China, Budget: Wealth Economic Update Mar. 23, 2018

U.S. and World News

  • The trade negotiations heated up this week as the newly imposed steel and aluminum tariffs come closer to taking effect. China continues to be the main target after an investigation into their practices revealed evidence of unfair terms on U.S. companies and foreign ownership restrictions. The United States filed a complaint at the World Trade Organization (WTO) over allegations that China is breaking WTO rules by denying basic patent rights that would stop Chinese entities from eventually using the technology of foreign patent holders. China responded on Thursday evening by revealing a specific list of 128 U.S goods that they plan to tariff in two steps. The plan includes a 15% tariff on 120 goods totaling $1 billion and a 25% tariff on eight goods totaling $2 billion.
  • self-driving-829192480_360Early this morning, the Senate passed a $1.3 trillion spending bill that would fund the government until September 30th, putting an end to the fuss about a potential government shutdown. The bill includes an increase in defense spending of $80 billion, domestic spending of $63 billion, $1.6 billion to fund a border wall with Mexico, and $100 million for research and testing of autonomous cars. Before President Trump signed the bill, he threatened to veto it citing lack of funding for the border wall with Mexico and no consideration for undocumented immigrants.

Markets

  • The markets experienced another selloff this week. The S&P 500 plummeted 93% and closed at 2,588.26. The Dow Jones also experienced a sharp decline this week losing 5.67% and closed at 23,533.20. Year to date, the S&P is down 2.74% and the Dow Jones is down 4.25%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 60% and 2.81%, respectively.
  • The spot price of WTI Crude Oil rose 70% this week, closing at $65.97 per barrel. Year to date, Oil prices are up 9.75%.
  • The spot price of Gold moved higher this week gaining 55%, closing at $1,347.80 per ounce. Year to date, Gold prices are up 3.45%.

Economic Data

  • Initial jobless claims rose by 3,000 from last week, coming in at 229,000. The four-week moving average moved slightly higher to 224,000. Layoffs remain at a very low pace and continue to fall further.
  • Existing home sales increased by 3.0% in February to a seasonally adjusted rate of 5.54 million units, beating expectations of a 0.4% increase. Sales in the West largely contributed to the increase.
  • Sales of new single-family homes fell 0.6% in February to a seasonally adjusted rate of 618,000 units slightly missing expectations of a 620,000 increase.
  • The Federal Open Market Committee (FOMC) raised the Fed Funds rate by 0.25% to a range of 1.50-1.75% in a widely expected move on Wednesday. The meeting had a more hawkish tone than expected, signaling 8 cumulative hikes in 2018-2020 when 6.75 were previously expected. The Fed now expects inflation to rebound in “the coming months” as opposed to “this year”.
  • Durable goods orders rose 3.1% in the month of February, beating expectations of a 1.6% increase. Durable goods orders continue to trend higher and a 25.5% increase in aircraft orders contributed to much of the increase.

Fact of the Week

  • As of last Friday (3/16/18), no US bank had failed YTD and required a financial bailout from the FDIC. This is the latest in any calendar year with no bank failures YTD since 2006, the last year in which no bank failures occurred during the entire year. Over the last 5 calendar years (2013-17), 63 banks failed in the United States, an average of 13 per year (source: Federal Deposit Insurance Corporation).

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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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

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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

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

 

Hurricane Irma, Debt Ceiling, DACA: Wealth Economic Update Sept. 8, 2017

U.S. and World News

  • hurricane-499087970_360As Texas gets the cleanup and reconstruction process underway following Hurricane Harvey, Florida is bracing for Hurricane Irma which is expected to hit the U.S. mainland on Sunday. Irma, which has developed into one of the most powerful storms ever recorded in the Atlantic Ocean, has already decimated many islands in the Caribbean, including Puerto Rico, on its way to East Coast.
  • A short term deal regarding the debt ceiling is close to completion, pushing the deadline back 3 months to March 2018. The temporary fix will be coupled with more than $15 billion in aid funding for Hurricanes Harvey and Irma. Some economists see this as a potential negative for tax reform prospects as the debt ceiling will now be breached sometime in the 1st quarter of 2018, right when it’s expected that tax legislation would be unveiled which may complicate matters further.
  • President Trump has decided to revoke the DACA program that shields young unauthorized immigrants from deportation. Trump announced that no action will be taken on those in the ‘Dreamers’ program for six months, giving Congress time to craft a solution. Absent action from Congress in that time frame, Trump said that he will “revisit the issue” when that deadline hits. Presumably, if a resolution isn’t found, over 800,000 young adults brought into the country illegally would become eligible for deportation.

Markets

  • Markets dipped this week. The S&P 500 fell 0.58% and closed at 2,461. The Dow Jones dropped 0.82% for the week and closed at 21,798. Year to date, the S&P is up 11.45% and the Dow is up 12.20%.
  • Interest rates fell quite substantially this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.64% and 2.05%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.57% this week, closing at $47.56 per barrel. Year to date, Oil prices have fallen 12.52%.
  • The spot price of Gold ended the week higher by 1.63%, closing at $1,346.78 per ounce. Year to date, Gold prices are up 17.37%.

 Economic Data

  • Initial jobless claims rose by 62,000 from last week, coming in at 298,000. This is the highest level of claims in more than two years; however, this mostly reflects a large jump (52,000) of jobless claims in Texas associated with Hurricane Harvey. The four week moving average for claims rose to 250,000.

Fact of the Week

  • According to the Census Bureau, 53% of the owner-occupied homes in the U.S. are owned by people who are age 55 or older. Ten years prior, the proportion of age 55+ homeowners was just 43%.

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.

 

Wealth Management Economic Update November 24, 2014

U.S. and World News

  • President Obama has outlined plans to use an executive order to aid millions of illegal immigrants, granting them the chance to apply for work permits and a temporary reprieve from deportation. Obama announced, “I will make it easier and faster for high-skilled immigrants, graduates and entrepreneurs to stay and contribute to our economy, as so many business leaders have proposed.” The move would mark the most drastic changes to the nation’s immigration laws in nearly 30 years and has predictably set off a fierce fight with Republicans over the limits of presidential powers.
  • China_shanghai_finance_000038795732_320In a surprising move, China has cut its benchmark interest rates for the first time in more than two years in response to a slowing economy. China is still growing faster than most developed nations but saw its growth slow to a five year low of 7.3% last quarter. The one year benchmark lending rate was lowered by 0.4% to 5.6% and the one year deposit rate was cut by 0.25% to 2.75%.
  • Data this week showed that Japan has fallen back into recession after posting a 1.6% GDP contraction in the 3rd quarter. In response, Japanese Prime Minister Shinzo Abe announced that he will delay a sales tax hike that was set to take effect next year. He also announced that snap elections will be held after the Japanese parliament is dissolved.
  • The U.S Senate fell one vote short in its attempt to approve construction of the Keystone XL pipeline, with the final tally of 59-41. Republican leadership believes that approval will come next year when the party takes majority in the Senate. It was widely believed that President Obama would have vetoed the bill had it passed in the Senate.

Markets

  • Equity markets continued to head higher this week as the S&P 500 and Dow Jones both closed Friday at new All-Time Highs. The S&P 500 advanced 1.20% and closed at 2,063. Likewise, the Dow Jones moved up 1.04% and closed at 17,810. Year to date, the S&P is up 13.68% and the Dow Jones is up 9.69%.
  • Yields in the Treasury markets traded flat this week. The 10 year Treasury bond now yields 2.31% and the 5 year Treasury yields 1.61%.
  • The spot price of WTI Crude Oil stopped its decline this week, rising 1.21%, closing at $75.98 per barrel. Year to date, Oil prices are down 17.21%.
  • The spot price of Gold increased this week, advancing by 1.04% and closing at $1,201.16 per ounce. Year to date, Gold prices are virtually unchanged.

Economic Data

  • Initial jobless claims rose from last week, coming in at 291,000 vs. consensus estimates of 284,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 288,000, which is near the lowest it’s been since April 2000.
  • Existing home sales rose 1.5% in October vs. expectations of a 0.4% decline. Existing home sales have generally trended upward since their recent trough in March, which was largely weather related.
  • The Headline Consumer Price Index was flat in October vs. expectations of -0.1%. Energy prices declined 1.9% in the month, mainly due to gasoline. Meanwhile, Core CPI (does not include food or energy) increased 0.2% this month against expectations of 0.1%.

Fact of the Week

  • According to the Social Security Administration, about 75% of single elderly people receiving Social Security benefits get more than half of their income from the program. In addition, 22% of married couples and 47% of single people receiving Social Security benefits count on the program for 90% or more of their income.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management