China, Trade, Korea: Wealth Economic Update May 25, 2018

U.S. and World News

  • cars-695675608_400Another round of trade negotiations will take place from June 2nd until June 4th as a U.S. delegation travels to China. China has pledged to reduce the import tariff on passenger vehicles to 15% from 25%. Another factor has been added to the trade negotiations after President Trump has announced an investigation under section 232 of the Trade Expansion Act of 1962 which would allow the president to restrict imports or levy tariffs on foreign goods that excessively displace domestic goods or cause substantial unemployment. China responded by expressing their opposition to the abuse of national security clauses, but will firmly defend their rights and interests.
  • President Trump canceled the planned June 12th meeting in Singapore between himself and Kim Jong-Un yesterday after a nasty war of words took place over its nuclear weapons program. This morning, foreign journalists watched as North Korea blew up tunnels leading to its nuclear facilities and President Trump expressed optimism about the summit between the two leaders taking place in the near future. North Korea remains under extremely tough international sanctions to pressure the country to end its nuclear weapons program.

 

 

Markets

  • The markets rose slightly higher this week. The S&P 500 gained 0.33% this week and closed at 2,721.33. The Dow Jones rose 0.18% and closed at 24,753.09. Year to date, the S&P is up 2.57% and the Dow Jones is up 1.07%.
  • Yields dropped significantly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.77% and 2.93%, respectively.
  • The spot price of WTI Crude Oil plummeted 5.31% this week and closed at $67.58 per barrel. Year to date, Oil prices are up 12.43%.
  • The spot price of Gold increased by 0.62%, closing at $1,301.09 per ounce. Year to date, Gold prices are down -0.13%.

Economic Data

  • Initial jobless claims rose 11,000 once again this week to 234,000, a seven-week high. The largest increases were in California and Pennsylvania. The four-week moving average moved higher by 6,000 to 220,000. The pace of layoffs still remains very low.jobless claims rose 11,000 once again this week to 234,000, a seven-week high. The largest increases were in California and Pennsylvania. The four-week moving average moved higher by 6,000 to 220,000. The pace of layoffs still remains very low.
  • Sales of new single family homes declined by 1.5% in April to a seasonally adjusted rate of 662,000 units, below expectations of 680,000. The prior 3 months were revised lower by a net 41,000.
  • New orders for durable goods declined by 1.7% in April versus expectations of a 1.3% drop led by defense aircraft orders.
    • Durable goods ex-transports rose 0.9% versus expectations of a 0.5% increase.
  • Core capital goods rose 1.0% in April, exceeding expectations of a 0.7% increase.
  • The University of Michigan index of consumer sentiment fell by 0.8 points versus expectations of an unchanged reading.

Fact of the Week

  • In 1954, economist Armen Alchian was able to figure out the secret materials being used to create the hydrogen bomb. While working at RAND, Alchian observed the stock performance of many different marterials companies, and noticed that the Lithium Corp. of America had significantly outperformed other material names in the six months leading up to the successful test of the H-bomb. Alchian wrote an internal memo at RAND announcing his discovery, and was told to withdraw the memo two days after its publication. (Source: Library of Economics and Liberty)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

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Korea, Iran: Wealth Economic Update May 21, 2018

U.S. and World News

  • radiation-856884068_380After witnessing ongoing joint military drills between South Korea and the United States, North Korea has cancelled planned discussions with South Korea and threatened to cancel the scheduled meeting with the United States on June 12th. Kim Jong-un expressed displeasure with having to unilaterally abandon its nuclear program. Vice Foreign Minister Kim Kye-gwan stated “If the U.S. is trying to drive us into a corner to force our unilateral nuclear abandonment, we will no longer be interested in such dialogue and cannot but reconsider our proceeding to the North Korea-U.S. summit”. The United States has stated that it continues to plan for the scheduled meeting on June 12th.
  • UAE Energy Minister Suhail bin Mohammed al-Mazroui stated that OPEC has the ability to produce enough oil to cushion oil prices if the United States re-imposes sanctions on Iran. The Energy Minister told reporters that OPEC is familiar with situations like these and there is no reason to worry about supply. The IEA cut its global demand growth for oil to 1.4 million barrels per day in 2018, lower than a previous estimate of 1.5 million barrels per day.

Markets

  • The markets ended the week slightly lower. The S&P 500 fell 47% this week and closed at 2,712.97. The Dow Jones lost 0.36% and closed at 24,715.09. Year to date, the S&P is up 2.24% and the Dow Jones is up 0.89%.
  • Yields moved higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 89% and 3.06%, respectively.
  • The spot price of WTI Crude Oil rose 89% this week and closed at $71.33 per barrel. Year to date, Oil prices are up 18.66%.
  • The spot price of Gold decreased by 05%, closing at $1,292.29 per ounce. Year to date, Gold prices are down -0.81%.

Economic Data

  • Initial jobless claims rose 11,000 to 222,000 for the week. The largest increases were in Missouri, Kentucky, and California. The four-week moving average moved lower 3,000 to 213,000. The pace of layoffs still remains very low.
  • The Philadelphia Fed manufacturing index rose by 11.2 points in May to 34.4 versus expectations of 21.0.
    • The  new orders component rose 22.2 points to 40.6 to the highest level since 1973.
  • Housing starts fell by 3.7% in April to a seasonally adjusted rate of 1,287k which was below expectations of a -0.7% decline. The decline was led by the multi-family category while single family homes moved higher by 0.1%.
    • The largest  declines were in the Northeast and Midwest , reflecting unseasonable weather.
  • Building permits fell 1.8% in April to an annualized rate of 1,352k in April compared to expectations of a 2.1% decline.
  • Industrial production rose 0.7% in April versus expectations of a 0.6% increase. Industrial production was led by utilities and mining output in April.
  • Retail sales rose by 0.3% in April, matching expectations. The figure was led higher by an increase at gas stations.
    • Retail sales ex-autos rose 0.3% in April versus expectations of a 0.5% increase.

Fact of the Week

  • The royal wedding between Prince Harry and Meghan Markle is estimated to cost around $45.8 million. This is well over 1000 times the cost of the average marriage in the US and UK at $34,000. Almost all of the $45.8 million budget is for security, which is estimated to cost $43 million. (Source: Business Insider)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

Visit Old Second Wealth Management

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Iran, CA Solar Homes, Korean Hostages: Wealth Economic Update May 11, 2018

U.S. and World News

  • The United States has withdrawn from the nuclear deal with Iran, sending the price of crude oil up over 3% to $71 a barrel. President Trump announced that he will impose the “highest level” of sanctions on Iran starting August 6th which would include restrictions on exports of airplanes and parts, dollar transactions, trade in gold and other metals, sovereign debt and the auto industry. On November 4th, additional sanctions will include a ban on oil purchases and transactions with the central bank. The withdrawal from the deal has been condemned by European countries, particularly France whose Foreign Minister said European companies should not have to pay for the US decision. Iran is now calling on Airbus, a plane manufacturer based in Europe, to continue to sell it planes.
  • solar-687096836_370California has voted unanimously to require that nearly all new homes and residential buildings smaller than four stories built after January 1st 2020 have solar panels. This is estimated to add between $8,000 and $12,000 to building a home. The CEC also estimated that mortgages will increase on average by $40 per month and savings on utility bills will be $80 per month.
  • Three Americans that were held as prisoners in North Korea for months were returned to the United States this week with Secretary of State Mike Pompeo. The meeting between President Trump and Kim Jong Un will take place on June 12th in Singapore. The location of Singapore symbolizes the desire to no longer utilize South Korea as an intermediary between the United States and North Korea, and also is a big step for Kim Jong Un to gain credibility as a leader.

Markets

  • AThe markets surged higher this week. The S&P 500, rose 2.49% this week and closed at 2,727.72. The Dow Jones rose 2.51% and closed at 24,831.17. Year to date, the S&P is up 2.71% and the Dow Jones is up 1.26%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.84% and 2.97%, respectively.
  • The spot price of WTI Crude Oil rose this week by 1.23% and closed at $70.58 per barrel. Year to date, Oil prices are up 17.42%.
  • The spot price of Gold rose this week by 0.35%, closing at $1,319.04 per ounce. Year to date, Gold prices are up 1.25%.

Economic Data

  • Initial jobless claims were flat at 211,000 for the week. The largest increase was in Ohio and the largest decline was in Wisconsin. The four-week moving average moved down 5,000 to 216,000, a 49 year low. The pace of layoffs still remains very low.
  • The consumer price index (CPI) rose 0.22% in April versus expectations of a 0.3% increase and the year-over-year rate remains unchanged at 2.1%. The increase was led by a rise in energy prices.
    • Core CPI (ex-food and energy) rose 0.1% in April versus expectations of a 0.2% increase.
  • The producer price index (PPI) rose 0.1% in April, below expectations of a 0.2% rise. The figure was held lower due to a 1.1% decline in food prices.
    • PPI ex-food and energy rose 0.2% in April, in line with expectations.
  • In the University of Michigan’s index of consumer sentiment May preliminary report, the index was unchanged at 98.8 versus expectations of a modest decline.

Fact of the Week

  • The individual stock that was the top performing stock within the S&P 500 YTD through 4/30/18 with a gain of +62.8% was also ranked as the #1 stock within the index for all of calendar year 2013 and again in calendar year 2015. But the stock was also ranked #430 in 2014 and #278 in 2016 (source: BTN Research).

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

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China, Hawaii Volcano: Wealth Economic Update May 4, 2018

U.S. and World News

  • A United States delegation traveled to China this week to negotiate on trade. Ahead of the meeting, Chinese Foreign Ministry spokeswomen Hua Chunying stated that it is not realistic to expect to have all the issues resolved in one meeting. It has been rumored that the United States requested China to reduce its trade surplus by at least $200 billion by 2021, cease government support for advanced technologies, cut tariffs on American products, and to agree not to retaliate. The United States has not made an official statement on the results of the meeting yet, however, China’s official news agency announced that the two countries agreed in some areas and would set up a “working mechanism” to keep trade negotiations going.
  • Kilauea-157649787_370Earlier in the week, a series of earthquakes on Hawaii’s Big Island sparked the eruption of the Kilauea volcano on Thursday evening. Nearly 1,500 people were forced to evacuate the area and lava is flowing through the streets of the Leilani Estates subdivision while residents are being sheltered at two community centers. On a Honolulu television station, a resident stated that “It sounded like if you were to put a bunch of rocks into a dryer and turn it on as high as you could.” The fire department has detected sulfar dioxide gas in the evacuation are at extreme levels. Kilauea is 212 miles southeast of Honolulu and is considered the most active volcano in Hawaii.

Markets

  • After The markets ended the week slightly lower. The S&P 500, lost 0.21% this week and closed at 2,663.42. The Dow Jones fell 0.19% and closed at 24,262.51. Year to date, the S&P is up 0.24% and the Dow Jones is down 1.20%.
  • Yields also moved lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.79% and 2.95%, respectively.
  • The spot price of WTI Crude Oil rose this week by 2.50% and closed at $69.80 per barrel. Year to date, Oil prices are up 16.12%.
  • The spot price of Gold fell this week by 0.67%, closing at $1,315.11 per ounce. Year to date, Gold prices are up 0.95%.

Economic Data

  • Initial jobless claims rose 2,000 to 211,000 for the week. The largest increases were in New York and California. The four-week moving average moved down 7,000 to 222,000. The pace of layoffs still remains very low.
  • The trade deficit fell $8.8 billion to $49.0 billion in March led by the decline of goods and services imports and real imports of nonpetroleum goods.
  • Nonfarm payrolls growth came in at 164,000 for the month of April, below expectations of a 193,000 increase. Growth in prior months was revised up by a netted 30,000. Unseasonable weather in the Midwest was partly to blame for the weaker than expected number.
    • Average hourly earnings rose by 0.15%, missing expectations of a 0.20% increase and the year-over-year rate remained stable at 2.6%.
    • The unemployment rate fell to 3.9% in April versus expectations of 4.0%.
  • Private payrolls increase by 204,000 versus expectations of a 198,000 increase.
  • The ISM non-manufacturing index fell by 2 points to 56.8, missing expectations of 58. The decline was led by the business activity index and the employment index.
  • Factory orders rose by 1.6% in March, exceeding expectations of a 1.4% increase.
  • The core PCE price index excluding food and energy increased 0.15% in March and the year-over-year rate increased to 1.88%. Expectations were for a 0.20% increase.
    • Personal income rose 0.3% in March versus expectations of a 0.4% increase.
    • Personal spending rose 0.4% in March, in line with expectations.

Fact of the Week

  • The total return for the S&P 500 over the last 10 years (2008-2017) was a gain of 8.5% per year (total return). If you avoided the 10 worst percentage days over the 10 years (10 trading days in total, not 10 days per year), the +8.5% annual gain rises to an annual gain of 16.8% (source: BTN Research).

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

Korea, Macron: Wealth Economic Update Apr. 27, 2018

U.S. and World News

  • korea_handshake-824604454_360The leaders of North and South Korea announced this morning that they would end the war that has lasted nearly 70 years and that they would begin pursuing “complete denuclearization” of the peninsula after holding a historic summit at the border. This marked the first time that a North Korean leader set foot in South Korea since 1953. The two leaders also agreed on potentially having high-level talks and negotiations with the United States and China.
  • President Trump met with French President Emanuel Macron earlier this week to discuss foreign policy issues. Following the meeting, Emanuel Macron stated that he believes that President Trump will scrap the Iran nuclear deal before the May 12th deadline, citing the president’s strong negative feelings about the deal. The Iran deal consists of billions of dollars in sanctions imposed on Iran being removed in exchange for an agreement to cease its nuclear program.

Markets

  • After another volatile week in the markets, the indices are almost unchanged from last week. The S&P 500, in a very rare occurrence, returned 0.00% this week and closed at 2,669.91. The Dow Jones fell 0.62% and closed at 24,311.19. Year to date, the S&P is up 0.45% and the Dow Jones is down 1.01%.
  • Yields were also unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.80% and 2.96%, respectively, the same exact level as last Friday’s close.
  • The spot price of WTI Crude Oil moved lower this week by 0.53% and closed at $68.04 per barrel. Year to date, Oil prices are up 13.19%.
  • The spot price of Gold fell this week by 0.98%, closing at $1,323.33 per ounce. Year to date, Gold prices are up 1.58%.

Economic Data

  • Initial jobless claims declined 24,000 to 209,000 for the week. The largest declines were in New Jersey, Pennsylvania, and Ohio. The four-week moving average moved down 2,000 to 229,000. The pace of layoffs still remains very low.
  • New durable goods orders increased by 2.6% in March exceeding expectations of a 1.6% increase. The increase was largely influenced by the 44.5% increase in non-defense aircraft orders. N
    • New durable goods order ex-transportations was flat for the month of March compared to expectations of a 0.5% increase.
  • Wholesale inventories rose by 0.5% in March missing expectations of a 0.7% increase. The figure was held lower by a decline in retail inventories of -0.4%.
    Real GDP rose by 2.3% in the first quarter of 2018 versus expectations of a 2.0% increase.

    • Consumption growth slowed to 1.1% versus 4.0% in quarter four.
    • Housing investment came in at -3.5% versus expectations of a 0.1% increase.
    • Government spending came in at -1.4% versus expectations of a 2.5% increase.
    • Nonresidential structures rose 12.3% versus expectations of a 7.0% increase.
  • The University of Michigan’s index of consumer sentiment rose 1.0 point to 98.8 in April versus expectations of 98.0.
  • Existing home sales rose 1.1% in March to a seasonally adjusted rate of 5.60 million units exceeding expectations of a 0.2% increase.
  • Consumer confidence rose to 128.7 in April exceeding expectations of 126.0.

Fact of the Week

  • Amazon closed today at $1572.96, after reaching an all-time high during trading at $1633.26. Amazon’s first close in 1997 was $1.96, on a split-adjusted basis. If you have invested $10,000 at the first closing price, your investment would be worth $8,023,507.24 as of close today. (Source: Money.net)

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

North Korea, Japan, Cuba: Wealth Economic Update Apr. 20, 2018

U.S. and World News

  • KOREA-652900206_360Japan’s Shinzo Abe traveled to Mar-a-Lago to meet with President Trump on Tuesday to discuss trade and a planned summit with North Korean leader Kim Jong-un. Japan wanted to discuss the United States renewed interest in re-entering the Trans-Pacific Partnership (TPP) and the possibility of Japan’s inclusion in the exemption of steel and aluminum tariffs with other United States allies. Japan was also concerned that they may have been excluded from nuclear negotiations with North Korea after President Trump made a decision to meet with Kim Jong-un without first conferring with Shinzo Abe. The two-day summit concluded with no deal being reached on the TPP, no exemption for Japan on the steel and aluminum tariffs, and a stronger agreement between the two leaders on North Korea.
  • After more than 60 years of Castro leadership in Cuba, Miguel Diaz-Canel was elected the next president of Cuba, a widely expected result. On Thursday, Raul Castro announced that he is stepping down and Diaz-Canel was elected after 603 out of the 604-member National Assembly had approved of him. Raul Castro will remain head of the country’s Communist Party until the next scheduled party congress in 2021. Miguel Diaz-Canel stated that he will reform the economy to improve the communication between the government and the people while preserving Cuba’s communist system.

Markets

  • The markets finished higher this week. The S&P 500 rose 0.54% and closed at 2,670.14. The Dow Jones rose 0.46% and closed at 24,462.94. Year to date, the S&P is up 0.45% and the Dow Jones is down 0.40%.
  • Yields moved much higher for yet another week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.80% and 2.96%, respectively. The 10-year Treasury yield hit its highest level since 2014.
  • The spot price of WTI Crude Oil rose again this week by 1.15% and closed at $68.10 per barrel. Year to date, Oil prices are up 13.29%.
  • The spot price of Gold fell this week by 0.76%, closing at $1,335.96 per ounce. Year to date, Gold prices are up 2.55%.

Economic Data

  • Initial jobless claims declined 1,000 to 232,000 for the week. The largest declines were in New Jersey, Pennsylvania, and Ohio. The four-week moving average moved up 1,000 to 231,000. The pace of layoffs still remains very low.
  • The Philadelphia Fed manufacturing index moved higher by 0.9 points to 23.2 vs consensus expectations of 21.0. The increase was led by the employment component and the average workweek component.
  • Retail sales increased by 0.6% in March versus expectations of a 0.4% increase. The increase was led by auto sales and slightly held back by falling gasoline prices.
    • Retail sales ex-autos increased 0.2% versus a median forecast of 0.2%
    • Retail sales ex-autos, gasoline, and building materials increased 0.4% versus a median forecast of 0.4%
  • Housing starts rose 1.9% in March to 1,319k, short of expectations of a 2.5% increase. The rise was driven by multi-family starts.
    • Building permits rose by 2.5% month-over-month in March to an annualized rate of 1,354k compared to a median forecast of an unchanged month-over-month figure.

Fact of the Week

  • Marijuana sales in Colorado generated $506 million in tax revenue for the state, through June 2017. In 2014, the first year it was legalized, the state generated $76 million in tax revenue from marijuana, nearly double the $42 million that was generated from alcohol sales in the state. The deficit in Illinois is $148 billion as of 4/20/18. (CNN Money, US Debt Clock).

Please contact a member of the Wealth Management Department if you have any questions about this information.

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

Visit Old Second Wealth Management

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Budget, Infrastructure: Wealth Economic Update Feb. 19, 2018

U.S. and World News

  • traffic-637694576_400President Trump released a detailed outline of his long-awaited infrastructure proposal. The major aspects of the proposal are similar to the framework that had been leaked a few weeks ago. The overall amount of federal funding for the proposal would be $200 billion and this would be combined with private funding for a total package of $1.5 trillion spread over several years. There are four broad segments addressed in the proposal: Infrastructure Incentives Program (transportation, water/sewer), Rural Infrastructure Program (broadband, electrical power), Transformative Projects Program (commercially viable projects with high risk/reward), and Infrastructure Financing Programs (additional funding and broader eligibility). In addition, President Trump is calling for a $0.25/gallon hike to the federal gas tax in order to fund the federal portion that will upgrade roads, bridges and public works. The proposal faces strong challenges before it can be enacted due to the 60 votes needed to pass it in the Senate and a current lack of bipartisan consensus about the appropriate structure for federal infrastructure funds.

Markets

  • Markets rebounded from last week’s plunge, although trading was still relatively volatile. The S&P 500 gained 4.37% and closed at 2,732. The Dow Jones followed suit by also gaining 4.36% and closing at 25,219. Year to date, the S&P is up 2.45% and the Dow Jones has gained 2.37%.
  • Yields continued their upward trend this week, the 5 year and 10 year U.S. Treasury Notes are now yielding 2.64% and 2.88%, respectively.
  • The spot price of WTI Crude Oil rose 4.04% this week, closing at $61.61 per barrel. Year to date, Oil prices are up 3.11%.
  • The spot price of Gold increased by 2.30% this week, closing at $1,346.96 per ounce. Year to date, Gold prices are up 3.39%.

Economic Data

  • Initial jobless claims increase 7,000 from last week, coming in at 230,000, a bit above consensus estimates of a slight increase. The four week moving average for claims now stands at 229,000.
  • The headline Consumer Price Index (inflation) reading for January increased 0.5%, over expectations of 0.3%. This reflected a 3.0% rise in energy prices. Over the last 12 months, headline prices have risen 2.1%.
    • Core CPI (excludes food and energy) came in at 0.35%, also higher than expectations of 0.2%. Over the last 12 months, Core inflation has been 1.85%.
  • Retail sales declined -0.3% in January, a disappointing figure compared to +0.2% expectations. Excluding autos, retail sales were flat, also below expectations. The largest declines in January were in health and personal care (-1.2%), sporting goods, hobby, book and music (-0.8%), and furniture (-0.4%) retailers.

Fact of the Week

  • The National Retail Federation estimates that more than 55% of the U.S. population celebrated Valentine’s Day this week, and will have spent $19.6 billion on gifts for the holiday.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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Stock Market, Shutdown, North Korea: Wealth Economic Update Feb. 12, 2018

U.S. and World News

  • stock_market-533891962_370After a long period of calm markets, the U.S equity market posted its first correction (10% loss) in two years amid concerns over rising interest rates, an overheating economy, and complex leveraged funds driven by algorithms used to speculate on volatility. International stock indexes followed suit and are now about 10% off their highs.
  • The government briefly shut down late Thursday night following a failure to reach an agreement on a new budget deal, but was reopened early this morning after a major fiscal spending bill was passed. The bill includes an extension to the debt ceiling, a two-year increase in spending on military and domestic programs by $300 billion, and an additional $90 billion to help aid the disasters that occurred in 2017, extend the Children’s Health Insurance Program, and fight the opioid crisis. House Speaker Paul Ryan stated this morning, “Ultimately, neither side got everything it wanted in this agreement, but we reached a bipartisan compromise that puts the safety and well-being of the American people first.”
  • Vice President Mike Pence stated that “The United States of America will soon unveil the toughest and most aggressive round of economic sanctions on North Korea ever” as North Korea continues its nuclear and ballistic missile program despite numerous threats to terminate it. The Vice President did not give any details regarding the planned sanctions, but it is likely that they will target Chinese businesses that do business with North Korea.

Markets

  • In the most volatile week that we have seen in 2 years, the market has dipped into correction territory. The S&P 500 fell 5.10% and closed at 2,619. The Dow Jones followed suit by also plummeting 5.10% and closing at 24,191. Year to date, the S&P is down 1.83% and the Dow Jones is down 1.90%.
  • After trading in a wide range throughout the week, the 5 year and 10 year U.S. Treasury Notes are now yielding 2.54% and 2.85%, respectively.
  • The spot price of WTI Crude Oil fell 9.52% this week, closing at $59.22 per barrel. Year to date, Oil prices are down 1.48%.
  • The spot price of Gold decreased by 1.36% this week, closing at $1,315.21 per ounce. Year to date, Gold prices are up 1.00%.

Economic Data

  • Initial jobless claims fell 9,000 from last week, coming in at 221,000 vs. consensus estimates of a slight increase. The decline is largely attributed to a 6,000 decline in Missouri. The four week moving average for claims now stands at 225,000.
  • The trade balance came in at -$53.1 billion in December versus consensus expectations of -$52.1 billion.
  • Wholesale inventory growth increased 0.4% in December versus consensus expectations of a 0.2% increase.

Fact of the Week

  • The stock market, on average, has a correction every 357 days, or about once a year. (Source: Deutsche Bank)
  • Based on research conducted on the Dow between 1945 and 2013, the average correction (which worked out to 13.3%) lasted a mere 71.6 trading days, or about 14 calendar weeks. (Source: MarketWatch)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

SOTU, Fed Chair: Wealth Economic Update Feb. 2, 2018

U.S. and World News

  • podium-665421982_370President Trump delivered his first State of the Union address this week in which he touched on five major policy areas: the economy, infrastructure, immigration, trade and national security. On the economy, Trump said, “Since the election we have created 2.4 million jobs, we are seeing rising wages, unemployment claims have hit a 45-year low and the stock market has smashed one record after another.” Trump also announced the “end of the war on American energy…the time to rebuild our crumbling infrastructure…and finally turn the page on decades of unfair trade deals.”
  • As widely expected, the Federal Reserve left interest rates unchanged in Janet Yellen’s final meeting as Fed Chair. The post-meeting statement generally upgraded it descriptions of economic activity, noting gains in employment, consumption and investment. The Committee also noted an expectation for inflation to pick up from its currently low levels. Leadership of the U.S. Central Bank will now shift to incoming Chairman Jerome Powell. The market is currently pricing in a 93% probability of a rate hike at the March meeting.

Markets

  • Markets retracted significantly this week, capped off by a steep Friday sell-off. The S&P fell 3.82%, closing at 2,762. The Dow Jones lost 4.11% for the week, closing at 25,520. Since the beginning of 2018, the S&P is up 3.44% and the Dow is up 3.34%.
  • Interest rates spiked this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.58% and 2.84%, respectively.
  • The spot price of WTI Crude Oil dipped by 1.83% this week, closing at $65.02 per barrel. Oil has started 2018 with a gain of 7.62%.
  • The spot price of Gold fell by 1.34%, closing at $1,331.09 per ounce. In 2018, gold prices are up 2.17%.

Economic Data

  • Initial jobless claims declined 1,000 from last week, coming in at 230,000, lower than expectations. The largest decreases were in Michigan, New Jersey and Ohio which all fell -2K during the week. The four week moving average for claims fell to 235,000.
  • The January employment report showed a gain of 200,000 jobs during the month, more than the forecasted 180,000. The prior two months’ figures were revised down a total 24,000 which brings the three month average for job gains to 192,000.
    • The headline unemployment rate held at 4.1% as expected. The labor force participation rate also held steady at 62.7%.
    • Average hourly earnings rose 0.3% during the month, beating expectations of 0.2%. With revisions to the prior months, over the last 12 months wages have increased 2.9%.
  • The Case-Shiller home price index rose by 0.7% in November, slightly more than expectations of 0.6%. Prices rose in all 20 cities measured with San Francisco (+1.8%), Las Vegas (+1.1%), and Tampa  (+1.0%) saw the largest monthly increases. Over the last 12 months, home prices as measured by the index have risen by 6.4%.

Fact of the Week

  • The S&P 500 has now gone 404 trading days without a peak-to-trough 5% pullback (6/28/2016 through 2/2/2018), the longest run of this kind in the history of the index. The current run overtook the previous record of 394 trading days which went from 12/21/1994 to 7/12/1996. With the drop this week, the current pullback in the S&P 500 has amounted to 3.8%. (Source: Pension Partners)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

DACA, Shutdown: Wealth Economic Update Jan. 26, 2018

U.S. and World News

  • worker-614128222_400The shutdown of the U.S. government lasted all of 3 days as Congress voted to reopen the government and provide funding through February 8th. Senate Democrats reluctantly voted to adopt a short-term spending bill to fund government operations without first addressing the fate of young undocumented immigrants in the DACA program. With another government shutdown on the horizon, President Trump will release a “legislative framework” on immigration issues next week that he believes “represents a compromise that members of both parties can support.” This would include “four agreed upon pillars”, “securing the border and closing legal loopholes, ending extended family chain migration, canceling the visa lottery and providing a permanent solution on DACA.”

Markets

  • Markets had yet another week of strong gains. The S&P rose 2.23%, closing at a new All-Time High of 2,872. The Dow Jones gained 2.09% for the week, also closing at a new All-Time High of 26,617. Since the beginning of 2018, the S&P is up 7.54% and the Dow is up 7.77%.
  • Interest rates were little changed from last week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.47% and 2.66%, respectively.
  • The spot price of WTI Crude Oil climbed by 4.48% this week, closing at $66.21 per barrel. Oil has started 2018 with a gain of 9.58%.
  • The spot price of Gold rose by 1.44%, closing at $1,350.97 per ounce. In 2018, gold prices are up 3.70%.

Economic Data

  • Initial jobless claims rose 17,000 from last week, coming in at 233,000, in line with expectations. The largest increases were in Michigan (+4k) and Wisconsin (+3k). The four week moving average for claims fell to 240,000.
  • The first estimate of 4th quarter 2017 real GDP showed 2.6% annualized growth, below expectations of 3.0%. Much of the miss was due to net exports which reflected the strength in goods imports during the quarter. For the entirety of 2017, real GDP of the U.S. grew 2.3%.

Fact of the Week

  • Janet Yellen’s 4 years as Federal Reserve Chair ends next Wednesday January 31st with her 32nd and final meeting. During Yellen’s term, the central bank implemented 5 rate hikes and began reversing the $4 trillion of bond purchases made from 2008-2014 during “Quantitative Easing”, which was started by her predecessor Ben Bernanke. President Trump’s nominee Jerome Powell is poised to take over as Fed Chair next month after being confirmed by the Senate this week.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.