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.

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

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

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

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

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

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

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

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

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

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

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

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

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

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus: Special Wealth Update, Mar. 19, 2020

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

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

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

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

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

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

Rich Gartelmann, CFP® – (630) 844-5730 –  rgartelmann@oldsecond.com

Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus: Special Wealth Update, Mar. 16, 2020

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

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

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

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

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

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

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

Rich Gartelmann, CFP® – (630) 844-5730 –  rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

Rich Gartelmann, CFP® – (630) 844-5730 –  rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

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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, Markets: Special Wealth Economic Update Mar. 13, 2020

SPECIAL UPDATE

basketball-183379378_370Yesterday markets had their largest single day drop since October of 1987 in the wake of the Coronavirus concerns.  We also saw all major sports in U.S. suspend their seasons and the NCAA cancel both the Men’s and Women’s basketball tournament.  Perhaps the rationale was that there is already enough madness this March.

On a serious note, the concerns over the economic impact resulting from cancelations, suspensions and layoffs resulting from Coronavirus are real.  Travel and Leisure industries were the first to be impacted and the rest of the market has followed suit.  As public officials begin to take proactive measures to stem a mass influx of Coronavirus cases on the medical infrastructure, cancelations are sure to become the norm moving forward.  These are unprecedented times for all of us, and certainly within the financial markets.

What does this mean from an investment perspective?  I was asked this morning, “What is a bear market?”  A bear market is a term used in the financial markets when an index drops 20% from its former peak.  Wednesday, the Dow Jones Industrial average dropped 20.3% and the Nasdaq and S&P followed suit Thursday when they crossed below that twenty percent threshold.

So is it time to invest?  Historically, by missing the 10 best days in the market over a 20-year period, you would cut your returns in half, and half of the markets best days in history have happened during bear markets. Further, by missing the best 30 recorded days in the market, your long-term cumulative return would actually be negative, so yes you should be invested. Yet, at this time we must be careful not to fall victim to behavioral biases.  Trying to time the market can be costly!  Just because markets are down consecutive days does not mean the markets are “due” and if we get a short-term rally we should not assume markets will continue to rally.  We should ensure we are invested consistent with our long-term goals and tolerance for risk and those factors shouldn’t be impacted by short-term market events.

During these uncertain times, the Investment Team at Old Second Wealth Management continues to monitor these situations closely and how they affect the fundamentals of the economy. As always, should you have any questions please reach out to your Relationship Manager or Investment Officer

Rich Gartelmann, CFP® – (630) 844-5730 –  rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus, Markets: Special Wealth Economic Update Mar. 12, 2020

SPECIAL UPDATE

stock-1209053608-370For the second time this week, the New York Stock Exchange halted trading due to the circuit breaker of a 7% intra-day loss being breached. Investors remain concerned of the impact from the Coronavirus through the U.S. as well as the rest of the world. As markets evaluate the economic impact and potential effect on corporate earnings, volatility has surged in the market with the VIX index reaching levels not experienced since the financial crises of 2008.

While investors look to Washington for guidance and some sort of backstop to the negative financial impact of “social distancing”, school and business closures, travel restrictions, and loss of revenue; they have been disappointed by the lack of fiscal response and health guidance provided by the current administration.

During times of market stress, we must remind ourselves that the overall future expectations for corporate earnings remains healthy. While this short-term uncertainty will certainly impact current earnings levels, near-term earnings have little impact on company valuations. Yet, this near-term uncertainty has created an environment where future guidance has been limited, resulting in uncertainty on future earnings and increased volatility. This spike in volatility has significantly impacted current price levels.

During these uncertain times, the Investment Team at Old Second Wealth Management continues to monitor these situations closely and how they affect the fundamentals of the economy. As always, should you have any questions please reach out to your Relationship Manager or Investment Officer.

Rich Gartelmann, CFP® – (630) 844-5730 –  rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.