Iran, Australia fires: Wealth Economic Update January 10, 2020

U.S. and World News

  • On Monday evening, Iran carried out its retaliatory response to last week’s assassination of their military leader in the form of a missile attack on a military base in Iraq housing U.S. troops. The White House said that Iran launched 16 ballistic missiles at the facility and that no U.S. troops were killed in the attack. President Trump stated that Iran appears to be standing down and that the United States “will immediately impose additional punishing economic sanctions on the Iranian regime” in response to Iranian aggression. This morning, Secretary of State Mike Pompeo and Secretary of Treasury Steve Mnuchin announced new sanctions on Iran that include penalties on some senior leaders. The new sanctions will target Iran’s steel, construction, manufacturing, textiles, and mining industries and will aim to prevent other nations from trading with the country. Foreign Minister Mohammad Javad Zarif stated that the strikes concluded Iran’s response to the killing of Soleimani.
  • australia1195174769_370Australia is urging approximately 250,000 people to evacuate as a result of the bushfires that have already burned 25.5 million acres and killed 27 people. The bushfires in Australia have burnt more land than this years’ fires in Brazil, California, and Indonesia combined. Westpac estimated that the total losses related to the bushfires would total about $3.44 billion and would result in a 0.2%-0.5% negative impact on GDP. During the past 10 days, about 2,000 homes have been destroyed in New South Wales and firefighters from the United States and Canada have traveled to Australia to help battle the fires.

Markets

  • Markets extended the rally this week. The S&P 500 gained 0.98% and closed at 3,265. The Dow Jones rose 0.67% and closed at 28,824. Year-to-date, the S&P 500 is up 1.13% and the Dow Jones is up 1.05%.
  • Yields rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.63% and 1.82%, respectively.
  • The spot price of WTI Crude plummeted this week on easing fears of Iran conflict. Prices dropped 6.17% and closed at $59.16 per barrel. Year-to-date, oil prices are down 3.11%.
  • The spot price of Gold rose by 0.56% and closed at $1,560.86 per ounce. Year-to-date, the price of gold is up 2.87%.

Economic Data

  • Initial jobless claims fell by 9,000 to 214,000 and the four-week moving average fell by 10,000 to 224,000. Claims fell by 3,000 in Illinois and by 2,000 in Tennessee, Pennsylvania, Ohio, New Jersey, and Michigan.
  • The ISM non-manufacturing index rose 1.1 points to 55.0 versus expectations for a reading of 54.5
  • Factory orders fell 0.7% versus expectations for a decline of 0.8%
  • Private sector employment in the ADP rose by 202,000 versus expectations for an increase of 160,000
  • Nonfarm payrolls rose 145,000 in December versus expectations for an increase of 160,000
  • The unemployment rate remained at 3.5%, in-line with expectations
  • Average hourly earnings rose by 0.1% versus expectations for an increase of 0.3% and the year-over-year rate came in at 2.9%

Fact of the Week

  • Between 7/01/18 and 7/01/19, the Census Bureau estimated that the US population grew from 326.688 million to 328.240 million, an increase of just +0.48%, i.e., less than 1/2 of 1% growth rate between 2018-2019. That’s the lowest year-over-year growth rate in the United States since 1918 or 101 years earlier (source: Census Bureau)

Rich Gartelmann, CFP® – (630) 844-5730 –  rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
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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Iran, airstrike: Wealth Economic Update January 3, 2020

U.S. and World News

  • us_iran-1089424782_370The leader of Iran’s elite Quds military force, Qassem Soleimani was killed Thursday night near Baghdad International Airport in an airstrike ordered by President Trump. Soleimani was one of the most powerful Islamic Republic figures and has been blamed for the deaths of hundreds of Americans, including the attack on December 27th that killed an American defense contractor. The Pentagon stated that Soleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region. Iran’s foreign minister Javad Zarif stated that the attack was “extremely dangerous and a foolish escalation” and Iran’s Defense Minister Amir Hatami has vowed to take “crushing revenge” for Soleimani’s assassination. The attack has consequently angered Iraq as well, a United States ally, as they were not warned of the attack against Iran on their soil. The Quds Force was labeled a foreign terrorist organization in April of 2019 when Secretary of State Mike Pompeo announced that “With this designation, we are sending a clear signal, a clear message to Iran’s leaders, including Qassem Soleimani and his band of thugs, that the United States is bringing all pressure to bear to stop the regime’s outlaw behavior.” Before the airstrike, Iranian protestors attacked the U.S. Embassy in Baghdad to protest a retaliatory U.S. attack on Sunday that killed two-dozen members of an Iranian backed group.

Markets

  • Markets finished the first week of the new decade on a higher note. The S&P 500 gained 0.45% and closed at 3,235. The Dow Jones rose 0.65% and closed at 28,635. The S&P rose 31.21% and the Dow Jones rose 25.09% in 2019.
  • Yields fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.59% and 1.79%, respectively.
  • The spot price of WTI Crude jumped this week amid renewed tensions in the Middle East. Prices rose 2.11% and closed at $63.02 per barrel. Oil prices rose 38.78% in 2019.
  • The spot price of Gold rose by 2.65% and closed at $1,550.64 per ounce. The price of gold rose 20.91% in 2019.

Economic Data

  • Initial jobless claims fell by 2,000 to 222,000 and the four-week moving average rose by 4,000 to 233,000. Claims rose by 2,000 in New York and fell by 6,000 in California
  • Pending home sales rose 1.2% versus expectations for an increase of 1.4%
  • The Conference Board index of consumer confidence fell 0.3 points to 126.5 versus expectations for a reading of 128.5

Fact of the Week

  • The SECURE Act was signed into law on December 20th 2019 and as a result:
    • There is now a 10-year distribution cap for non-spousal beneficiaries
    • The required age to begin required-minimum-distributions was raised to 72 from 70 1/2
    • Contributions to IRA’s will be allowed to continue after the age of 70 1/2

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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China negotiations, California blackouts: Wealth Economic Update October 11, 2019

U.S. and World News

  • china-1053768454_370Ahead of scheduled trade negotiations today with Chinese Vice Premier Liu He, the Trump administration has added 28 Chinese entities to an export blacklist as a consequence of Beijing’s repression of Muslim minorities. The Trump administration stated that this move is completely unrelated to trade negotiations and it will prevent the blacklisted companies from buying American components without government approval. China quickly responded by saying it would take countermeasures, “urging the U.S. side to immediately correct its mistake.” and announced a plan to restrict visas for U.S. nationals with ties to anti-China groups. The Chinese delegation arrived in Washington yesterday where negotiations began and President Trump announced that talks went “very well”. After the meeting at the White House, President Trump told the press that the U.S. and China have “come to a substantial phase 1 deal”. In exchange for the cancelation of the United States planned increase in tariffs on Chinese goods on October 15th, China has agreed to increase purchases of U.S. agriculture goods from $8 billion to $40-$50 billion and has agreed to be more transparent with regard to their currency.
  • California’s largest utility company PG&E took preventative measures and cut power to 700,000 households ahead of a string of days with 40 mile per hour winds that have sparked wildfires in the past. Late last night, a wildfire started in the San Fernando Valley area, just north of Los Angeles that is responsible for two deaths, covers 823 acres and is 10% contained. Approximately 100,000 people have been ordered to evacuate their homes and over 25 homes have been damaged so far. Water dropping helicopters worked to help extinguish the fire throughout the night and were accompanied by planes early this morning. Investigators say that they know how the Sandalwood Fire started, but they continue to look for any possible criminal activity.


Markets

  • Markets are higher after a volatile week. The S&P 500 rose 0.66% and closed at 2,970. The Dow Jones rose 0.93% and closed at 26,817. Year-to-date, the S&P is up 20.30% and the Dow Jones is up 17.05%.
  • Yields rebounded sharply this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.55% and 1.73%, respectively.
  • The spot price of WTI Crude rose after an Iranian tanker near Saudi Arabia was attacked. Prices rose 3.77% and closed at $54.80 per barrel. Year to date, Oil prices are up 20.68%.
  • The spot price of Gold fell by 1.09% and closed at $1,488.24 per ounce. Year to date, Gold prices are up 16.04%.

Economic Data

  • Initial jobless claims fell by 10,000 to 210,000 and the four-week moving average rose by 1,000 to 214,000. Claims fell by 4,000 in Michigan, 3,000 in California, and 2,000 in Ohio.
  • The consumer price index (CPI) remained unchanged versus expectations for a 0.1% increase and the year-over-year rate rose by 1.7% versus expectations for a 1.8% increase
  • Core CPI rose by 0.1% versus expectations for a 0.2% increase and the year-over-year rate rose by 2.4%, in-line with expectations
  • The producer price index (PPI) fell by 0.3% versus expectations for a 0.1% increase
  • Wholesale inventories rose by 0.2% versus expectations for a 0.4% increase
  • The University of Michigan’s index of consumer sentiment rose 2.8 points to 96.0 versus expectations for a reading of 92.0

Fact of the Week

  • At the beginning of the bull market that started on 3/10/09, the total market cap of all US stocks was $7.6 trillion. At the end of the third quarter (09/30/19) the total market cap of US stocks was $32.3 trillion. The S&P 500 makes up 80% of the total market cap of US stocks. (Source: Wilshire, 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
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

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Oil, Brexit, Fed market funding: Wealth Economic Update September 20, 2019

U.S. and World News

  • oil-1090135110_370Weekend drone strikes on the heart of the Saudi oil industry forced the kingdom to shut down half its crude production, amounting to a loss of 5.7M barrels a day, or roughly 5% of the world’s daily production of crude oil. Yemen’s Iranian-aligned Houthi rebels claimed credit for the attack, saying they sent 10 drones to strike at important Aramco facilities, including the world’s largest oil processing plant and a major oil field. The disruption sent WTI futures as much as 15.5% higher overnight to $63.34, the biggest intraday percentage gain since June 22, 1998, while President Trump authorized a release of crude from the Strategic Petroleum Reserve, as necessary. For the global oil market, the 5.7M bpd Saudi halt is the single worst sudden disruption ever, surpassing the loss following the Invasion of Kuwait and Iranian Revolution.
  • The stakes couldn’t be higher given the current Brexit turmoil as Britain’s highest court begins hearing arguments today on whether the government’s decision to suspend Parliament was lawful (judges in England and Scotland previously came to contrasting conclusions). Boris Johnson argues that he asked the Queen to prorogue the lower house in order to introduce a new legislative agenda, but critics accuse him of attempting to stymie debate and push through a no-deal Brexit before an Oct. 31 deadline.
  • Policymakers have been thrown another unexpected curveball as cash available to banks for their short-term funding needs all but dried up on Monday and Tuesday. That forced the New York Fed to make an emergency injection of more than $50B, its first since the financial crisis, to bring down key short-term rates that had spiked to as high as 10%. Fed traders will be back this morning to restore calm by offering another $75B of cash to the market.


Markets

  • Markets receded slightly this week. The S&P 500 was down 0.5% and closed at 2992.03. The Dow Jones fell by 1.05% and closed at 26,935.07. Year-to-date, the S&P is up 21.04% and the Dow Jones is up 17.49%.
  • Yields came back down after a pop last week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.6% and 1.715%, respectively.
  • The spot price of WTI Crude soared after the attack in Saudi Arabia. Prices rose 5.9% and closed at $58.09 per barrel. Year to date, Oil prices are up 27.92%.
  • The spot price of Gold gained 1.87% and closed at $1,516.29 per ounce. Year to date, Gold prices are up 18.23%.

Economic Data

  • Existing home sales rose by 1.3% to a seasonally adjusted annualized rate of 5.49 million units in the August report, against consensus expectations for a 0.7% decline. August home sales rose for both single-family units (+1.2%) and condos and co-ops (+1.7%). Sales increased in three of four regions, led by the Northeast (+7.6%), and followed by the Midwest (+3.1%) and South (+0.9%). Sales declined in the West (-3.4%).
  • The level of housing starts increased to 1,364k in August above expectations for a more moderate increase. Single-family starts increased by 4.4% while the volatile multi-family category increased by 32.8%. August housing starts increased in three out of four regions, led by the Northeast (+30.5%), and followed by the Midwest (+15.4%) and South (+14.9%). Housing starts were flat in the West.
  • Building permits increased 7.7%, above expectations, with a 4.5% increase in single-family permits alongside a 13.3% increase in multi-family permits. Permits increased in the Northeast (+26.9%), Midwest (+14.5%), and South (+11.0%), and declined in the West (-7.8%).
  • Industrial production rose by 0.6% in August, against consensus expectations for a smaller increase. Manufacturing production rose by 0.5%, driven by a 0.6% increase in ex-auto manufacturing and offset by a 1.0% decline in auto manufacturing. The capex-sensitive business equipment category rebounded 1.0%. The utilities component, an input into consumption in the GDP accounts, rose 0.6% further, after rising 3.7% in July. Industrial production growth in July was revised up by 0.1pp to -0.1%.

Fact of the Week

  • The median household income (adjusted for inflation) was the highest ever recorded in the USA at $63,179. It was the third consecutive year (2016-2018) that the USA has produced an all time high in adjusted median household income. Prior to 2016, the record high was set in 1999. (Source: Federal Reserve Bank of St. Louis)

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
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.

China, Brexit, EU: Wealth Economic Update May 17, 2019

U.S. and World News

  • china_us-1035146880Earlier this week, China announced new tariffs on $60 billion of American imports in response to the tariff increase by the United States. The Trump administration will subsidize U.S. farmers with $15 billion in aid, in addition to the Department of Agriculture’s $12 billion compensation plan that was put into place last year. President Trump has stated his intention to meet Chinese President Xi Jinping at the G20 summit in June. The United States also has banned China’s Huawei Technologies from buying U.S. technology without special approval and has restricted its equipment from being any part of U.S. telecom networks. Equipment produced by Huawei Technologies, the world’s third largest smartphone maker, is allegedly used by the Chinese to spy, however Huawei has denied those allegations.
  • Brexit drama heats up again after weeks of negotiations between Theresa May and opposition party leader Jeremy Corbyn have closed with Jeremy Corbyn telling the media that his party will oppose the deal. The Conservative Party has been enraged with Theresa May over the past month for negotiating with the Labour Party and Theresa May has finally set a timetable for her departure as prime minister in the beginning of June. Jeremy Corbyn added that the strong probability of Theresa May soon being replaced had contributed to his decision to oppose her deal.
  • As trade negotiations with China have been extended into the foreseeable future, the Trump administration has delayed tariffs on cars and auto part imports from the European Union and Japan for up to six months. In February, the Commerce Department had found that car imports and certain auto parts harm national security, leading to the planned auto tariffs. Agreements have already been made with Canada, Mexico, and Korea, while the European Union and Japan have rejected the idea.


Markets

  • Markets are lower after another volatile week. The S&P 500 fell 0.69% and closed at 2,860. The Dow Jones fell 0.61% and closed at 25,764. Year to date, the S&P is up 14.96% and the Dow Jones is up 11.48%.
  • Yields continued to fall this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.18% and 2.39, respectively.
  • The spot price of WTI Crude Oil rose this week. Prices climbed 1.67% and closed at $62.69 per barrel. Year to date, Oil prices are up 38.05%.
  • The spot price of Gold fell 0.63% this week and closed at $1,277.97 per ounce. Year to date, Gold prices are down 0.35%.

Economic Data

  • Initial jobless fell to 212,000 this week. The four-week moving average of claims rose by 5,000 to 225,000. Claims rose by 4,000 in California
  • The Philadelphia Fed manufacturing index rose 8.1 points to 16.6 versus expectations for a reading of 9.0
  • Housing starts rose 5.7% to 1,235k versus expectations for a 6.2% increase to 1,209k
  • Building permits rose by 0.6% versus expectations for a 0.1% increase
  • Import prices rose by 0.2% versus expectations for a 0.7% increase
  • Import prices ex-petroleum fell by 0.6% versus expectations for a 0.2% increase
  • Retail sales fell by 0.2% versus expectations for a 0.2% increase
  • Retail sales ex-auto & gas fell by 0.2% versus expectations for a 0.3% increase
  • Industrial production fell by 0.5% versus expectations for an unchanged reading
  • The University of Michigan’s index of consumer sentiment rose by 5.2 points to 102.4 in the preliminary report versus expectations for a reading of 97.2.

Fact of the Week

  • From its closing high of 2946 on April 30th, the S&P 500 has fallen 3.56% to 2859. Since the beginning of the bull market on 3/10/09, the market has had 12 pullbacks of at least 5%, including 6 drops at least 10% and 3 of at least 15%. (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
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.

 

China, Brexit, Iran: Wealth Economic Update May 11, 2019

U.S. and World News

  • china-1053768454_370On Sunday night, just days before a Chinese trade delegation would depart for Washington to wrap up 18 months of trade negotiations, President Trump tweeted that tariffs on $200 billion of Chinese goods would rise to 25% from 10% by the end of the week, accusing China of “reneging” on its trade promises. President Trump also shared his intention to impose a 25% tariff on the remaining $325 billion of Chinese goods that aren’t currently taxed, making virtually all Chinese exports to the United States subject to a 25% tariff. The Chinese trade delegation led by Vice Premier Liu He did travel to the White House on Thursday for negotiations that ended earlier today, and the 10% tariff rate on $200 billion in Chinese goods did increase to 25% at midnight last night. China’s Commerce Ministry has announced that they will be taking countermeasures against the tariff increase, but that specifically has not yet been revealed. There have been numerous statements from officials of both countries regarding trade talk progress or lack thereof while markets respond in volatile fashion and struggle for direction, however, the only things we actually know to be true at this point is the fact that there is no done deal, and the tariff rate on $200 billion of Chinese goods has risen to 25% from 10%.
  • British Prime Minister Theresa May’s future has once again, been called into question as members of the committee are talking about a rule change that would allow another no-confidence vote to oust her. Currently, the Prime Minister is protected by a rule that does not allow more than one no-confidence vote within 12 months of the previous one that occurred in December. Committee members are growing frustrated that a timetable for Theresa May’s departure has not been set out. Both parties experienced losses in last week’s elections and a new offer is on the table, a deal that would result in a customs union-type arrangement lasting until 2022, Britain’s next general election. At that point in time, it would be decided whether to move toward a full customs union or a deal that would allow Britain to make trade deals with other countries.
  • After American sanctions on Iran have begun to cripple their economy, President Trump has offered to meet and negotiate with Iran’s leadership team about giving up their nuclear program, which was quickly rejected. The United States deployed the Abraham Lincoln carrier through Egypt’s Suez Canal and B-52 bombers to the U.S. base in Qatar yesterday as a warning to Iran. Iran’s leader, Ayatollah Tabatabai-Nejad responded by saying “Their billion dollar fleet can be destroyed with one missile” and “if they attempt any move, they will face dozens of missiles”.


Markets

  • Markets experienced volatility as a result of trade drama with China and finished the week lower. The S&P 500 fell 2.10% and closed at 2,881. The Dow Jones fell 1.96% and closed at 25,942. Year to date, the S&P is up 15.74% and the Dow Jones is up 12.15%.
  • Yields fell this week as investors fled to bonds. The 5 year and 10 year U.S. Treasury Notes are yielding 2.26% and 2.47, respectively.
  • The spot price of WTI Crude Oil ended the week relatively unchanged. Prices fell 0.37% and closed at $61.71 per barrel. Year to date, Oil prices are up 35.90%.
  • The spot price of Gold rose 0.54% this week and closed at $1,286.05 per ounce. Year to date, Gold prices are up 0.28%.

Economic Data

  • Initial jobless fell to 228,000 this week. The four-week moving average of claims rose by 7,000 to 220,000. Claims rose by 11,000 in New York and by 2,000 in Illinois.
  • The producer price index (PPI) rose by 0.2% versus expectations for a 0.3% increase
    PPI ex-food and energy rose by 0.1% versus expectations for a 0.2% increase
  • The trade deficit rose to $50.0 billion, as expected
  • Wholesale inventories fell by 0.1% versus expectations for no change
  • The consumer price index (CPI) rose by 0.32% versus expectations for a 0.4% increase and the year-over-year rate came in at 2.0% versus expectations for 2.1%
  • Core CPI rose by 0.14% versus expectations for a 0.2% increase and the year-over-year rate came in at 2.07%, in-line with expectations

Fact of the Week

  • Sell in May? Since 1989, the 6 month period beginning November 1st has outperformed the 6 month period beginning May 1st 19 out of 30 times. Total return for the 6 month periods starting November 1st were +731%, while total returns for the 6 month periods starting May 1st were only +119% over the 30 year period. (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
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.

 

Iran Oil: Wealth Economic Update May 3, 2019

U.S. and World News

  • oil-509843570The sanctions imposed on Iran by the United States in November have cut Iran’s oil exports by roughly 1 million barrels per day, and after Thursday’s waivers have expired to some of Iran’s biggest customers, exports are expected to fall by another several hundred thousand barrels per day. At a time of heightened tensions, Iran’s oil minister warned that OPEC is “likely to collapse” due to unilateralism by certain members. Iran appears to be referring to Saudi Arabia’s and the United Arab Emirates’ cooperation with the United States in offsetting the reduction in supply of oil to stabilize prices, and causing substantial economic damage to Iran. Iranian Oil Minister Bijan Zangeneh told an Iranian news agency that “Iran is an OPEC member just for its interests and if certain OPEC members want to threaten and endanger Iran, Iran will not refrain from responding to them”. The next OPEC meeting is scheduled for June 25-26 in Vienna, where the members will decide whether to keep in place an oil supply limit that was established in January.


Markets

  • Markets ended the week relatively unchanged from last week. The S&P 500 rose 0.22% and closed at 2,946. The Dow Jones fell 0.14% and closed at 26,505. Year to date, the S&P is up 18.21% and the Dow Jones is up 14.37%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.32% and 2.53, respectively.
  • The spot price of WTI Crude Oil dropped this week. Prices fell 2.27% and closed at $61.68 per barrel. Year to date, Oil prices are up 35.83%.
  • The spot price of Gold fell 0.55% this week and closed at $1,279.11 per ounce. Year to date, Gold prices are down 0.26%.

Economic Data

  • Initial jobless remained unchanged at 230,000 for the week. The four-week moving average of claims rose by 7,000 to 213,000. Claims rose by 7,000 in New York, 5,000 in New Jersey, and by 2,000 in Pennsylvania.
  • Nonfarm productivity rose by 3.6% versus expectations for a 2.4% increase
  • The core PCE index rose by 0.06% versus expectations for a 0.1% increase and the year-over-year rate fell to 1.55% versus expectations for 1.70%
  • Personal income rose by 0.1% versus expectations for a 0.4% increase
  • Personal spending rose by 0.9% versus expectations for a 0.7% increase
  • The Conference Board index of consumer confidence rose by 5.0 points to 129.2 versus expectations for a reading of 126.8
  • Pending home sales rose by 3.8% versus expectations for a 1.5% increase
  • Private sector employment rose by 275,000 versus expectations for a 180,000 increase
  • The ISM manufacturing index fell 2.5 points to 52.8 versus expectations for a reading of 55.0
  • The ISM non-manufacturing index fell 0.6 points to 55.5 versus expectations for a reading of 57.0
  • Construction spending fell by 0.9% versus expectations for a flat reading
  • Factory orders rose by 1.9% versus expectations for a 1.6% increase
  • Nonfarm payrolls rose by 263,000 versus expectations for a 190,000 increase
  • The unemployment rate fell to 3.6% versus expectations for a reading of 3.8%
  • Average hourly earnings rose 0.2% versus expectations for a 0.3% increase and the year-over-year rate remained stable at 3.2%

Fact of the Week

  • On Wednesday 5/01/19, the USA began its 119th month of an economic expansion. The average length of all 33 expansions in the country since 1854 (not counting the current expansion) is 58 months(source: National Bureau of Economic 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
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.

Brexit, California Wildfires: Wealth Economic Update Nov. 17, 2018

U.S. and World News

  • The British pound had a volatile week as uncertainty around the outcome of a Brexit deal rose higher. Theresa May has lost transport minister Jo Johnson and Brexit Secretary Dominic Raab within the past week and risks further resignations of pro-EU ministers. There was a Cabinet meeting held this week in an attempt to gain support on an agreement with a focus on the controversial Irish border. The deal would force Britain to abide by European rules and would make it very difficult for Britain to negotiate trade deals with other countries. Citing Brexiteer sources, Telegraph Chief Political Correspondent Christopher Hope tweeted “The threshold of 48 letters of no confidence in Theresa May will be passed today. They are expecting a no confidence vote in the PM on Tuesday”.

  • The death toll has climbed to 65 and over 600 people are missing in the deadliest wildfire in California state history. The two major fires are the Camp Fire, just north of Sacramento, which is 45% contained and the Woolsey Fire, just outside of Los Angeles, which is 69% contained. The state of California is also battling very serious air quality issues as a result of the fire, with the smoke continuing to flow southwest. The California utility company PG&E’s faulty power lines are believed to have started the fire.


Markets

  • Stocks retreated this week from last week’s gains. The S&P 500 fell 1.54% and closed at 2,736. The Dow Jones dropped 2.15% and closed at 25,413. Year to date, the S&P is up 4.12% and the Dow Jones is up 4.84%.
  • Yields dropped sharply from last week and the yield curve steepened. The 5 year and 10 year U.S. Treasury Notes are yielding 2.88% and 3.07%, respectively.
  • The spot price of WTI Crude Oil continued falling this week, shedding another 5.63% and closing at $56.80 per barrel. Year to date, Oil prices are down 5.51%.
  • The spot price of Gold rose 0.99% this week and closed at $1,221.59 per ounce. Year to date, Gold prices are down 6.23%.

Economic Data

  • Initial jobless claims rose by 2,000 to 216,000 this week. The four-week moving average of claims rose by 1,000 to 215,000. Claims increased by 2,000 in New York and fell by 3,000 in Michigan, 2,000 in North Carolina, and 2,000 in California.
  • Retail sales rose by 0.8% in October versus expectations for a 0.5% increase. This was led by sales at gas stations.
    • Retail sales ex-autos rose 0.7% versus expectations for a 0.5% increase.
    • Retail sales ex-auto & gas rose by 0.3% versus expectations for a 0.4% increase.
  •  Import prices rose by 0.5% in October versus expectations for a 0.1% increase.
    •  Import prices-ex petroleum rose by 0.2% versus expectations for a flat reading.
  •  The Philadelphia Fed manufacturing index fell by 9.3 points to 12.9 in November versus expectations for a reading of 20.0.
  •  The Empire State manufacturing index increased by 2.2 points to 23.3 in November versus expectations for a reading of 20.0.
  •  The consumer price index (CPI) rose by 0.33% in October, meeting expectations. The increase was driven by higher energy prices. The year-over-year rate came in a 2.53%, also meeting expectations.
    •  Core CPI rose by 0.19% in October, meeting expectations. The year-over-year rate came in at 2.15%, also meeting expectations.
  •  Industrial production rose by 0.1% in October versus expectations for a 0.2% increase.
  •  Manufacturing production rose by 0.3% in October versus expectations for a 0.2% increase.

Fact of the Week

  • As of October 31, the US was producing 11.2 million barrels of crude oil a day, while importing 7.3 million barrels. US oil production has risen substantially from October 2016, when the US produced only 8.5 million barrels and imported 9 million. (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 – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava – (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.

Iran, Midterm Elections: Wealth Economic Update Nov. 9, 2018

U.S. and World News

  • On Monday, sanctions on Iran imposed by the United States that target the oil, banking and transportations sectors have taken affect. The sanctions were imposed as a means to end Iran’s nuclear program. Eight countries were given temporary exemptions, allowing them to continue to import Iranian petroleum. This will buy time for Iran to continue to negotiate their missile and nuclear programs with the United States, however, Iran is taking a tough stance on the sanctions. Iranian President Hassan Rouhani stated that Iran will “sell its oil and break sanctions” and that “This is an economic war against Iran, but we are prepared to resist any pressure”.
  • In a widely expected outcome, the 2018 midterm election resulted in the Democrats gaining control of the House of Representatives while the Republicans retained control of the Senate. In two closely watched, key races, Republican Ron DeSantis defeated Tallahassee Democratic Mayor Andrew Gillum for Governor of Florida and Republican Ted Cruz was able to keep his Texas Senate seat after defeating Beto O’Rourke. Also, 29-year-old Democrat Alexandria Ocasio-Cortez became the youngest women ever elected to Congress after her victory in New York’s 14th district.


Markets

  • Stocks continued their climb higher this week, despite the declines seen today. The S&P 500 rose 2.21% and closed at 2,781. The Dow Jones gained 3.00% and closed at 25,989. Year to date, the S&P is up 5.72% and the Dow Jones is up 7.10%.
  • Yields ended the week mostly unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.04% and 3.18%, respectively.
  • The spot price of WTI Crude Oil slid into a bear market this week, losing another 5.26% and closing at $59.82 per barrel. Year to date, Oil prices are down 0.48%.
  • The spot price of Gold fell 1.91% this week and closed at $1,209.35 per ounce. Year to date, Gold prices are down 7.17%.

Economic Data

  • Initial jobless claims fell by 1,000 to 214,000 this week. The four-week moving average of claims did not change and remained at 214,000. Claims fell by 5,000 in Illinois and by 3,000 in Missouri.
  • The ISM non-manufacturing index declined by 1.3 points to 60.3 versus expectations for a reading of 59.0.
  • The producer price index (PPI) increased by 0.6% month-over-month in October versus expectations for a 0.2% increase. The year-over-year figure rose by 2.9%. 
    • PPI excluding food, energy, and trade services rose by 0.2% month-over-month, in-line with expectations. The year-over-year figure rose by 2.8%.
  • The University of Michigan’s index of consumer sentiment fell by 0.3 points to 98.3 in the November preliminary reading versus expectations for a reading of 98.0.
  • Wholesale inventories rose by 0.4% for September versus expectations for a 0.3% increase.

Fact of the Week

  • Tuesday’s Midterm elections saw Democrats taking control of the house while Republicans bolstered their control of the senate. Historically, returns in the S&P 500 under a Republican President, Republican Senate, and Democratic House are 10.8% annualized. (Source: Strategas)

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
Mike Cava – (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.

Mexico/Canada trade, Oil prices: Wealth Economic Update Sept. 28, 2018

U.S. and World News

  • The Trump administration is willing to move forward on a trade agreement with Mexico, excluding Canada, if Canada does not agree to grant the United States access to its dairy market. This has been a very important point for the United States throughout the negotiation process. President Trump also threatened to impose a 25% tariff on cars imported from Canada, as the administration continues to further pressure Canada. So far, Canada is not calling the bluff, and U.S. Trade Representative Robert Lighthizer expressed a negative view on current negotiations with Canada. Congress members stated that there would be very little support for a deal that excluded Canada.
  • oil-859021152_370Oil prices skyrocketed as United States sanctions on Iran are set to begin on November 4th and OPEC has agreed to keep oil production at its current levels rather than pump more. The United States promised that the oil market would be sufficiently supplied in time for the sanctions to begin. OPEC’s decision against increasing supply could force the United States to release oil from the Strategic Petroleum Reserve to keep oil prices under control.


Markets

  • Stocks pulled back this week while the S&P 500 finished its strongest quarter since December of 2013. The S&P 500 fell 0.51% and closed at 2,914. The Dow Jones lost 1.07% and closed at 26,458. Year to date, the S&P is up 10.47% and the Dow Jones is up 8.73%.
  • Yields finished the week almost unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.95% and 3.06%, respectively.
  • The spot price of WTI Crude Oil continued its surge higher another 3.90% this week to close at $73.54 per barrel. Year to date, Oil prices are up 22.34%.
  • The spot price of Gold fell 0.71% this week, and closed at $1,191.53 per ounce. Year to date, Gold prices are down 8.54%.

Economic Data

  • Initial jobless claims rose by 12,000 to 214,000 this week. The four-week moving average of claims remained unchanged at 206,000. Claims rose by 10,000 in North Carolina, 7,000 in Kentucky, and 3,000 in South Carolina and California.
  • Durable goods orders rose by 4.5% in August, exceeding expectations of a 2% increase. This increase reflected a 13% increase in transportation equipment.
    • Durable goods orders ex-transportation rose by 0.1% versus expectations of 0.4%.
  • The Conference Board index of consumer confidence rose to 138.4 in September versus expectations of a 132.1 reading. This is the highest level since 2000.
  • Sales of new single-family homes rose by 3.5% in August to a seasonally-adjusted annualized rate of 629,000 versus expectations of 630,000. The prior three months were revised down by a net 40,000. The largest increase was in the Northeast region.
  • The core PCE price index ex-food and energy rose by 0.4% month-over-month in August versus expectations of 0.1%.
    • Personal income rose by 0.3% in August versus expectations of 0.4%
    • Personal spending rose by 0.3% in August, in line with expectations
  • The University of Michigan’s index of consumer sentiment fell to 100.1 in the August final reading versus expectations of a 100.6 reading.
  • The Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to 2-2.25% at the September meeting. Jerome Powell indicated that the FOMC would continue with gradual rate hikes and did not refer to the current monetary policy as “accommodative”, which is what it was previously referred too.


Fact of the Week

  • Of 2,000 American’s surveyed, 48% thought that the market was flat over the last 10 years, while 18% thought the market was down the last 10 years. As of last Friday, September 21st, the S&P 500 had returned 163.42% on a total return basis , or 10.16% annualized. (Source: Betterment, Bloomberg)

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

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.