Stimulus, Vaccine: O2 Wealth Economic Update, Dec. 31, 2020

U.S. and World News

  • iStock-1253347371$600 stimulus checks from the new COVID Relief bill are currently being distributed to bank accounts, according to Treasury Secretary Mnuchin. Tuesday evening, the Treasury Secretary tweeted that payments to those who have direct deposit would state going out, and some might have received them as early as Tuesday night. Payments will continue to roll out through next week, and payments to those who do not have direct deposit began shipment on Wednesday.
  • In the UK, the COVID-19 vaccine developed by the University of Oxford and AstraZeneca was authorized for emergency use in the county, welcome news for a country that has been hit hard recently by the virus, resulting in strict lockdown measures.

Markets

  • Markets were up heading into the new year. The S&P 500 was up 0.36% and closed at 3,756. The Dow Jones was up 1.35% and closed at 30,606. Year-to-date, the S&P 500 is up 18.05% and the Dow Jones is up 9.41%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.91%, respectively.
  • The spot price of WTI Crude rose this week. Prices were up 0.39% and closed at $48.42 per barrel. Year to date, Oil prices are down -20.07%.
  • The spot price of Gold ticked higher by 0.83% and closed at $1,899.09 per ounce. Year to date, Gold prices are up 25.16%.

Economic Data

  • Pending home sales declined by 2.6% in November, against consensus expectations for an unchanged reading.
  • The S&P/Case-Shiller 20-city home price index increased by 1.6% in October, above consensus expectations.
  • Initial jobless claims declined to 787,000 against expectations for an increase for the week ended December 26.

Fact of the Week

  • Carolina Panthers offensive lineman Russel Okung has become the first player in NFL history to receive payment in digital currency. It was announced that half of Okung’s $13 million base salary from the 2020 season will be paid in bitcoin (Source: USA Today)

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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Vaccine, Stimulus: O2 Wealth Economic Update, Dec. 18, 2020

U.S. and World News

  • iStock-1266490076_370The Federal Drug Administration advisory panel has confirmed on Thursday that the benefits of approving Moderna’s COVID-19 vaccine outweigh the risks, putting the ball in the FDA’s court for approval, which could come as soon as tomorrow. According to Bloomberg, as of this morning, over 1.1 million people across four countries have been vaccinated. In the United States, the vaccine has been given to health care workers, as public workers on the front lines are first in line. Pfizer has publically expressed its happiness throughout the week with the success of the vaccine rollout, though there have been some scattered reports of supply chain issues. Given the approval from the FDA, Moderna’s vaccine distribution is expected to run smoother, as the vaccine does not require special storage equipment to keep it at extreme cold temperatures.
  • Stimulus negotiations in Washington have made significant progress throughout the week, with both sides having a lot invested, it is anticipated that a deal will be done, however it seems that talks will run into the weekend as differences still remain. The size of the stimulus package, as it stands now, is just under $1 trillion and does not include the major sticking points of state and local aid and liability protections for businesses. It is being reported that the stimulus package will include $600 stimulus checks to individuals and unemployment benefits of $300 a week. The latest complication is a Republican Senator’s demand to terminate the Federal Reserve’s emergency lending program by the end of the year, when it was originally set to expire in the CARES Act.

Markets

  • Markets rallied this week. The S&P 500 rose 1.29% and closed at 3,710. The Dow Jones climbed 0.46% and closed at 30,179. Year-to-date, the S&P 500 is up 16.57% and the Dow Jones is up 7.91%.
  • Yields moved higher and the yield curve steepened this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.38% and 0.94, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 5.24% and closed at $49.01 per barrel. Year to date, Oil prices are down -19.73%.
  • The spot price of Gold rose by 2.18% and closed at $1,880.61 per ounce. Year to date, Gold prices are up 23.94%.

Economic Data

  • Initial jobless claims rose to 885,000 and the 4-week moving average rose by 34,000 to 813,000.
  • Industrial production rose by 0.4% versus expectations for an increase of 0.3%
  • Import prices rose by 0.1% versus expectations for an increase of 0.3%
  • Import prices ex-petroleum was flat for the month versus expectations for an increase of 0.2%
  • Retail sales fell by -1.1% versus expectations for a decline of -0.3%
  • Retail sales core/control fell by -0.5% versus expectations for an increase of 0.2%
  • Business inventories rose by 0.7% versus expectations for an increase of 0.6%
  • The level of housing starts rose by 1.2% to a seasonally-adjusted-annualized-rate of 1.547 million units versus expectations for an increase of 0.3%
  • Building permits rose by 6.2% versus expectations for an increase of 1.0%

Fact of the Week

  • The total rounds of golf played by Americans is projected to increase by 50 million rounds in 2020, the largest year-over-year growth in 23 years. In 1997, spurred on by the appeal of a then 21-year old Tiger Woods, the number of rounds increased by 63 million rounds (source: National Golf Foundation).

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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Brexit, Vaccine: O2 Wealth Economic Update, Dec. 11, 2020

U.S. and World News

  • iStock-1177313859_370Brexit negotiations have made no progress while the December 31st deadline is only weeks away, increasing expectations that the United Kingdom will leave the European Union without a deal potentially resulting in major supply chain disruptions throughout Europe. The “no deal” scenario would include the U.K. leaving the European Union without a comprehensive trade deal covering the $1 trillion in annual bilateral trade. Among the issues of disagreement involve the U.K. seeking independence regarding climate, specifically fishing rights, as well as labor standards. The European Union, however, does not want to give up a certain level of judicial oversight of the U.K. Prime Minister Boris Johnson and President of the European Commission Ursula Von Der Leyen both warned that the probability of a “no deal” is high and have pointed to Sunday as a deadline for negotiators.
  • The Pfizer/BioNTech mRNA COVID vaccine was approved by a Food and Drug Administration Advisory panel for emergency use on Thursday, paving the way for vaccinations in the United States to begin. The committee voted on whether the benefits of the vaccine outweigh the risks for use in individuals 16 years of age and older, and it passed 17-4, while one voter abstained. Once the vaccine is ultimately approved by the FDA, the first batches will likely be given to healthcare workers, while certain categories of Americans next in line is being debated.

Markets

  • Markets fell lower this week. The S&P 500 dropped -0.95% and closed at 3,663. The Dow Jones lost -0.54% and closed at 30,046. Year-to-date, the S&P 500 is up 15.39% and the Dow Jones is up 7.70%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.89, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 0.69% and closed at $46.58 per barrel. Year to date, Oil prices are down -23.71%.
  • The spot price of Gold rose by 0.01% and closed at $1,839.07 per ounce. Year to date, Gold prices are up 21.21%.

Economic Data

  • Initial jobless claims jumped to 853,000 and the 4-week moving average rose by 36,000 to 776,000.
  • The consumer price index (CPI) rose by 0.2% versus expectations for an increase of 0.1% and the year-over-year rate rose by 1.2% versus expectations for an increase of 1.1%
  • The Core CPI index rose by 0.2% versus expectations for an increase of 0.1% and the year-over-year rate rose by 1.7% versus expectations for an increase of 1.5%
  • The producer price index (PPI) rose by 0.1%, in-line with expectations
  • PPI ex-food, energy and trade services rose by 0.1% versus expectations for an increase of 0.2%
  • Nonfarm productivity was revised lower by 0.3% to 4.6% for the third quarter versus expectations for it to remain unchanged at 4.9%
  • Job openings increased by 158,000 to 6.652 million versus expectations for a reading of 6.494 million
  • Wholesale inventories rose by 1.1% versus expectations for an increase of 0.9%
  • The University of Michigan’s index of consumer sentiment rose by 4.5 points to 81.4 versus expectations for a reading of 76.0

Fact of the Week

  • Small American businesses, defined as having less than 500 employees, are responsible for 44% of US economic activity (source: US Small Business Administration – Office of Advocacy).

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.

Dow tops 30k; Black Friday, Cyber Monday: O2 Wealth Economic Update, Nov. 27, 2020

U.S. and World News

  • The Dow Jones Industrial Average hit and closed above 30,000 on Tuesday for the first time since its inception in 1896. Vaccine sentiment reignited the recovery rally on hope that the economy will soon get back to normal, and was topped off by the GSA clearing the way for a presidential transition process and reports that Janet Yellen could head up the Treasury.
  • iStock-624893634_370The biggest shopping weekend of the year is here, with bargain hunters across the U.S. planning to spend the next few days searching for discounts in stores and online despite the coronavirus pandemic. With rising wages and increasing consumer confidence, U.S. holiday sales are expected to grow between 3.6% and 5.2%, compared with the 4% growth last year, while online sales are seen rising 20% to 30%, according to the National Retail Federation.

Markets

  • Markets gained this week. The S&P 500 rose 2.3% and closed at 3,638. The Dow Jones gained 2.23% and closed at 29,910. Year-to-date, the S&P 500 is up 14.52% and the Dow Jones is up 7.04%.
  • Yields rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.37% and 0.84, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 7% and closed at $45.39 per barrel. Year to date, Oil prices are down -25.66%.
  • The spot price of Gold fell by -4.49% and closed at $1,786.99 per ounce. Year to date, Gold prices are up 17.78%.

Economic Data

  • Initial jobless claims increased to 778k for the week ended November 21, against expectations for a decline, and the 4-week moving average fell by 4k to 749k.
  • Third-quarter real GDP growth was unrevised at +33.1%, in line with consensus expectations.
  • The Conference Board index of consumer confidence fell by 5.3 points to 96.1 in November, below expectations for a smaller decrease.
  • The FHFA house price index increased by 1.7% in September, above consensus expectations for a more modest increase.

Fact of the Week

  • It took less than four years for the Dow Jones Industrial Average to climb from 20,000 to 30,000 (Jan 2017 – Nov 2020). It took 18 years (1999-2017) for the index to reach 20,000 from 10,000, and 103 years (1896-1999) to reach 10,000 from its original inception (Source: Yahoo Finance)

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
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.

COVID: O2 Wealth Economic Update, Nov. 20, 2020

U.S. and World News

  • iStock-1207650868_370The United States reported a record 180,000 new cases of coronavirus yesterday, prompting the CDC to urge Americans to stay home for the Thanksgiving holiday. Also, the level of hospitalizations has doubled in the past two weeks, causing the level of deaths to increase as well. Several individual states throughout the week have put in place additional restrictions that include curfews for non-essential businesses, a ban on gatherings with people outside of your household, and capacity limits for retailers. Additional positive vaccine data rolled in this week from Moderna and Astrazeneca as Pfizer submits its application to the FDA for their emergency-use designation. Dr. Anthony Fauci has expressed concern about skepticism as it relates to vaccines, he told reporters this week that “if we have an effective vaccine and 50% of the population refuses to take it, you still have a considerable public-health challenge”. Pfizer CEO Albert Bourla stated that the first doses of the vaccine could be distributed within hours of approval.
  • On Thursday evening, Treasury Secretary Mnuchin requested that the Federal Reserve let five of the nine credit facilities put in place as part of the CARES act expire on December 31st. Secretary Mnuchin stated that the facilities have “clearly achieved their objective” and bond issuance volumes have returned to their pre-COVID-19 levels. The Federal Reserve issued a statement reading “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.” Mr. Mnuchin also argued that the funds need to be reallocated to the people that need it, and not to buy bonds, referring to the approximately $455 billion remaining from the CARES Act.

Markets

  • Markets pulled back this week. The S&P 500 fell -0.73% and closed at 3,558. The Dow Jones lost -0.65% and closed at 29,264. Year-to-date, the S&P 500 is up 11.95% and the Dow Jones is up 4.69%.
  • Yields fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.37% and 0.83%, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 5.03% and closed at $42.15 per barrel. Year to date, Oil prices are down -30.97%.
  • The spot price of Gold fell by -0.89% and closed at $1,872.35 per ounce. Year to date, Gold prices are up 23.40%.

Economic Data

  • Initial jobless claims rose to 742,000 and the four-week moving average of claims fell by 14,000 to 742,000. Claims fell by 22,000 in Illinois, 9,000 in Florida, and by 8,000 in Washington. Claims rose by 32,000 in Louisiana, 10,000 in Massachusetts, and by 6,000 in Texas
  • The Philadelphia Fed manufacturing index fell by 6.0 points to 26.3 versus expectations for a reading of 22.5
  • Retail sales rose by 0.3% versus expectations for an increase of 0.5%
  • Retail sales ex-auto & gas rose by 0.2% versus expectations for an increase of 0.6%
  • Import prices ex-petroleum was flat versus expectations for an increase of 0.3%
  • Industrial production rose by 1.1% versus expectations for an increase of 1.0%
  • Business inventories rose by 0.7% versus expectations for an increase of 0.6%
  • The level of housing starts rose by 4.9% to a seasonally-adjusted-annualized-rate of 1.53 million versus expectations for an increase of 3.2%
  • Existing home sales rose by 4.3% to a seasonally-adjusted-annualized-rate of 6.85 million units versus expectations for a decline of -1.1%

Fact of the Week

  • If a trade bought the SPY ETF at the open and sold it at the close every day since the start of 1993, they would be down 10% over the 27 year period. If, instead, they had purchased the SPY ETF at the beginning of 1993 and reinvested the dividends, they would be up over 1270% (Source; Bespoke Research, Bloomberg).

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.

Pfizer vaccine, COVID: O2 Wealth Economic Update, Nov. 13, 2020

U.S. and World News

  • vaccine_1205972800_370Pharmaceutical giant Pfizer Inc. and its German biotech partner BioNTech released data Monday morning showing that its vaccine is 90% effective. The effectiveness rate of the Pfizer vaccine is far higher than the 44% effectiveness rate of the flu vaccine and is comparable to the rates seen for Mumps and Chickenpox. Pfizer CEO Albert Bourla told reporters that the trial will be finished by the end of November and is expected to gain emergency-use approval by the end of this year. Dr. Scott Gottlieb stated that the timeline for mass vaccination is late February/early March and that it may not be broadly available until the end of the second quarter/beginning of the third quarter of next year. The distribution of the vaccine is expected to be complex and expensive, as it has a short shelf life and must be stored at -94 degrees Fahrenheit. Dr. Anthony Fauci told reporters that biotech company Moderna’s vaccine might exhibit similar results to Pfizer’s.
  • New daily coronavirus cases in the United States are surging as 150,530 new cases were reported yesterday and the 7-day average in new cases reached 130,000 which is about 100,000 higher than where it was in September. There are currently about 67,000 patients being treated for coronavirus in U.S hospitals, higher than levels seen in April. Yesterday, Chicago Mayor Lori Lightfoot announced a stay-at-home advisory for the city after seeing a record spike in new infections and Illinois Governor J.B. Pritzker announced that the state is on the verge of new shutdowns as well. New York City Mayor Bill De Blasio announced today that schools will close and move to remote learning once a seven-day positivity rate of 3% is breached, the rate is currently at 2.83%. New daily cases across Europe are beginning to peak and turn lower after local lockdowns have been mandated in most countries.

Markets

  • Markets continued to rally this week. The S&P 500 rose 2.16% and closed at 3,585. The Dow Jones spiked 4.19% and closed at 29,479. Year-to-date, the S&P 500 is up 12.77% and the Dow Jones is up 5.37%.
  • Yields rose this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.40% and 0.89%, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 8.19% and closed at $40.18 per barrel. Year to date, Oil prices are down -34.20%.
  • The spot price of Gold fell by -3.24% and closed at $1,888.12 per ounce. Year to date, Gold prices are up 24.44%.

Economic Data

  • Initial jobless claims fell to 709,000 and the four-week moving average of claims fell by 33,000 to 755,000. Claims fell by 15,000 in Georgia, 9,000 in New Jersey, and by 8,000 in Texas. Claims rose by 10,000 in Washington and by 2,000 in Virginia.
  • The consumer price index (CPI) was flat versus expectations for an increase of 0.1% and the year-over-year rate rose by 1.2% versus expectations for an increase of 1.3%
  • Core CPI was flat versus expectations for an increase of 0.2% and the year-over-year rate rose by 1.6% versus expectations for an increase of 1.7%
  • The producer price index (PPI) rose by 0.3% versus expectations for an increase of 0.2%
  • PPI ex-food and energy rose by 0.1% versus expectations for an increase of 0.2%
  • The University of Michigan’s index of consumer sentiment fell by 4.8 points to 77.0 in the preliminary report versus expectations for a reading of 82.0

Fact of the Week

Chinese state-owned enterprises represented 25% to 28% of the entire Chinese economy over each of the last 20 years (source:Gavekal 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.

Election 2020, Stimulus Bill: O2 Wealth Economic Update, Nov. 6, 2020

U.S. and World News

  • iStock-1141007609_370The roller coaster ride that is the 2020 presidential election continues today, as absentee ballots in battleground states Nevada, Pennsylvania, Georgia, North Carolina, Alaska, and Arizona are still being counted. Contrary to what the polls suggested, the results on Tuesday night indicated that President Trump was likely to win the election, however as absentee ballots were counted throughout the week, Joe Biden took the lead in several key states. As it stands today, there is a large indication that Joe Biden will win the election, and he is expected to address the nation tonight. This is not without threatened litigation by President Trump, who claims that the election is being stolen due to orchestrated Democrat voter fraud in key battleground states. Also contrary to polling, Republicans have picked up six House of Representatives seats and have lost one Senate seat, pending further results. More clarity on results is expected going into the weekend, but anticipated litigation by the President could lead to some more uncertainty in the longer run.
  • The fate of the next fiscal stimulus bill is being questioned after Senate Majority Leader Mitch McConnell has stated that the upbeat jobs report this morning and the 6.9% unemployment rate “clearly ought to affect the size of any additional stimulus package we do”. Prior to the surprise jobs number and lower-than-expected unemployment figure, Senate Republicans had proposed a $500 billion relief bill, compared to the administrations $1.9 trillion proposal last month. Larry Kudlow also helped pour cold water on the hopes of a large stimulus package after he stated that “we’re not interested in you know two or three trillion” citing the jobs report this morning.

Markets

  • Markets surged this week in the best market week since April. The S&P 500 jumped 7.36% and closed at 3,509. The Dow Jones rose 6.89% and closed at 28,323. Year-to-date, the S&P 500 is up 10.32% and the Dow Jones is up 1.13%.
  • Yields fell slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.36% and 0.82%, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 4.52% and closed at $37.41 per barrel. Year to date, Oil prices are down -38.73%.
  • The spot price of Gold rose by 3.93% and closed at $1,952.61 per ounce. Year to date, Gold prices are up 28.69%.

Economic Data

  • Initial jobless claims fell to 751,000 and the four-week moving average of claims fell by 4,000 to 787,000. Claims fell by 9,000 in Massachusetts, 8,000 in Michigan, and by 6,000 in Georgia. Claims rose by 22,000 in Illinois, 3,000 in Kentucky, and by 3,000 in Pennsylvania.
  • Nonfarm productivity rose by 4.9% in the third quarter versus expectations for an increase of 5.6%
  • Unit labor costs fell by -8.9% in the third quarter versus expectations for a decline of -11.0%
  • The ISM manufacturing index rose by 3.9 points to 59.3 versus expectations for a reading of 56.0
  • The ISM non-manufacturing index fell by 1.2 points to 56.6 versus expectations for a reading of 57.5
  • Construction spending rose by 0.3% versus expectations for an increase of 1.0%
  • Wholesale inventories rose by 0.4% versus expectations for a decline of -0.1%
  • Factory orders rose by 1.1% versus expectations for an increase of 1.0%
  • Private sector employment in the ADP report rose by 365,000 versus expectations for an increase of 643,000
  • Nonfarm payrolls rose by 638,000  versus expectations for an increase of 580,000
  • Average hourly earnings rose by 0.1% versus expectations for an increase of 0.2% and the year-over-year rate rose by 4.5%
  • The unemployment rate fell to 6.9% versus expectations for a reading of 7.6%

Fact of the Week

  • The state of Ohio has correctly backed the winner of the US presidential election in each of the last 14 races for the White House, i.e., 1964-2016 (source: USConstitution.net).

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.

Election 2020: O2 Wealth Economic Special Update, Nov. 4, 2020

iStock-1217964301Despite early polling pointing to a decisive victory for Joe Biden and the Democrats gaining control of the Senate in what would be a Blue Wave, the actual votes indicate a much different result than was anticipated, creating somewhat of a Purple Haze. The race for President remains undecided this morning with several states still counting ballots, including record numbers of mail-in and absentee ballots, and the process could last for days. Control of the Senate also remains unresolved but appears to be leaning toward a retention of the majority by Republicans. This is not a terribly surprising scenario. We saw in 2016 the inherent flaws in polling data that skew toward Democratic candidates and thought these races would be much closer than the polls indicated and positioned our portfolios accordingly.

Despite the election uncertainty, and the Doomsday fears of many investors, stock market reaction has largely been positive with futures pointing toward a strong open and technology stocks leading. Bond yields have also dropped overnight as the complexion of the races have shifted. These market actions point to the anticipation of a divided government, under which expectations for the size of further stimulus are lowered.

This is clearly a fluid situation and we will continue to monitor closely as it develops over the coming hours and days. As always, please do not hesitate to reach out to your Relationship Manager or Investment Officer if you have any questions.

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.

Hurricane Zeta, COVID: O2 Wealth Economic Update, Oct. 30, 2020

U.S. and World News

  • Hurricane Zeta made landfall in Louisiana late Wednesday afternoon as a strong Category 2, leaving over 2.6 million people without power across seven states. The hurricane quickly weakened to a Tropical Storm, but maintained that strength as it traveled northeast into the Carolinas. Zeta is the 11th named storm and 6th hurricane to make landfall in the United States this year, a seasonal record. As a result of the hurricane, at least six people died, power lines and trees were knocked down, houses were destroyed, and streets were flooded. Close to 2,000 National Guard personnel are assisting with the cleanup work in Louisiana.
  • iStock-1214300376_370Coronavirus cases and hospitalizations across the United States are at their highest levels since May, prompting some states to announce new restrictions on businesses. Global daily deaths came in at more than 7,000 twice this week, bringing the 7-day average higher. Europe continues to struggle with rapidly spreading infections as a full lockdown goes into effect today in France and will last until the end of November. France is working towards a plan that will limit the economic fallout from the lockdown, targeting a contraction in GDP of roughly half the 30% drop that was seen during the first one. Regeneron has stopped enrollment in its trial for its antibody therapy used by President Trump, for patients with serious cases, after a safety issue warning from a third party. Eli Lilly also ceased enrollments into its program after research indicated that patients were unlikely to recover from the treatment in the late stages of infection.

Markets

  • Markets slipped this week. The S&P 500 dropped -5.62% and closed at 3,270. The Dow Jones fell -6.47% and closed at 26,504. Year-to-date, the S&P 500 is up 2.77% and the Dow Jones is down -5.38%
  • Yields rose this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.38% and 0.87%, respectively.
  • The spot price of WTI Crude fell this week. Prices fell -10.61% and closed at $35.62 per barrel. Year to date, Oil prices are down -41.66%.
  • The spot price of Gold fell by -1.26% and closed at $1,878.10 per ounce. Year to date, Gold prices are up 23.78%.

Economic Data

  • Initial jobless claims fell to 751,000 and the four-week moving average of claims fell by 25,000 to 788,000. Claims fell by 12,000 in Texas, 9,000 in Florida, and by 8,000 in California. Claims rose by 10,000 in Michigan, 6,000 in Illinois, and by 3,000 in Virginia.
  • Real GDP rose by 33.1% versus expectations for an increase of 32.0%
  • Personal consumption rose by 40.7% versus expectations for an increase of 38.9%
  • The core PCE inflation index rose by 3.5% annually versus expectations for an increase of 4.0%
  • Sales of new single-family homes fell by -3.5% to a seasonally-adjusted annualized rate of 959,000 units versus expectations for an increase of 1.4%
  • Pending home sales fell by -2.2% versus expectations for an increase of 2.9%
  • The FHFA house price index rose by 1.5% versus expectations for an increase of 0.7%
  • New orders for durable goods rose by 1.9% versus expectations for an increase of 0.5%
  • Durable goods orders ex-transports rose by 0.8% versus expectations for an increase of 0.4%
  • Core capital goods orders rose by 1.0% versus expectations for an increase of 0.5%
  • Core capital good shipments rose by 0.3% versus expectations for an increase of 0.4%
  • The Conference Board index of consumer confidence fell by 0.4 points to 100.9 versus expectations for a reading of 102.0
  • The University of Michigan’s index of consumer sentiment rose by 0.6 points to 81.8 versus expectations for a reading of 81.2
  • Retail inventories rose by 1.6% versus expectations for an increase of 0.5%
  • Wholesale inventories fell by -0.1% versus expectations for an increase of 0.4%
  • Personal income rose by 0.9% versus expectations for an increase of 0.4%
  • Personal spending rose by 1.4% versus expectations for an increase of 1.0%

Fact of the Week

  • The price of lumber increased nearly 50% from 4/30/20 to 8/31/20, the largest 4-month increase ever in the cost of lumber based upon data maintained since 1949. The rally was driven by an acute supply shortage stemming from widespread production cuts due to pandemic-related demand concerns that proved to be short-lived and missed the positive catalysts for home construction and improvement that emerged. (source: Bureau of Labor Statistics, Bloomberg Intelligence).

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.

COVID, Markets, Election: O2 Wealth Economic Special Update, Oct. 29, 2020

Yesterday the S&P 500 traded off -3.5%, marking the third consecutive day of losses for a cumulative drop of -5.6% for the week.  This most recent move leaves the S&P 500 -8.7% below the most recent high and roughly flat for the year.  Since the March 23rd market bottom the market has increased an unprecedented 60% over the following five months.  During that recovery, the market posted three consecutive down days only once.  As the initial federal stimulus programs ended and uncertainty around further stimulus increased, we saw market complacency replaced by the volatility that often precedes Presidential elections.

With news of Coronavirus related shutdowns increasing at home and abroad, we must be careful to avoid a false narrative.  Swift market moves such as this are best described as a market adjustment in search of a headline.  Market pundits often fall hostage to the same behavioral biases that they warn investors against. Rather than properly assessing all available information and resulting market impact, these experts instead seek out one culprit for the current market movements.  If only it were that easy!  In the 39 trading days since the recent market high, the market has traded in negative territory 20 times and posted three consecutive down days five times in just over a month.

vote-1255319660_370While we acknowledge a potential widespread shutdown to contain the Coronavirus would be economically devastating, we don’t believe this concern to be the primary driver behind current market conditions.  On the election front, though Biden maintains a large lead in national polls, they have tightened recently and the probability of a Democratic sweep has dropped from over 70% to near 50%.  As outcomes become less clear ahead of the elections, profit taking has accelerated and further pressured markets.  Also, tightening of polls in battle ground states has increased odds of a contested election, further adding to market uncertainty.

As we move through this election cycle we must recognize that this is not unchartered territory.  We have had elections where one party has gained control of the House, Senate and Presidency, in 2000 we had a contested election thanks to “hanging chads”, and earlier this year we managed through a pandemic driven shutdown.  Though another shutdown would certainly hamper further recovery, many states seeing increased Covid cases have already taken a stance against shutdowns.  In those states with more stringent pandemic protocols, business and citizens are challenging those protocols and are gaining judicial support.  With an impending resolution for further Coronavirus relief being anticipated post-election and a strong possibility of increased infrastructure spending next year, the economic backdrop is very favorable.  While we remain cautious during times of heightened volatility, we recognize these are also the times to be opportunistic and incrementally position portfolios toward their long-term objectives.

For over 100 years, Old Second Wealth Management has navigated our clients’ assets through a multitude of world events helping them meet their financial goals. As always, please do not hesitate to reach out to your Relationship Manager or Investment Officer should you have any questions or concerns.

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.