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

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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

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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

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Coronavirus, Rates: O2 Wealth Economic Update, May 1, 2020

U.S. and World News

  • piggy-1212172874_370bAs the coronavirus has spread to over 3.2 million people and resulted in over 230,000 deaths, discussions among world leaders regarding the root cause of the virus have begun. While President Trump was talking to reporters Thursday night about the progress of the trade deal he stated that it “becomes secondary to what took place with the virus”, indicating that there could be repercussions for China. The President stated during the press conference that China was spreading misinformation when the virus began to spread and even said that he saw evidence that the virus originated in a Chinese lab. The calls for an investigation from lawmakers across Europe into the root cause of the virus are being supported by Ursula von der Leyen, the head of the European Union’s executive arm. Additionally, she had indicated that she would like to see China work with her organization, and others, during the investigation. In response to widespread criticism over its handling of the virus, Chinese Vice Premier Le Yucheng stated that “China has been open, transparent and responsible in its COVID-19 response.”
  • The Federal Open Market Committee concluded the April meeting with no changes to interest rates, forward guidance, the asset purchase plan, or the credit facilities. When asked about forward guidance, Fed Chairman Jerome Powell stated that “we’re not going to be in any hurry to move rates up”. Jerome Powell noted dramatic changes in the economy, including a double-digit unemployment rate and weakening inflation in the near-term. The Fed will keep interest rates at their current levels “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

Markets

  • Markets ended the week relatively unchanged from last week in another volatile week. The S&P 500 declined -0.19% and closed at 2,831. The Dow Jones fell -0.22% and closed at 23,724. Year-to-date, the S&P 500 is down -11.83% and the Dow Jones is down -16.26%.
  • Yields rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.62%, respectively.
  • The spot price of WTI Crude rebounded sharply this week. Prices spiked 16.23% and closed at $19.69 per barrel. Year to date, Oil prices are down -67.75%.
  • The spot price of Gold fell -1.74% and closed at $1,699.57 per ounce. Year to date, Gold prices are up 12.02%.

Economic Data

  • Initial jobless claims fell by 603,000 to 3.8 million and the four-week moving average of claims fell by 757,000 to 5.0 million. Claims increased by 79,000 in Washington, 55,000 in Georgia, and by 23,000 in New York. Claims fell by 173,000 in California, 78,000 in Florida, and by 68,000 in New Jersey
  • Personal income fell by 2.0% versus expectations for a decline of 1.7%
  • Personal spending fell by 7.5% versus expectations for a decline of 5.1%
  • The PCE price index fell by 0.3%, in-line with expectations and the year-over-year rate rose by 1.3%, in-line with expectations
  • Wholesale inventories fell 1.0% versus expectations for a decline of 0.4%
  • The Conference Board index of consumer confidence fell by 31.9 points to 86.9 versus expectations for a reading of 87.0
  • Pending home sales fell by 20.8% versus expectations for a decline of 13.6%
  • Real GDP fell by 4.8% in the first quarter versus expectations for a decline of 4.0%
  • Personal consumption fell by 7.6% versus expectations for a decline of 3.6%
  • The ISM manufacturing index came in at 41.5 versus expectations for a reading of 36.0
  • Construction spending rose by 0.9% versus expectations for a decline of 3.5%

Fact of the Week

  • April of 2020 was the best month for the stock market since 1987 and the third-best since World War II with the S&P 500 gaining 12.7% and the Dow Jones Industrial Average gaining 11.1%. The S&P 500 rose 13.2% in January of 1987 and 16.3% in October of 1974. (Source: Factset)

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

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Coronavirus, Kim Jong Un: O2 Wealth Economic Update, April 24, 2020

U.S. and World News

  • iStock-1211588220Some states are moving forward with reopening business and easing restrictions as they attempt to put the economy back on track. Georgia has allowed barber shops, tattoo parlors, hair salons, massage parlors, and gyms to open cautiously, with requirements such as screening of customers, wearing protective gear, and additional cleaning. Governor Brian Kemp of Georgia has faced criticism for opening business prematurely in a state that has lacked sufficient testing. This morning President Trump signed into law a $484 billion coronavirus relief bill that will primarily provide additional funding to small businesses while also providing funding to hospitals and efforts to increase testing. Some larger public companies have been criticized for taking government aid when unnecessary, while other companies such as Neiman Marcus have announced that they would file for bankruptcy protection. President Trump indicated this week the possibility of social distancing guidelines being extended into early summer and Dr. Anthony Fauci stated that the coronavirus will likely return in the fall. Developing a vaccine remains a critical task for the world and health care giants Johnson & Johnson, Pfizer, and Moderna remain optimistic about their efforts.
  • Speculators say that Kim Jong Un’s health is in danger following his absence from a birthday celebration of North Korea’s founding father, Kim Il Sung. It was reported that Kim underwent cardiovascular surgery, leading to rumors about his ill health, while a South Korean newspaper reported that Kim is “currently touring provincial areas with his close aides.” The Kingdom that is known to lack transparency, has admitted this week to having cases of the coronavirus. President Trump stated that he believes the report of Kim Jong Un’s illness is incorrect.

Markets

  • Markets finished the week lower. The S&P 500 lost 1.3% and closed at 2,837. The Dow Jones fell 1.9% and closed at 23,775. Year-to-date, the S&P 500 is down 11.7% and the Dow Jones is down 16.1%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.59%, respectively.
  • The spot price of WTI Crude dropped this week. Prices tumbled 31.8% and closed at $17.08 per barrel. Year to date, Oil prices are down 72.0%.
  • The spot price of Gold spiked 2.6% and closed at $1,726.80 per ounce. Year to date, Gold prices are up 13.8%.

Economic Data

  • Initial jobless claims fell by 810,000 to 4.4 million and the four-week moving average of claims rose by 280,000 to 5.8 million. Claims rose by 379,000 in Florida, 41,000 in West Virginia, and by 31,000 in Texas. Claims fell by 219,000 in New York, 106,000 in Michigan, and by 105,000 in California.
  • Existing home sales fell by 8.5% to a seasonally-adjusted-annualized rate of 5.27 million units versus expectations for a decline of 9.0%
  • Sales of new single-family homes fell by 15.4% to a seasonally-adjusted-annualized rate of 627,000 units versus expectations for a reading of 644,000 units
  • New orders for durable goods fell by 14.4% versus expectations for a decline of 12.0%
  • Durable goods ex-transports fell by 0.2% versus expectations for a decline of 6.5%
  • Core capital goods orders rose by 0.1% versus expectations for a decline of 6.7%
  • Core capital goods shipments fell by 0.2% versus expectations for a decline of 7.0%
  • The University of Michigan’s index of consumer sentiment increased by 0.8 points to 71.8 versus expectations for a reading of 68.0

Fact of the Week

  • The average price of gas in the US today is $1.745, the lowest level since February of 2016. At the beginning of the year, the average price at the pump was $2.57, a decline of 32% this year. The lowest current price at any gas station in the US is $0.75 in Francis Creek, Wisconsin. (Source: GasBuddy)

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

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

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

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

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

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

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

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

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

Visit Old Second Wealth Management

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

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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

Visit Old Second Wealth Management

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

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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

Visit Old Second Wealth Management

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

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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

Visit Old Second Wealth Management

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

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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

Visit Old Second Wealth Management

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