Coronavirus uptick: O2 Wealth Economic Update, July 17, 2020

U.S. and World News

  • iStock-1218500852Due to the uptick in coronavirus cases, a growing number of U.S. states and localities have mandated the use of masks and face coverings while in public. Georgia Governor Brian Kemp is suing Atlanta Mayor Keisha Lance Bottoms over the city’s mask mandate – which is punishable by a fine or up to six months in jail – claiming the measure is more restrictive than a state order that “strongly encourages face coverings” but does not require them. On the corporate side of things, Walmart, Kroger and Target announced Wednesday that they would will require customers to put on a mask or face covering inside stores.
  • “What we really need are drugs that, when given early, can prevent a symptomatic person from requiring hospitalization or very dramatically diminish the time that they’re symptomatic,” Dr. Anthony Fauci told Mark Zuckerberg during a Facebook Live interview. Looking for a treatment, he expects results for a clinical trial on monoclonal antibodies by late summer or early fall. The laboratory-produced proteins – described as “precise bullets” that can be developed from antibodies from other people who’ve been infected by COVID-19 – are hoped to be used to treat sick coronavirus patients as well as for prophylaxis.

Markets

  • Markets rose again this week. The S&P 500 jumped 1.27% and closed at 3,224. The Dow Jones rose 2.32% and closed at 26,671. Year-to-date, the S&P 500 is up 0.88% and the Dow Jones is down -5.3%.
  • Interests rates were fell slightly from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.28% and 0.62%, respectively.
  • The spot price of WTI Crude oil inched higher this week. Prices rose 0.12% and closed at $40.60 per barrel. Year to date, Oil prices are down -33.51%.
  • The spot price of Gold rose 0.69% and closed at $1,811.04 per ounce. Year to date, Gold prices are up 19.36%.

Economic Data

  • Business inventories declined by 2.3% in May
  • Retail sales increased 7.5% month over month in June.
  • The Philadelphia Fed manufacturing index fell by 3.4 points, better than concensus estimates for a larger decline.
  • Initial Jobless claims fell by 10,000 to 1.3 million in the week of July 11.
  • Industrial production increase by 5.4% in June, mostly lead by a large increase in automobile manufacturing.
  • CPI rose by 0.24% month over month in June.

Fact of the Week

  • Then market cap weighted performance of the top 5 stocks in the S&P500 (Microsoft, Apple, Amazon, Facebook, Google) has been +32% year to date. The performance of the remaining 495 stocks in the index has been -7.7% year to date. (Source: Strategas)

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 season, Libya: O2 Wealth Economic Update, July 10, 2020

U.S. and World News

  • iStock-692343236_370Hurricane season in 2020 has started with the earliest 6th named storm on record set to make landfall in the Northeastern U.S. tonight. Tropical Storm Fay is sustaining winds around 50 mph as of this morning and is expected to bring 2 to 4 inches of rain with some isolated areas expecting to see 7 inches. Tropical Storm Warnings are currently in effect for New Jersey, New York, and Connecticut as the Northeast prepares for flash flooding throughout the night. The storm gained structure and transformed into a Tropical Storm this morning and the potential exists for it to become a Category 1 hurricane which is defined by sustained winds of at least 75 mph.
  • Tensions in Libya escalated further this week after Turkey announced that they will be holding large scale naval exercises off the Libyan coast in anticipation of war in the eastern Mediterranean. One day later, the Egyptian media announced that the Egyptian Army will host their own military drills near the western Libyan border. Turkey has been stepping up its military efforts in Libya recently in support of the government, which is currently battling a civil war. Egypt supports the opposing party in Libya, and this is the first show of force by the Egyptian Army since Turkey began intervening.

Markets

  • Markets rallied this week. The S&P 500 spiked 1.79% and closed at 3,185. The Dow Jones rose 0.98% and closed at 26,075. Year-to-date, the S&P 500 is down -0.38% and the Dow Jones is down -7.44%.
  • Interests rates were unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.63%, respectively.
  • The spot price of WTI Crude oil fell slightly this week. Prices fell -0.37% and closed at $40.50 per barrel. Year to date, Oil prices are down -33.67%.
  • The spot price of Gold rose 1.31% and closed at $1,799.18 per ounce. Year to date, Gold prices are up 18.58%.

Economic Data

  • Initial jobless claims fell by 99,000 to 1.3 million and the four-week moving average of claims fell by 63,000 to 1.4 million. Claims fell by 37,000 in New York, 23,000 in Florida, and by 12,000 in Oklahoma. Claims rose by 39,000 in Texas, 30,000 in California, and by 4,000 in Connecticut.
  • The ISM non-manufacturing index rose by 11.7 points to 57.1 versus expectations for a reading of 50.2
  • Wholesale inventories fell -1.2%, in-line with expectations
  • The producer price index (PPI) fell by -0.2% versus expectations for an increase of 0.4% and the year-over-year rate fell by -0.8%
  • PPI ex-food, energy and trade services rose by 0.3% versus expectations for an increase of 0.1% and the year-over-year rate was flat

Fact of the Week

The money used by the Federal Reserve in its lending programs and asset-buying programs was “digitally created” by the Fed, i.e., the Fed does not technically “print” money (it does not have a printing press) but rather it creates money with the press of a button on a keyboard.  The Fed is forecasted to create$5 trillion of new money between March 2020 and December 2020 (source: Federal Reserve)

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

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

Coronavirus, Jobs Gains: O2 Wealth Economic Update, July 3, 2020

U.S. and World News

  • The United States is setting records for new confirmed daily coronavirus cases heading into Independence Day weekend as dozens of states have either delayed reopening plans or have taken steps back in the process. After reporting a record 509 new cases yesterday, Washington State Governor Jay Inslee announced that he would pause reopening in the state for 2 weeks and directed all businesses to require face coverings for employees and customers. The announcement from the Washington Governor comes after Texas issued a similar order requiring face coverings as Houston hospitals were forced to move ICU patients as far as 50 miles away as a result of overcapacity. The state of Arizona announced this morning that 91% of its ICU beds are occupied by COVID-19 patients and only 196 beds remain available as 4,433 new cases were reported yesterday in the state. The United Kingdom released travel guidelines easing restrictions on travelers from a handful of countries excluding the United States, continuing to require Americans to quarantine for 2 weeks upon arrival.
  • In the past two months, the United States has added back a shocking 7.5 million of the 20.7 million lost jobs in April. About 40% of the job gains were in the leisure and hospitality sector as most restaurants and bars have reopened. New jobs in the retail trade industry accounted for about 10% of the total job gains in the past two months as clothing stores and general merchandise stores also reopened. Education and health services jobs also increased substantially, as many dentists, physicians, and private educators went back to work. The rate of job growth in the past two months have smashed expectations as the unemployment rate was expected to rise to 19.1% in May but instead fell to 13.3% while the unemployment rate in June fell to 11.1% versus 12.5% expected.

Markets

  • Markets surged higher in the holiday shortened trading week. The S&P 500 jumped 4.07% and closed at 3,130. The Dow Jones spiked 3.29% and closed at 25,827. Year-to-date, the S&P 500 is down -2.13% and the Dow Jones is down -8.33%.
  • The yield curve steepened this week as the level of rates remained relatively unchanged. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.67%, respectively.
  • The spot price of WTI Crude oil rose this week. Prices rose 4.68% and closed at $40.29 per barrel. Year to date, Oil prices are down -34.01%.
  • The spot price of Gold rose 0.23% and closed at $1,775.35 per ounce. Year to date, Gold prices are up 17.01%.

Economic Data

  • Initial jobless claims fell by 55,000 to 1.4 million and the four-week moving average of claims fell by 1118,000 to 1.5 million. Claims fell by 47,000 in Oklahoma, 8,000 in New York, 3,000 in California, and by 3,000 in Florida. Claims increased by 6,000 in Wisconsin and by 5,000 in Texas.
  •  Nonfarm payrolls rose by 4.8 million in June versus expectations for an increase of 3.2 million
  • Private sector employment in the ADP rose by 2.4 million versus expectations for an increase of 2.9 million
  • The unemployment rate fell to 11.1% versus expectations for a reading of 12.5%
  •  Average hourly earnings fell -1.2% versus expectations for a decline of -0.8% and the year-over-year rate rose 5.0%
  • Factory orders increased by 8.0% versus expectations for an increase of 8.6%
  • Pending home sales rose by 44.3% versus expectations for an increase of 19.3%
  • The S&P/Case-Shiller home price index rose by 0.3% versus expectations for an increase of 0.5%
  • The Conference Board index of consumer confidence rose by 12.2 points to 98.1 versus expectations for a reading of 91.5
  • The ISM manufacturing index rose by 9.5 points to 52.6 versus expectations for a reading of 49.8
  • Construction spending fell by -2.1% versus expectations for an increase of 1.0%

Fact of the Week

  • In 2000, Bobby Bonilla was let go from the New York Mets. Instead of receiving the $5.9 million he was due in his contract, the two parties agreed to defer payment until 2011, when the Mets would begin paying Bonilla $1.19 million every July 1st, through 2035. To this day, he has received $11.9 million dollars from the Mets. If he had instead taken the $5.9 million and invested it into the S&P500 on January 1st 2000, he would have $12.5 million. (Source: ESPN, 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.

Bank Regulations, Coronavirus “hotspots”: O2 Wealth Economic Update, June 26, 2020

U.S. and World News

  • During this Thursday’s stress test of the banking industry, it was discovered that several banks could reach minimum capital requirement levels, prompting the Fed to take action. The Federal Reserve placed new restrictions on the banking industry that requires big banks to cease share repurchases and cap dividends at their current levels for the next quarter. Additionally, banks will need to prove a specified level of net income from the previous four quarters in order to qualify to pay a dividend going forward. Banks are expected to reveal their plans with regards to dividends on Monday, June 29th.
  • COVID-19 “hotspots” have begun to develop in the United States that include Arizona, Florida, Texas, and California, many of which reporting the largest one-day spike in new cases on record. As a result of the surge in new cases, Houston area hospitals have reached their ICU capacity, leading the state of Texas to roll back their reopening plans and order bars to close immediately. Harris country Texas, the third-largest in the United States by population, just declared a “top level emergency” regarding COVID-19. Shortly after, Florida, which reported a record 8,942 cases yesterday followed suit and ordered all bars to close. Also, the positivity rate in Florida has increased from 4.39% on June 13th to 15.84% this Tuesday, raising questions about the correlation between increased testing and increased cases. The White House coronavirus task force is holding a news briefing regarding the issue today for the first time in nearly two months.

Markets

  • Markets are lower after another volatile week. The S&P 500 fell -2.86% and closed at 3,009. The Dow Jones dropped -3.31% and closed at 25,016. Year-to-date, the S&P 500 is down -5.97% and the Dow Jones is down -11.23%.
  • Yields also fell lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.64%, respectively.
  • The spot price of WTI Crude oil fell this week. Prices fell -4.22% and closed at $38.15 per barrel. Year to date, Oil prices are down -37.52%.
  • The spot price of Gold rose 1.53% and closed at $1,770.55 per ounce. Year to date, Gold prices are up 16.69%.

Economic Data

  • Initial jobless claims fell by 60,000 to 1.5 million and the four-week moving average of claims fell by 161,000 to 1.6 million. Claims increased by 22,000 in California, 11,000 in Indiana, and by 10,000 in Florida. Claims fell by 36,000 in Oklahoma, 26,000 in Kentucky, and by 11,000 in Massachusetts.
  • New orders for durable goods rose by 15.8% versus expectations for an increase of 10.5%
  • Durable goods orders ex-transports rose 4.0% versus expectations for an increase of 2.1%
  • Core capital goods orders rose 2.3% versus expectations for an increase of 1.0%
  • Core capital goods shipments rose by 1.8% versus expectations for a decline of -1.0%
  • Personal consumption fell by -6.8%, in-line with expectations
  • Personal income fell by -4.2% versus expectations for a decline of -6.0%
  • Personal spending rose by 8.2% versus expectations for an increase of 9.3%
  • Wholesale inventories fell by -1.2% versus expectations for an increase of 0.4%
  • Existing home sales fell -9.7% to a seasonally-adjusted-annualized-rate of 3.91 million units versus expectations for a decline of -5.6%, led by the Northeast (-13.0%)
  • Sales of new single-family homes rose by 16.6% to a seasonally-adjusted-annualized-rate of 676k units versus expectations for a reading of 640k units
  • The PCE price index rose by 0.1% versus expectations for an unchanged reading and the year-over-year figure rose 0.6% versus expectations for a 0.5% increase
  • The core PCE price index rose by 0.1% versus expectations for an unchanged reading and the year-over-year rate rose 1.0% versus expectations for an increase of 0.9%
  • The University of Michigan’s index of consumer sentiment fell by 0.8 points to 78.1 versus expectations for a reading of 79.2

Fact of the Week

  • At the end of 2019, 61% of the world’s foreign exchange reserves (cash held by central banks around the world) was in US dollars. In total, the world’s central banks held $6.745 Trillion, with the second largest reserve position was the Euro at €2.275 Trillion. (Source: International Monetary Fund)

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.

China trade, India v. China: O2 Wealth Economic Update, June 19, 2020

U.S. and World News

  • In January, the United States and China agreed to a “Phase One” trade deal where China would be responsible for buying $36.5 billion in U.S agriculture products, an increase from $24 billion in 2017. Year-to-date, China has only purchased $4.65 billion, which is almost half as much purchased during the same period in 2017. Yesterday, Secretary of State Mike Pompeo said China’s top foreign policy official is still committed to the $36.5 billion in purchases for the year, despite the current shortfall. Pompeo tweeted on Thursday “During my meeting with CCP Politburo Member Yang Jiechi, he recommitted to completing and honoring all of the obligations of Phase 1 of the trade deal between our two countries”.
  • iran-china-1225077759_370For the first time in about 50 years, a border clash between India and China broke out after weeks of rising tensions along the disputed and undefined Line of Actual Control (LAC) that separates China and India in Ladakh and the Tibet region. The high altitude and sub-zero temperatures in the mountainous region led to the death of 20 wounded Indian troops. China has not confirmed the death of any of its troops and has accused the Indian army of provoking and attacking Chinese personnel. Both sides have held talks over the phone, agreeing to cool down tensions, expressing that they do not seek escalation to war. Despite the agreed de-escalation, China and India have sent additional military personnel to the region.

Markets

  • Markets rebounded higher this week. The S&P 500 spiked 1.28% and closed at 3,098. The Dow Jones rose 0.33% and closed at 25,871. Year-to-date, the S&P 500 is down -3.68% and the Dow Jones is down -8.98%.
  • Yields were relatively unchanged this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.34% and 0.71%, respectively.
  • The spot price of WTI Crude oil fell this week. Prices fell -1.42% and closed at $38.84 per barrel. Year to date, Oil prices are down -36.39%.
  • The spot price of Gold fell -0.34% and closed at $1,724.80 per ounce. Year to date, Gold prices are up 13.68%.

Economic Data

  • Initial jobless claims fell by 58,000 to 1.5 million and the four-week moving average of claims fell by 235,000 to 1.8 million. Claims increased by 22,000 in Georgia and by 16,000 in New York. Claims fell by 20,000 in Maryland, 16,000 in Massachusetts, and by 16,000 in Oklahoma.
  • Retail sales rose by 17.7% versus expectations for an increase of 8.4%
  • Core retail sales rose by 11.0% versus expectations for an increase of 5.2%
  • Industrial production rose by 1.4% versus expectations for an increase of 3.0%
  • Business inventories fell by 1.3% versus expectations for a decline of 1.0%
  • The level of housing starts rose by 4.3% to 974k units versus expectations for an increase of 23.5%
  • Building permits rose by 14.4% versus expectations for an increase of 16.8%

Fact of the Week

  • The nation’s 13.3% jobless rate as of 5/31/20 (released on Friday 6/05/20) would have been an estimated 16.3% if the workers who were being paid wages from funds obtained through a “Payroll Protection Program” (PPP) loan were counted as “temporarily laid off” instead of “actively employed” (source: Bureau of Labor Statistics).

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

Visit Old Second Wealth Management

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

Coronavirus, Markets, Oil production: Special Wealth Economic Update Mar. 9, 2020

SPECIAL UPDATE

virus_oil-1209053811_370The New York Stock Exchange halted trading this morning due to the circuit breaker of a 7% intra-day loss being breached on the heels of Coronavirus spread and the surprise decision made by Saudi Arabia to slash prices and increase production of oil. These circuit breakers were put in place in an effort to calm market trading during times of extreme stress & panic. Markets have been experiencing wide spread volatility over the course of the last two weeks and this past weekend’s events added to the market’s fears. While the effect on stocks has certainly been front and center, the fear has gripped the bond markets, sending interest rates to their lowest levels in history. The entirety of the U.S. Treasury curve going out to 30 years is now below a 1% yield.

One major catalyst for the heightened volatility was the plunge in oil prices as a result of Saudi Arabia’s decision at the weekend OPEC meeting to instigate a price war on oil. Early on during OPEC’s meeting in Vienna last week, Russia refused to agree upon a cartel-wide production cut in order to bolster already falling oil prices, believing that the move would be too beneficial to U.S. shale producers. In response to their non-compliance, Saudi Arabia put forth plans to slash prices and increase production in a direct shot at Russia’s market share. The response in the oil markets was precipitous, with more than a -20% drop and WTI crude pricing in the low $30’s per barrel. The size of the drop in prices signals not only a price war being waged, but also a steep decline in demand based on lower economic activity, which we believe to be overstated. Oil experienced a similar shock toward the end of 2015 when crude fell to $25/barrel as U.S. supply rose and OPEC made the decision to keep their cartel’s production at the same level.

The impact of the Coronavirus continues to expand globally. Reports came out this weekend that the Northern Italian region of Lombardy which is home to 16 million people will be quarantined until April 3rd. Here in the U.S., the number of confirmed cases stands at over 500, while deaths rose to 22.  The U.S. has ramped up efforts to contain the spread of the disease, including the cancellation of some widely attended events and temporary school closings. The lasting effects of Covid-19 and its containment efforts are still unclear but previous infectious disease episodes have resulted in temporary, albeit painful, economic disruptions.

Global central banks have been active in easing and maintaining liquidity in the markets with our own Federal Reserve announcing a 50 basis point cut to the Fed Funds Rate last week with potentially more cuts coming. The Federal Reserve also announced today that they will increase the amount of short-term loans it is offering to money markets to due to funding strains resulting from the coronavirus and an increased demand for short-term lending. This adjustment was designed to make sure the supply of bank deposits held at the Fed, called reserves, “remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation,” the New York Fed said. “They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus.” Coordinated fiscal policy efforts are being discussed and would be a welcome development, as they have a more direct influence on day-to-day activities than monetary policy and would have a larger impact on damaged consumer sentiment.

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

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

Visit Old Second Wealth Management

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

Coronavirus, Oil production: Special Wealth Economic Update Mar. 6, 2020

U.S. and World News

  • President Donald Trump signed an $8.3 billion emergency spending package this morning to fight the coronavirus. At this point, there are have been more than 100,000 confirmed coronavirus cases in the world, including over 230 cases in the United States that include 14 deaths. Italy is now the worst-affected country outside of Asia with 2,502 cases and 79 deaths, which led to all schools and universities to be closed across the country. The coronavirus began to spread in several communities across the United States this week, closing schools and putting California in a state of emergency after their first death. According to the International Air Transport Association, airlines are expected to lose $63 billion to $113 billion in revenue for passenger traffic globally in 2020, depending on the future spread of the virus.
  • Looking to provide some stability to the price of oil, OPEC+ met this week in Vienna to discuss production cuts. Saudi Arabia was pushing for a cut of 1M-1.5M barrels per day in the second quarter and for an extension until the end of 2020 for existing cuts of 2.1M barrels per day that will expire this month. Russia, a country that is typically reluctant to agree to production cuts, announced that it would not back the additional cuts. The 14-member group is not scheduled to meet again until June 9th to review the policy. The price of oil fell 8% on the news.

Markets

  • Markets ended the week higher, despite the Dow Jones having 1,000 point swings nearly every day. The S&P 500 rose 0.65% and closed at 2,972. The Dow Jones gained 1.79% and closed at 25,865. Year-to-date, the S&P 500 is down 7.68% and the Dow Jones is down 8.95%.
  • Yields dropped sharply this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.61% and 0.76%, respectively.
  • The spot price of WTI Crude fell this week. Prices fell 7.42% and closed at $41.44 per barrel. Year to date, Oil prices are down 32.13%.
  • The spot price of Gold rose by 5.61% and closed at $1,674.61 per ounce. Year to date, Gold prices are up 10.37%.

Economic Data

  • Initial jobless claims fell by 3,000 to 216,000 and the four-week moving average of claims rose 3,000 to 213,000. Claims fell by 3,000 in Illinois, but increased by 5,000 in Ohio.
  • ISM manufacturing fell 0.8 points to 50.1 versus expectations for a reading of 50.5
  • The ISM non-manufacturing index rose by 1.8 points to 57.3 versus expectations for a reading of 54.8
  • Construction spending rose 1.8% versus expectations for an increase of 0.6%
  • Private sector employment rose by 183,000 versus expectations for an increase of 170,000
  • Factory orders fell by 0.5% versus expectations for a 0.1% decline
  • Nonfarm payrolls rose by 273,000 versus expectations for a 175,000 increase
  • The unemployment rate fell to 3.5% versus expectations for a reading of 3.6%
  • Average hourly earnings rose by 0.3%, in-line with expectations

Fact of the Week

  • During the 11 year bull market that began 3/10/09, the S&P 500 has had 7 “corrections” between 10 and 30 percent. The first was 07/02/10, and the last started when we entered correction territory last Friday. (Source: BTN Research)

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

Visit Old Second Wealth Management

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

Coronavirus, Trump in India: Special Wealth Economic Update Feb. 28, 2020

U.S. and World News

  • medicine-1090255620_370Investors across the world have started to panic as new cases of the coronavirus have started to flare up outside of China. The virus has spread to 49 countries, with epidemics emerging in Iran, Italy and South Korea, where the number of people diagnosed with the virus is growing at a rapid pace. The World Health Organization held a press conference this morning where they declared that the virus poses a “very high” risk at a global level and earlier this week the Center of Disease Control warned that the coronavirus is “likely” to spread across the United States. The CDC reported on Wednesday the first case of “community spread” within the United States when a California man contracted the virus without having any prior travel links or contact with any people diagnosed with the virus. In a press conference Wednesday night, President Trump told reporters that the risk to Americans was “very, very low” and placed Vice President Mike Pence in charge of the U.S. response. Last night, Switzerland announced a ban on all events over 1,000 people and Saudi Arabia stated that foreign visitors to Mecca is no longer allowed as countries are increasingly taking stronger measures to prevent the spread.
  • President Donald Trump traveled to India earlier this week to continue ongoing trade negotiations with Indian Prime Minister Narendra Modi. The President and Modi have agreed to “promptly” conclude trade negotiations that could potentially lead to a bilateral U.S. – India trade deal. During the trip, the United States secured a sale of $3 billion in military equipment to India. The two countries have been communicating for months regarding tariff rates, farm goods, medical devices, and digital trade. President Trump stated earlier this week that “India is probably the highest tariff nation in the world”.

Markets

  • Coronavirus fears gripped markets this week triggering steep declines. The S&P 500 fell 11.44% and closed at 2,954. The Dow Jones dropped 12.26% and closed at 25,409. Year-to-date, the S&P is down 8.24% and the Dow Jones is down 10.51%.
  • Yields dropped to record lows this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.94% and 1.16%, respectively.
  • The spot price of WTI Crude fell this week. Prices dropped 15.19% and closed at $45.27 per barrel. Year to date, Oil prices are down 25.86%.
  • The spot price of Gold fell by 3.55% and closed at $1,585.00 per ounce. Year to date, Gold prices are up 4.46%.

Economic Data

  • Initial jobless claims rose by 8,000 to 219,000 and the four-week moving average of claims rose 1,000 to 210,000. Claims rose by 4,000 in Illinois and New York.
  • Personal consumption rose by 1.7%, in-line with expectations
  • New orders for durable goods fell by 0.2% versus expectations for a decline of 1.4%
  • Durable goods ex-transports rose by 0.9% versus expectations for an increases of 0.2%
  • Core capital goods orders rose by 1.1% versus expectations for an increase of 0.1%
  • Core capital goods shipments rose by 1.1% versus expectations for no change
  • The Conference Board index of consumer confidence rose 0.3 points to 130.7 versus expectations for a reading of 132.2
  • Sales of new single-family homes increased by 7.9% to a seasonally-adjusted annualized rate of 764k units versus expectations for a reading of 718k
  • Pending home sales rose by 5.2% versus expectations for an increase of 3.0%
  • Personal income rose by 0.6% versus expectations for an increase of 0.4%
  • Personal spending rose by 0.2% versus expectations for an increase of 0.3%
  • The PCE price index rose by 0.1% versus expectations for an increase of 0.2% and the year-over-year rate rose 1.7% versus expectations for an increase of 1.8%
  • The core PCE price index rose by 0.1% 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 University of Michigan’s index of consumer sentiment rose 0.1 points to 101.0 versus expectations for a reading of 100.7

Fact of the Week

The S&P 500 and the Dow Jones posted their largest one-week losses since 2008. Despite this fall, the S&P is up 6.1% over the last year. (Source: 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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

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Post-brexit: Wealth Economic Update Aug 8, 2016

U.S. and World News

  • london_big-ben_49186880_340U.K. Prime Minister Theresa has outlined her plan to reshape the British economy for a post-Brexit world. Her goal is to revive industrial productivity growth in the country by encouraging innovation and focusing on sectors and technologies that will give Britain a competitive advantage. Meanwhile, the Bank of England announced more easing measures in a continued effort to spur growth. Benchmark interest rates were cut and the central bank’s bond buying program was expanded and will now include corporate bonds.
  • Japanese Prime Minister Shinzo Abe announced a fresh stimulus package that ranks among the country’s largest since the global financial crisis. The package totals ¥28 trillion ($274 billion) and was approved in response to growing consensus that monetary policy alone won’t be able to revive Japan’s economy. Included in the package that’s expected to lift GDP 1.4% are childcare benefits, $150 handouts to 22 million low income citizens, a loan of ¥10.7 trillion for infrastructure projects and ¥7.5 trillion for direct fiscal spending.
  • India’s upper house of parliament unanimously approved the creation of a national sales tax, nearly a decade after the move was first proposed. This is considered to be the biggest legislative victory for Prime Minister Narendra Modi since he took office in 2014. The tax bill seeks to streamline the country’s fragmented tax system by imposing a single national tax, something businesses have been lobbying for as it would reduce costs and could boost economic growth by 2%. The bill now must be ratified by at least half of all states in India, a process projected to be concluded before the end of the year.

Markets

  • This week the S&P 500 was up 0.49% and closed at an All-Time High of 2,183. The Dow Jones rose 0.65% and closed at 18,544. So far in 2016, the S&P is up 8.08% and the Dow is up 7.94%.
  • Interest rates popped up this week, particularly following the strong July employment report. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.13% and 1.59%, respectively.
  • The spot price of WTI Crude Oil gained 0.91% this week to close at $41.98 per barrel. WTI Crude is up 4.77% in 2016.
  • The spot price of Gold fell 1.13% this week, closing at $1,336.00 per ounce. Year to date, gold prices are up 25.91%.

Economic Data

  • Initial jobless claims came in at 269,000 which is higher than last week’s reading of 266,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved up to 260,000.
  • The July employment report showed an increase of 255,000 non-farm payrolls, beating expectations of 180,000. The prior two months’ figures were revised up a total of 18,000, bringing the three month average for job gains to 190,000.
    • The headline unemployment rate remained at 4.9%, narrowly missing estimates of 4.8%. The small miss was due to the labor force participation rate rising by 0.1% to 62.8%.
    • Average hourly earnings rose by 0.3% in July, beating expectations of 0.2%. Over the last 12 months, wages are up 2.6%.
  • The PCE Price index (measure of inflation) rose 0.1% in June, lower than expectations of 0.2%. Over the last 12 months, the PCE index is up 0.9%.
    • The Core PCE Price Index (excludes food and energy, the Fed’s preferred measure of inflation) rose 0.1% in June, in line with expectations. Over the last year, core prices are up 1.6%.

Fact of the Week

  • At $25,000, George Washington’s presidential salary represented 2% of the U.S. budget in 1789. If that percentage of pay held today, Barrack Obama would be paid over $67 billion a year. (Source: USA Today)

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®, 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.

 

Wealth Management Economic Update October 5, 2015

U.S. and World News

  • india_coin_320With the preemptive resignation of House Speaker John Boehner paving the way for compromise, this week President Obama signed into law a bill that extends federal funding until December 11th. Had Congress not come to an agreement, the government would have shut down on October 1st. Both sides now have about 10 weeks to formulate a long-term budget, with the parties aiming to strike a two year deal.
  • The Reserve bank of India surprised markets by reducing its policy interest rate by a greater than expected 0.5% to 6.75%. The central bank cited low inflation as the main reason for the cut. This is the fourth interest rate cut this year in India, following three previous 0.25% cuts.

Markets

  • Equity markets increased slightly this week. The S&P 500 ended the week up 1.04%, closing at 1,951. Similarly, the Dow Jones increased 0.97% and closed at 16,472. Year to date, the S&P is down 5.22% and the Dow is down 7.58%.
  • Yields in the Treasury markets fell this week. The 10 year Treasury bond now yields 1.99% while the 5 year Treasury bond now yields 1.29%.
  • The spot price of WTI Crude Oil decreased slightly this week. Prices dropped by 0.11%, closing at $45.65 per barrel. In 2015, WTI Oil prices are down 22.35%.
  • The spot price of Gold decreased this week, declining 0.72% and closing at $1,137.99 per ounce. Year to date, gold prices are down 3.92%. 

Economic Data

  • Initial jobless claims came in at 277,000 which was an increase from the prior week’s figure of 267,000. The Labor Department noted that there were no special factors that affected the claims figure. The four week moving average for claims now stands at 271,000.
  • The Case-Shiller home price index unexpectedly declined in July, showing prices falling 0.2% vs. an expected gain of 0.1%. Prices fell in 11 of 20 cities covered by the index. Over the past 12 months, home prices have risen a solid 5.0%.
  • Nonfarm payrolls were 142,000 for the month of September, much lower than the forecasted figure of 201,000. Nonfarm payrolls for July and August were also revised down by a combined 59,000. Unemployment was unchanged at 5.1% and average hourly earnings remained flat.

Fact of the Week

  • This week in 1981, the U.S. government issued 20-year Treasury bonds at a 15.78% yield, an all-time record high interest rate for any U.S. government issue.

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®, 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
Tamara Wiley, CFP® – (630) 844-3222 twiley@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.

*Image of Japanese Prime Minister Shinzo Abe. Author: 多摩に暇人. License: GNU Free Documentation License, also filed under Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license. (See, https://commons.wikimedia.org/wiki/File:Shinzo_Abe.jpg).