economic Update, July 24, 2020

U.S. and World News

  • iStock-1212555850The Sun Belt region of the United States continues to battle a high number of daily new cases of COVID-19, contributing largely to the country’s third straight day of over 1,000 deaths. The approximate daily currently hospitalized figure of about 60,000 has now reached levels last seen in late April. The state of Florida, particularly the Miami-Dade area, remains the most severely affected, with a 19.2% positivity rate versus the state positivity rate of 13.3%. President Trump announced yesterday that the Republican convention scheduled to be held in Jacksonville Florida next month will be canceled, citing the coronavirus “flare up”. During a House committee hearing this week, Moderna, Pfizer, Johnson & Johnson, and Merck all pointed out their plans to have a vaccine by 2021, with AstraZeneca stating that they would have an emergency based vaccine available by the end of this year.
  • On Tuesday night in Houston, police and fire fighters responded to a reported fire at the Chinese Consulate which was eventually discovered to be the result of barrels filled with burning documents. The Trump administration quickly responded by closing the consulate and ordering Chinese personnel to leave within 72 hours, angering China who is now accusing the United States of breaking down the “friendship bridge” that bands together the two countries. Secretary of State Mike Pompeo gave a speech yesterday, in which he called for engagement and empowerment of Chinese people, attempting to rally the people against the Communist Party of China. In fulfilling their promised retaliation, China announced Friday morning that it would close the American consulate in Chengdu, the capital of the Sichaun Province. The statement from the White House this morning states that China should “cease these malign actions rather than engage in tit-for-tat retaliation.”

Markets

  • Markets declined slightly this week. The S&P 500 fell -0.27% and closed at 3,216. The Dow Jones lost -0.74% and closed at 26,470. Year-to-date, the S&P 500 is up 0.61% and the Dow Jones is down -6.00%.
  • Interests rates fell slightly again. The 5 year and 10 year U.S. Treasury Notes are yielding 0.27% and 0.58%, respectively.
  • The spot price of WTI Crude oil rose this week. Prices rose 1.15% and closed at $41.22 per barrel. Year to date, Oil prices are down -32.49%.
  • The spot price of Gold rose 5.05% and closed at $1,901.80 per ounce. Year to date, Gold prices are up 25.34%.

Economic Data

  • Initial jobless claims rose by 109,000 to 1.4 million and the four-week moving average of claims fell by 17,000 to 1.36 million. Claims fell by 13,000 in Florida, 9,000 in Texas, and by 6,000 in Indiana. Claims rose by 45,000 in New York, 16,000 in Virginia, and by 11,000 in Tennessee.
  • Existing home sales rose 20.7% to a seasonally-adjusted-annualized-rate of 4.72 million units versus expectations for an increase of 21.4%. Sales were led by the West and South regions.
  • The FHFA house price index fell by -0.3% versus expectations for an increase of 0.3%
  • Sales of new single-family homes rose by 13.8% to a seasonally-adjusted-annualized-rate of 776,000 units versus expectations for 700,000 units.

Fact of the Week

  • 57% of colleges anticipate they will offer “in-person” class instruction for the upcoming 2020-21 school year, just 9% will offer only online class instruction, while 29% of schools will provide a combination of “in-person” and online class instruction. The remaining 5% of schools have yet to decide as of Friday 7/10/20 (source: Chronicle of Higher Education).

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.

China trade, India v. China: O2 Wealth Economic Update, June 19, 2020

U.S. and World News

  • In January, the United States and China agreed to a “Phase One” trade deal where China would be responsible for buying $36.5 billion in U.S agriculture products, an increase from $24 billion in 2017. Year-to-date, China has only purchased $4.65 billion, which is almost half as much purchased during the same period in 2017. Yesterday, Secretary of State Mike Pompeo said China’s top foreign policy official is still committed to the $36.5 billion in purchases for the year, despite the current shortfall. Pompeo tweeted on Thursday “During my meeting with CCP Politburo Member Yang Jiechi, he recommitted to completing and honoring all of the obligations of Phase 1 of the trade deal between our two countries”.
  • iran-china-1225077759_370For the first time in about 50 years, a border clash between India and China broke out after weeks of rising tensions along the disputed and undefined Line of Actual Control (LAC) that separates China and India in Ladakh and the Tibet region. The high altitude and sub-zero temperatures in the mountainous region led to the death of 20 wounded Indian troops. China has not confirmed the death of any of its troops and has accused the Indian army of provoking and attacking Chinese personnel. Both sides have held talks over the phone, agreeing to cool down tensions, expressing that they do not seek escalation to war. Despite the agreed de-escalation, China and India have sent additional military personnel to the region.

Markets

  • Markets rebounded higher this week. The S&P 500 spiked 1.28% and closed at 3,098. The Dow Jones rose 0.33% and closed at 25,871. Year-to-date, the S&P 500 is down -3.68% and the Dow Jones is down -8.98%.
  • Yields were relatively unchanged this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.34% and 0.71%, respectively.
  • The spot price of WTI Crude oil fell this week. Prices fell -1.42% and closed at $38.84 per barrel. Year to date, Oil prices are down -36.39%.
  • The spot price of Gold fell -0.34% and closed at $1,724.80 per ounce. Year to date, Gold prices are up 13.68%.

Economic Data

  • Initial jobless claims fell by 58,000 to 1.5 million and the four-week moving average of claims fell by 235,000 to 1.8 million. Claims increased by 22,000 in Georgia and by 16,000 in New York. Claims fell by 20,000 in Maryland, 16,000 in Massachusetts, and by 16,000 in Oklahoma.
  • Retail sales rose by 17.7% versus expectations for an increase of 8.4%
  • Core retail sales rose by 11.0% versus expectations for an increase of 5.2%
  • Industrial production rose by 1.4% versus expectations for an increase of 3.0%
  • Business inventories fell by 1.3% versus expectations for a decline of 1.0%
  • The level of housing starts rose by 4.3% to 974k units versus expectations for an increase of 23.5%
  • Building permits rose by 14.4% versus expectations for an increase of 16.8%

Fact of the Week

  • The nation’s 13.3% jobless rate as of 5/31/20 (released on Friday 6/05/20) would have been an estimated 16.3% if the workers who were being paid wages from funds obtained through a “Payroll Protection Program” (PPP) loan were counted as “temporarily laid off” instead of “actively employed” (source: Bureau of Labor Statistics).

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, Vaccine, Expansion: O2 Wealth Economic Update, June 12, 2020

U.S. and World News

  • iStock-1205972800_370On Thursday, the FOMC announced that it will leave the fed funds target rate range unchanged at 0-0.25%. The Fed expects no change in the rate through 2022. The statement’s characterization of the current economic situation was mostly unchanged from the April FOMC meeting, and continued to acknowledge the “tremendous human and economic hardship” caused by the virus outbreak. The statement once again noted “sharp” declines in economic activity, “a surge” in job losses, and that weaker demand and lower oil prices are “holding down” inflation. The FOMC outlined its economic projections for the next 3 years, expecting GDP growth of -6.5% for 2020, +5% for 2021, and +3.5% for 2022. They also noted that they will increae holdings of UST as well as residental and commercial MBS in order to “sustain smooth market functioning”.
  • The Wall Street Journal reported this week that the National Institute of Health will be funding and conducting studies for three potential COVID-19 vaccines beginning this summer. Trials for Moderna’s mRNA-1273 will begin next month, Oxford University and AstraZeneca’s AZD1222 will begin in August, and Johnson & Johnson’s As26.COV2-S will begin in Septerber. The NIH may include additional large-scale studies of other candidates as well, according to Dr. Larry Corey, a member of the committe advising the NIH.
  • The National Bureau of Economic Research (NBER) annouced Monday that the business cycle peaked in February, marking the end of the expansion that began in June 2009 and the beginning of a recession. The expansion lasted 128 months, the longest expansion in the history of U.S buisness cycles, dating back to 1854. The previous longest was the 120 month expanison from March 1991 to March 2020.

Markets

  • The markets faded after a strong week last week. The S&P 500 fell -4.73% and closed at 3,041. The Dow Jones was down -5.51% and closed at 25,605. Year-to-date, the S&P 500 is down -4.98% and the Dow Jones is down -9.20%.
  • Yields fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.33% and 0.71%, respectively.
  • The spot price of WTI Crude fell as well this week. Prices fell -7.91% and closed at $36.42 per barrel. Year to date, Oil prices are down -40.35%.
  • The spot price of Gold gained 2.79% and closed at $1,732.14 per ounce. Year to date, Gold prices are up 14.16%.

Economic Data

  • Job openings declined 965,000 in April and the outright decline in layoffs was consistent with the stronger than expected May jobs report.
  • The May core CPI price index fell by 0.06% month-over-month, lowering the year-on-year rate by two tenths to 1.2%, both below consensus.
  • The producer price index (PPI) increased by 0.4% in May, three tenths above consensus expectations, led by an increase in food prices (+6%) and energy prices (+4.5%).
  • Initial jobless claims declined to 1.5 million in the week ended June 6, in line with consensus expectations. Continuing claims fell by 339,000 to 20.9 million.
  • The University of Michigan’s index of consumer sentiment rose by 6.6 points to 78.9 in the June preliminary report, above expectations.

Fact of the Week

  • From 1927 to 1981, dividend’s accounted for about 60% of stocks total return, while price movement accounted for 40%. Since 1982, dividends only make up about 25% of annualized return (Source: Strategas).

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.

George Floyd, SpaceX: O2 Wealth Economic Update, June 5, 2020

U.S. and World News

  • police-1202429977_370On Memorial Day in Minneapolis, George Floyd, an unarmed black man died while being restrained by a police officer with three officers nearby, all of which have been charged with his death. The tragedy was captured in a cell phone video that went viral and sparked nationwide demonstrations last weekend, some of which escalated to violence and looting. The demonstrations have continued throughout the week and are expected to continue during the weekend resulting in curfews being put in place by major U.S. cities. The National Guard has been called in by nearly half of the country to help police protect communities in the event of violence. A memorial was held yesterday in Minneapolis for George Floyd that was broadcast on networks nationwide.
  • Nearly a decade after the United States shelved the space shuttle program, a private U.S. company has launched astronauts into orbit for the first time ever. Private company SpaceX, founded by Elon Musk, launched its Falcon 9 rocket with two American astronauts on board last Saturday to travel to the International Space Station.  An estimated 10.3 million people viewed the broadcast of the launch, the most-watched event that NASA has ever tracked. SpaceX currently holds a $2.6 billion contract with NASA to conduct five more of the crewed flights to the International Space Station.

Markets

  • The markets extended their rally this week. The S&P 500 spiked 4.96% and closed at 3,194. The Dow Jones jumped 6.85% and closed at 27,111. Year-to-date, the S&P 500 is down -0.26% and the Dow Jones is down -3.90%.
  • Yields spiked this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.46% and 0.88%, respectively.
  • The spot price of WTI Crude climbed higher this week. Prices rose 10.74% and closed at $39.30 per barrel. Year to date, Oil prices are down -35.64%.
  • The spot price of Gold fell -2.77% and closed at $1,682.26 per ounce. Year to date, Gold prices are up 10.87%.

Economic Data

  • Initial jobless claims fell by 246,000 to 1.9 million and the four-week moving average of claims fell by 325,000 to 2.3 million. Claims increased by 57,000 in California, 47,000 in Florida. Claims fell by 134,000 in New York, 21,000 in Georgia, and by 21,000 in Pennsylvania.
  • The ISM manufacturing index rose by 1.6 points to 43.1 versus expectations for a reading of 43.8
  • The ISM non-manufacturing index rose by 3.6 points to 45.4 versus expectations for a reading of 44.4
  • Private sector employment in the ADP fell by 2.8 million versus expectations for a decline of 9 million
  • Factory orders fell by 13.0% versus expectations for a decline of 13.4%
  • Nonfarm payrolls rose 2.5 million versus expectations for a decline of 7.5 million
  • The unemployment rate came in at 13.3% versus expectations for a reading of 19.0%
  • Average hourly earnings fell 1.0% versus expectations for an increase of 1.0% and the year-over-year rate rose 6.7%

Fact of the Week

  • The S&P 500 has returned 37.7% over the last 50 trading days, making it the benchmark index’s largest 50-day rally in history. (Source: LPL Financial)

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.

IL Coronavirus, China: O2 Wealth Economic Update, May 29, 2020

U.S. and World News

  • salon-1223523705_370Today the state of Illinois transitions to Phase 3 of Governor J.B. Pritzker’s reopening plan, while Chicago Mayor Lori Lightfoot has the city of Chicago on hold until June 3rd. Outdoor dining at restaurants and bars, hair salons, and non-essential retail businesses are set to reopen with capacity limitations, social distancing, and enhanced sanitary requirements. In addition to businesses reopening, people may begin gathering in groups of up to 10 people. Illinois is expected to move to Phase 4 of the five-phase plan in late June given all of the requirements are met. In New York, five regions are looking enter Phase 2 of their plan, while New York City is on hold until further notice. All 50 states in America are now at least partially reopened and the COVID-19 test positivity rate continues to decline.
  • Political tensions are rising between the United States and China as a result of the controversial national security law that was approved this week. Secretary of State Mike Pompeo stated that “No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given the facts on the ground.” President Trump held a press conference today announcing that certain foreign Chinese nationals would be suspended from entering the United States and that Chinese officials responsible for the Hong Kong bill would be sanctioned. Additionally, the administration will begin eliminating policy exemptions granted to Hong Kong, as a result of their lack of autonomy from China. President Trump also announced that he is terminating the relationship between the United States and the World Health Organization, claiming that they are “China centric”.

Markets

  • Markets rose significantly again this week. The S&P 500 jumped 3.04% and closed at 3,044. The Dow Jones rose 3.85% and closed at 25,383. Year-to-date, the S&P 500 is down -5.00% and the Dow Jones is down -10.06%.
  • Yields declined this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.65%, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 5.53% and closed at $35.09 per barrel. Year to date, Oil prices are down -42.53%.
  • The spot price of Gold fell -0.14% and closed at $1,732.23 per ounce. Year to date, Gold prices are up 14.17%.

Economic Data

  • Initial jobless claims fell by 315,000 to 2.1 million and the four-week moving average of claims fell by 436,000 to 2.6 million. Claims rose by 17,000 in Pennsylvania, 15,000 in Virginia, and by 14,000 in Kentucky. Claims fell by 48,000 in Florida, 43,000 in New York, and by 34,000 in California.
  • New orders for durable goods fell by -17.2% versus expectations for a -19.0% decline
  • Durable goods orders ex-transports fell by -7.4% versus expectations for a decline of -15.0%
  • Personal consumption fell -6.8% versus expectations for a decline of -7.5%
  • Personal income rose by 10.5% versus expectations for a decline of -5.9%
  • Personal spending fell by -13.6% versus expectations for a decline of -12.8%
  • The Conference Board index of consumer confidence rose by 0.9 points to 86.8 versus expectations for a reading of 87.0
  • Sales of new single-family homes rose by 0.6% to a seasonally-adjusted-annualized rate of 623,000 units versus expectations for a reading of 480,000 units.
  • Pending home sales fell -21.8% versus expectations for a decline of -17.3%
  • First-quarter real GDP growth was revised down to -5.0% versus expectations for a reading of -4.8%
  • The PCE price index fell by -0.5% versus expectations for a decline of -0.6% and the year-over-year rate rose by 0.5%, in-line with expectations
  • The core PCE price index fell by 0.4% versus expectations for decline of -0.3% and the year-over-year rate rose by 1.0% versus expectations for an increase of 1.1%
  • Wholesale inventories rose by 0.4% versus expectations for a -0.7% decline
  • The University of Michigan’s index of consumer sentiment fell by 1.4 points to 72.3 versus expectations for a reading of 74.0

Fact of the Week

  • Since bottoming on March 23rd, the S&P 500 gained 32.6% over the next 43 days through 5/20. It was the second best 43 day period for the index in that last 30 years, behind the 37.8% that the S&P 500 gained from 3/09/09 – 5/08/09 (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.

China, Michigan flood: O2 Wealth Economic Update, May 22, 2020

U.S. and World News

  • The People’s Republic of China proposed a national security bill for Hong Kong which could result in Chinese intelligence agencies setting up bases there, threatening the independence and pro-democracy movement in Hong Kong. Pro-democracy lawmakers called the plans “the end of Hong Kong”, arguing that it is a violation of the “one country, two systems” agreement created when Britain returned Hong Kong to China in 1997. In the proposal, China would annex laws into Hong Kong’s mini-constitution, the Basic Law, without any local legislative scrutiny and are intended to safeguard the central government’s “overall jurisdiction” as well as Hong Kong’s “high autonomy” given Hong Kong’s “increasingly notable national security risks”. Currently, China can take no enforcement action in the city of Hong Kong, but this proposal would allow agencies to be set up in the city, expanding China’s presence. President Trump warned that the United States would react “very strongly” if China put the bill into law, and Secretary of State Mike Pompeo said that it would be the “death knell” for Hong Kong’s autonomy.
  • flood-1150729894Residents of Midland, Michigan began returning to their homes and assessing the damage from what is being called the “500-year flood” caused by a long period of heavy rain and the failure of two dams protecting the city. Nearly 11,000 people were evacuated from the city as the Tittabawassee River rose to a record 35.05 feet, much higher than the flood stage of 24 feet and left Midland underwater. Concerns over potential spread of toxic contamination arose as floodwaters overtook containment ponds at the nearby Dow chemical plant. Flood warnings remain in effect for the entire area and a forecast exists for more rain next week

Markets

  • Markets surged this week as states begin reopening. The S&P 500 spiked 3.27% and closed at 2,955. The Dow Jones jumped 3.43% and closed at 24,465. Year-to-date, the S&P 500 is down -7.77% and the Dow Jones is down -13.40%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.34% and 0.66%, respectively.
  • The spot price of WTI Crude rallied higher this week. Prices rose 13.38% and closed at $33.47 per barrel. Year to date, Oil prices are down -45.16%.
  • The spot price of Gold fell -0.50% and closed at $1,734.98 per ounce. Year to date, Gold prices are up 14.35%.

Economic Data

  • Initial jobless claims fell by 249,000 to 2.4 million and the four-week moving average of claims fell by 501,000 to 3 million. Claims rose by 59,000 in New York, 41,000 in Washington, and 36,000 in California. Claims fell by 55,000 in Georgia, 46,000 in Kentucky, and 35,000 in New Jersey.
  • The Philadelphia Fed manufacturing index rose by 13.5 points to -43.1 versus expectations for a reading of -40.0
  • The level of housing starts fell 30.2% to 891,000 versus expectations for a decline of 25.9%
  • Building permits fell by 20.8% versus expectations for a decline of 25.9%
  • Existing home sales fell by 17.8% to a seasonally-adjusted-annualized rate of 4.33 million units versus expectations for a 19.9% decline.

Fact of the Week

  • This week in 1991, Michael Jordan won his second MVP title. When Jordan first launched his iconic Air Jordan sneaker with Nike in 1984, the company put a sales goal of $3million over 2 years for the shoe. The original Air Jordan went on to sell $126 million in the first year alone. (Source: Bleacher Report)

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, Essential Heroes, Reopening: O2 Wealth Economic Update, May 15, 2020

U.S. and World News

  • essential-1215136769_370The U.S. House of Representatives will vote today on the latest stimulus bill, called the Heroes Act. This round of relief would include another $1,200 stimulus check to all Americans, $200 billion in additional funding for essential workers, and a six-month extension of the enhanced unemployment program. The $3 trillion of additional stimulus would also include funding to state and local governments, among other things. The bill is not expected to pass the Senate however, as it has been met with criticism by Republicans who believe that further stimulus is not necessary at this time. The White House responded to rumors that another stimulus check would be issued to Americans with a statement that said “As President Trump has said, we are going to ensure that we take care of all Americans so that we emerge from this challenge healthy, stronger, and with economic prosperity, which is why the White House is focused on pro-growth, middle class tax and regulatory relief.”
  • The U.S. Centers for Disease Control and Prevention issued new guidance this week with regards to businesses reopening. States that have already begun reopening, have done so without guidance from the CDC and have seen low traffic as widespread fear about the virus persists. The guidelines require bars and restaurants to encourage social distancing, space out tables, and other restrictions while transportations services should limit routes that travel through higher risk areas. The responsibility for the timing of reopening businesses will be left to the state governments, who will be encouraged to follow the guidelines issued by the CDC.

Markets

  • Markets fell this week as tensions with China have risen. The S&P 500 fell -2.20% and closed at 2,864. The Dow Jones dropped -2.60% and closed at 23,685. Year-to-date, the S&P 500 is down -10.70% and the Dow Jones is down -16.30%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.31% and 0.64%, respectively.
  • The spot price of WTI Crude spiked higher this week. Prices rose 19.50% and closed at $29.56 per barrel. Year to date, Oil prices are down -51.60%.
  • The spot price of Gold rose 2.40% and closed at $1,743.64 per ounce. Year to date, Gold prices are up 14.90%.

Economic Data

  • Initial jobless claims fell by 195,000 to 3.0 million and the four-week moving average of claims fell by 564,000 to 3.6 million. Claims rose by 59,000 in New York, 50,000 in Wisconsin, and by 42,000 in Florida. Claims fell by 108,000 in Texas, 100,000 in California, and by 62,000 in Oklahoma.
  • The consumer price index (CPI) fell by 0.8%, in-line with expectations and the year-over-year rate rose by 0.3% versus expectations for an increase of 0.4%
  • The core consumer price index (CPI) fell by 0.4% versus expectations for a decline of 0.2% and the year-over-year rate rose by 1.4% versus expectations for an increase of 1.7%
  • The producer price index (PPI) fell by 1.3% versus expectations for a 0.5% decrease
  • The core measure of the producer price index fell by 0.9% versus expectations for a decline of 0.1%
  • Retail sales fell by 16.4% versus expectations for a decline of 12.0%
  • Core retail sales fell by 15.3% versus expectations for a decline of 5.0%
  • The Empire manufacturing index came in at -48.5 versus expectations for a reading of -60.0
  • Industrial production fell by 11.2% versus expectations for a decline of 12.0%
  • The University of Michigan’s index of consumer sentiment rose 1.9 points to 73.7 versus expectations for a reading of 68.0

Fact of the Week

  • The average interest rate on a 30-year fixed rate mortgage was 3.23% as of 4/30/20, a record low for a statistic that has been tracked since 1991 (source: Freddie Mac)

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, China, Reopenin: O2 Wealth Economic Update, May 8, 2020

U.S. and World News

  • virus-1204033162_370During a press conference, Secretary of State Mike Pompeo stated that he has seen “significant evidence” that COVID-19 originated in a Chinese laboratory and alluded to the possibility of a restructuring, stating “how we restructure … supply chains to prevent something like this from ever happening again”. Another U.S. government official stated that the United States is “turbocharging” the previously put in place initiative to remove global industrial supply chains from China. Some examples of action that could be taken are tax incentives and re-shoring of subsidies for companies doing business in China. The United States is not alone in this initiative as other large trading partners such as India, Japan, and members of the European Union have set aside funds for incentives to companies doing business in China. The United States is also considering creating an “Economic Prosperity Network” (EPN) that would consist of trusted trading partners such as Japan, India, Australia, and others to work toward balancing the economic, political, and security imperatives so that there is less reliance on China for supplies.
  • Several states across the country are beginning the process of reopening their economies, while others remain under shelter-in-place orders. Governors are taking different approaches with regards to reopening business as the number of daily new coronavirus cases falls lower. Most states have already unveiled plans to open by Memorial day weekend, however, there are strict social distancing guidelines that must be followed in retail stores and restaurants. Governor Cuomo of New York, the most severely affected state, announced plans to reopen parts of the state in a lengthy 12-step process. Businesses in Georgia must continue to operate under social distancing and enhanced sanitary guidelines until May 13th, and the State of Emergency will expire on June 12th. Governor Kemp of Georgia was openly criticized by many, including President Trump, for his decision to prematurely open business within the state.

Markets

  • Markets spike higher this week. The S&P 500 jumped 3.56% and closed at 2,930. The Dow Jones rose 2.67% and closed at 24,331. Year-to-date, the S&P 500 is down -8.69% and the Dow Jones is down -14.03%.
  • The yield curve steepened this week, with short-term yields falling and long-term yields rising. The 5 year and 10 year U.S. Treasury Notes are yielding 0.32% and 0.68%, respectively.
  • The spot price of WTI Crude rose higher again this week. Prices surged 24.30% and closed at $24.59 per barrel. Year to date, Oil prices are down -59.70%.
  • The spot price of Gold rose 0.35% and closed at $1,706.41 per ounce. Year to date, Gold prices are up 12.46%.

Economic Data

  • Initial jobless claims fell by 67,000 to 3.2 million and the four-week moving average of claims fell by 861,000 to 4.2 million. Claims rose by 36,000 in New Jersey, 32,000 in Maryland, and by 19,000 in Connecticut. Claims fell by 302,000 in Florida, 69,000 in Georgia, and by 66,000 in Alabama.
  • Nonfarm productivity fell 2.5% in the first quarter versus expectations for a decline of 5.5%
  • Factory orders fell 10.3% versus expectations for a 9.7% decline
  • The ISM non-manufacturing index fell by 10.7 points to 41.8 versus expectations for a reading of 38.0
  • Private sector employment in the ADP report fell by 20.2 million versus expectations for a decline of 20.6 million
  • Nonfarm payrolls fell 20.5 million in April versus expectations for a decline of 22 million
  • The unemployment rate came in at 14.7% versus expectations for a reading of 16.0%
  • Average hourly earnings rose by 4.7% versus expectations for a 0.4% increase
  • Wholesale inventories fell by 0.8% versus expectations for a decline of 1.0%

Fact of the Week

  • In the 3 years through 3/31/20, the number of US households (both owners and renters) has increased by +5.5 million to 124.4 million. The number of owner households has increased by +5.6 million to 81.3 million while the number of renter households has declined by 0.1 million to 43.1 million (source: Census Bureau).

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.