China Tariffs, Brexit: Wealth Economic Update Dec. 14, 2018

U.S. and World News

  • Trade tensions with China have eased after some constructive talks between Chinese Vice Premier Liu He, Treasury Secretary Steven Mnuchin, and Trade Representative Robert Lighthizer earlier this week. China has begun purchasing soybeans from the United States again and has announced that the retaliatory tariffs put on U.S. autos will be suspended until March 1st. The tariff rate on autos exported to China will now be reduced from 40% to 15%. March 1st remains the deadline for the trade truce established between President Trump and Chinese President Xi Jinping in Buenos Aires on December 1st. The recent development is a sign that the arrest of Huawei CFO Meng Wanzhou has not derailed trade negotiations.
  • Theresa May delayed the House of Commons vote on her Brexit deal earlier this week, as it was expected to fail with near certainty. As a result of the delay, 48 Conservative lawmakers called for her ouster. Theresa May then when on to survive the no-confidence vote and travel to Brussels to hear the European Union’s concerns regarding the deal. The Irish backstop, which is the plan to prevent a hard border in Northern Ireland, continues to be the point of disagreement. Theresa May’s own members of parliament are concerned that the Irish Backstop could keep the United Kingdom tied to the European Union’s policies and would prevent them from making trade deals.


Markets

  • Stocks fell further this week amid global uncertainty. The S&P 500 fell 1.22% and closed at 2,600. The Dow Jones declined 1.17% and closed at 24,101. Year to date, the S&P is down 0.81% and the Dow Jones is down 0.20%.
  • Yields rebounded slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.73% and 2.89%, respectively.
  • The spot price of WTI Crude Oil erased its gains from last week, losing 2.79% and closing at $51.14 per barrel. Year to date, Oil prices are down 14.92%.
  • The spot price of Gold fell 0.87% this week and closed at $1,238.47 per ounce. Year to date, Gold prices are down 4.94%.

Economic Data

  • Initial jobless claims fell by 27,000 to 206,000 this week. The four-week moving average of claims fell by 4,000 to 225,000. Claims fell by 5,000 in Pennsylvania, 3,000 in California, 3,000 in Texas, and 2,000 in Georgia.
  • Import prices fell by 1.6% in November month-over-month versus expectations for a decline of 1.0%.
  • Import prices ex-petroleum fell by 0.3% in November versus expectations for a 0.1% decline.
  • The producer price index (PPI) rose by 0.1% in November month-over-month versus expectations for no change.
  • PPI ex-food and energy rose by 0.3% in November versus expectations for a 0.1% increase.
  • The consumer price index (CPI) rose by 0.02% in November versus expectations for no change. The year-over-year rate came in at 2.18%, in-line with expectations.
  • Core CPI rose by 0.21% in November, in-line with expectations. The year-over-year rate came in at 2.21%, in-line with expectations.
  • Retail sales rose by 0.2% month-over-month in November versus expectations for a 0.1% increase.
  • Retail sales core/control rose by 0.9% in November versus expectations for a 0.4% increase.
  • Industrial production rose by 0.6% in November versus expectations for a 0.3% increase.

Fact of the Week

  • 30 years ago (1988), the Chinese economy was just 6% of the U.S. economy. 10 years ago (2008), the Chinese economy grew to 31% of the U.S. economy. Today, the Chinese economy is 63% the size of our economy. (Source: Trading Economics)

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

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China Tariffs, Gas Prices/Canada: Wealth Economic Update Dec. 7, 2018

U.S. and World News

  • china-943639230_370.jpgFollowing the meeting in Buenos Aires between President Trump and President Xi Jinping of China, President Trump agreed to delay a planned increase in the tariff rate on $200 billion of Chinese goods by 90 days while China agreed to begin purchasing agricultural, energy, and industrial commodities from the United States. The deal was initially met with skepticism by markets, however, China has begun preparations to begin importing soybeans and liquefied natural gas. Yesterday, the CFO of Chinese company Huawei was arrested for a violation of United States sanctions that prohibit doing business with Iran. The incident is not estimated to have any effect on trade negotiations between the United States and China.
  • In an effort to combat rapidly falling oil prices, Canada has unexpectedly announced an output cut of 325 thousand barrels per day, setting the precedent for other major oil producing nations to follow suit. Later in the week, Saudi Energy Minister Khalid al-Falih stated that no OPEC deal was a real risk, just before Russia and OPEC members were to meet to discuss further production cuts. After Thursday’s summit concluded with no deal, OPEC met again to agree on 1.2 million barrels per day of production cuts. The deal is viewed as a victory United States oil producers as they are able to enjoy rising oil prices without having to cut production.


Markets

  • In another volatile week, stocks reversed course and headed sharply lower. The S&P 500 plummeted 4.55% and closed at 2,633. The Dow Jones lost 4.44% and closed at 24,389. Year to date, the S&P is up 0.40% and the Dow Jones is up 0.95%.
  • Yields continued their slide this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.70% and 2.86%, respectively.
  • The spot price of WTI Crude Oil rose higher this week, gaining 2.75% and closing at $52.33 per barrel. Year to date, Oil prices are down 12.94%.
  • The spot price of Gold rose 1.46% this week and closed at $1,248.60 per ounce. Year to date, Gold prices are down 4.16%.

Economic Data

  • Initial jobless claims fell by 4,000 to 231,000 this week. The four-week moving average of claims rose by 4,000 to 228,000. Claims rose by 4,000 in California, 2,000 in Illinois, 2,000 in Iowa, 2,000 in Texas, and 2,000 in Wisconsin.

     

  • Private sector employment rose by 179,000 in November versus expectations for a 195,000 gain.

     

  • The trade deficit rose $0.9 billion to -$55.5 billion in October versus expectations for a reading of $-55 billion.

     

  • The ISM manufacturing index rose by 1.6 points to 59.3 in November versus expectations for a reading of 57.5.

     

  • The ISM non-manufacturing index rose by 0.4 points to 60.7 versus expectations for a reading of 59.0.

     

  • Factory orders fell by 2.1% month-over-month in October versus expectations for a 2.0% decline.

     

  • Construction spending fell by 0.1% in October versus expectations for an increase of 0.4%.

     

  • Nonfarm payrolls rose by 155,000 in November month-over-month versus expectations for an increase of 198,000. The lower-than-expected reading was led by slower growth in construction, leisure, and hospitality.

     

    • The unemployment rate held steady at 3.7%, in-line with expectations.

       

    • The labor force participation rate remained at 62.9%

       

    • Average hourly earnings rose by 0.2% month-over-month in November versus expectations for an increase of 0.3%.

Fact of the Week

  • Credit card debt in the US peaked in May 2008 before the global real estate crisis at $1.02 trillion. It then hit a low of $832 billion in April 2011. As of August 2018, US credit card debt climbed back to a record level of $1.04 trillion. (Source: Federal Reserve)

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

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Special Market Update: Dec. 6, 2018

The market reversal that began on Tuesday has carried over into today’s trading as stocks continue to exhibit a high level of volatility. At the time of this writing, the markets are down 2.3% as measured by the S&P 500.  The Dow is off 2.8% while international markets are down 1.2% and the Shanghai composite closed down 1.8%.

iStock-874979248Stocks experienced a relief rally last week and into early this week on Fed Chair Jerome Powell’s more dovish comments indicating a more measured approach to interest rate hikes in 2019. This was followed by optimism on progress regarding the trade issues between the U.S. and China last weekend at the G-20 meeting in Buenos Aires. Initial reports stated that there was somewhat of a ‘trade truce’ reached between the two countries that would delay the escalation of tariffs for 90 days and include Chinese purchases of agriculture and liquid natural gas. Markets turned on Tuesday when the validity of those initial reports were called into question, something of which we have not seen any hard evidence.

The catalyst for today’s drop seems to be the arrest of the CFO of Chinese tech giant Huawei in Canada on charges that the firm violated U.S. sanctions by selling to Iran. This has been an issue with Chinese firms in the past, notably the recent fines levied against ZTE for similar allegations. Chinese officials are reportedly outraged by the detainment of Meng Wanzhou, daughter of the prominent CEO of the Chinese tech giant. The arrest, which occurred on the same day (December 1) as the Xi-Trump dinner, has stoked fears of an escalation of the trade tensions between the U.S. and China and that any progress that may have been made last weekend at the G-20 has been negated.

It is unclear what the ramifications of the arrest will have on the big picture trade negotiations but the United States’ handling of it will be a near term focus of markets given the prominence of Huawei (comparable to Apple in the U.S.) and the existing controversy of the firm’s development of 5G networks around the world. Old Second Wealth Management’s investment professionals will continue to monitor the situation and provide pertinent updates.

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

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Brexit, China Tariffs, Ukraine: Wealth Economic Update Dec. 1, 2018

U.S. and World News

  • iStock-815062310The House of Commons will vote on Theresa May’s new Brexit withdrawal agreement on December 11th, which calls for London to follow many of the European bloc’s rules in an effort to keep trade agreements intact. Meanwhile, people in the “Remain” group are hopeful that the European Union’s top court will determine that the U.K. can unilaterally cancel Brexit after it has been completed. European Union Brexit negotiator Michel Barnier has advised Britain that this agreement is “the only one possible”.
  • President Trump has threatened to raise tariffs to 25% from 10% on $200 billion of Chinese goods effective January 1st and institute tariffs on $267 billion more Chinese imports that would include iPhones and laptops. The announcement preludes the G20 summit in Argentina taking place this weekend that will be attended by President Trump, Xi Jinping. President Trump and the Chinese President are expected to have a dinner meeting on Saturday night to discuss trade.
  • Tensions are rising between Vladimir Putin and Ukraine after Russia captured and fired upon three Ukrainian navy vessels that had entered the Kerch strait near Crimea last weekend. Russia is now planning to deploy more surface-to-air missile systems to the area. Ukraine is calling for NATO to deploy warships to the sea of Azov, between the two countries.


Markets

  • Stocks rebounded this week. The S&P 500 gained 4.91% and closed at 2,760.16. The Dow Jones rose 5.52% and closed at 25,538.46. Year to date, the S&P is up 5.10% and the Dow Jones is up 5.54%.
  • Yields dropped again from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.82% and 2.99%, respectively.
  • The spot price of WTI Crude Oil rose slightly this week, up 0.36% and closing at $50.60 per barrel. Year to date, Oil prices are down 16.17%.
  • The spot price of Gold fell 0.07% this week and closed at $1,222.12 per ounce. Year to date, Gold prices are down 6.19%.

Economic Data

  • Initial jobless claims rose by 10,000 to 234,000 this week. The four-week moving average of claims rose by 4,000 to 223,000. Claims rose by 5,000 in New York, 3,000 in Pennsylvania, and 2,000 in Georgia.
  • The core PCE price index ex-food and energy rose by 0.10% month-over-month in October versus expectations for a 0.2%. The year-over-year rate fell 0.2% to 1.8% versus expectations for 1.9%.
  • Personal income rose by 0.5% month-over-month in October versus expectations for a 0.4% increase.
  • Consumer spending rose by 0.6% in October versus expectations for a 0.4% increase.
  • Pending home sales fell by 2.6% in October versus expectations for a 0.5% increase. Declines were led by the West region.
  • Sales of new single-family homes fell by 8.9% in October to a seasonally-adjusted annualized rate of 544k versus expectations of 575k. This is the lowest level since March 2016.
  • Second-quarter GDP growth was unrevised and remained at 3.5% versus expectations for a revision to 3.6%.
    • The October goods trade deficit increased by $1.2 billion to $77.2 billion, versus expectations for a reading of $77.0 billion.
    • Wholesale inventories rose 0.7% in October versus expectations for a 0.4% increase.
  • The Conference Board index of consumer confidence fell 2.2 points to 135.7 in November, in-line with expectations.

Fact of the Week

  • Outstanding student loan debt in the US doubled from $360 million to $720 billion from 3/31/05 to 12/31/09. It double again to $1.44 trillion as of 9/30/18.

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

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Brexit, China Tariffs, CA Wildfires, Saudis: Wealth Economic Update Nov. 23, 2018

U.S. and World News

  • Brexiteers had warned of “Judgement Day,” but opponents of British Prime Minister Theresa May are reportedly six letters short of the 48 threshold needed to trigger a no confidence vote on her leadership. May said on Sunday that toppling her would risk delaying Brexit and she would not let talk of the challenge distract her from getting the support of the U.K. business community ahead of a critical week of Brexit negotiations.

  • “We put tariffs on $250B in Chinese goods, and we could more than double that number,” Vice President Mike Pence told the APEC summit, stating the “U.S. will not change course until China changes its ways.” The warning follows remarks made by President Trump that helped the Dow close higher on Friday. The U.S. “may not” need to impose more tariffs after China sent over measures it was willing to take to resolve trade tensions, he said, adding that “we’ll probably get to the four or five big things that were left off” the list.

  • The current wildfires in California could pressure insurers operating in the state given underwriting losses have the potential to approach around $6.8B. “They are not permitted to take all the given year’s losses and cram them into next year’s rates,” California Insurance Commissioner Dave Jones told CNBC. A state ordinance instead spreads repayment of property and casualty insurance payouts over the next twenty years

  • President Trump has called the CIA assessment blaming Saudi Crown Prince Mohammed bin Salman for the killing of Saudi journalist Jamal Khashoggi “very premature” and said he will receive a complete report of the case on Tuesday. Saudi Arabia plays an important role in the oil markets, counters Iran’s influence in the region, and President Trump has repeatedly said he doesn’t want to harm U.S. defense contractors by blocking U.S. arms sales to the kingdom.


Markets

  • Stocks retreated again this week. The S&P 500 fell 3.76% and closed at 2,632.56. The Dow Jones dropped 4.39% and closed at 24,285. Year to date, the S&P is up 0.26% and the Dow Jones is up 0.32.
  • Yields dropped slightly from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.87% and 3.04%, respectively.
  • The spot price of WTI Crude Oil fell sharply this week, losing another 11.10% and closing at $50.39 per barrel. Year to date, Oil prices are down 16.17%.
  • The spot price of Gold rose 0.05% this week and closed at $1,223.93 per ounce. Year to date, Gold prices are down 6.06%.

Economic Data

  • Housing starts increased 1.5% in October to 1,228k, and September starts were revised up 9k to 1,210k. The composition of the report was somewhat softer, as the volatile multi-family category increased 10.3% but single-family starts declined 1.8%. Housing starts declined in the Northeast (-34.1%) and West (-4.6%), and increased in the Midwest (+32.9%) and in the South (+4.7%), where there is potential scope for further recovery as the rebound from Hurricane Florence was likely offset by a drag from Hurricane Michael..
  • Existing home sales increased 1.4% month-over-month in October to a seasonally adjusted annualized rate of 5.22 million units, above expectations and the first increase in 6 months. October home sales increased among single-family units (+0.9%) and among condos and co-ops (+5.3%). Sales rose in the West (+2.8%), South (+1.9%), and Northeast (+1.5%) regions and declined in the Midwest (-0.8%).
  • The University of Michigan’s index of consumer sentiment declined 0.8pt to 97.5 in the final November report from the preliminary report. The survey’s current conditions (-0.9pt to 112.3) and expectations (-0.6pt to 88.1) components both moved down from their preliminary readings. The report’s measure of 5- to 10- year inflation expectations remained unchanged at 2.6%.
  • In the week ended November 17, initial jobless claims increased by 3k to 224k—the highest level since June—against expectations for a decrease. The four-week moving average of claims increased by 2k to 219k. Jobless claims increased by 3k in California and Texas, and by 2k in Illinois. Claims declined by 2k in New York. Nationwide continuing claims—the number of persons receiving benefits through standard programs—declined 2k to 1,668k in the previous week. The insured unemployment rate remained unchanged on a rounded basis at 1.2%.

Fact of the Week

  • The S&P 500 has gone 46 trading days (as of 11/23) since it last closed at an all-time high. Since a record close on 3/28/13, the longest that the S&P 500 has gone between record closes is 286 trading days, between 5/21/15 and 7/11/16. (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.

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.

Wealth Management Economic Update August 24, 2015

U.S. and World News

  • After the Chinese Yuan fell 3.6% last week, Chinese markets continued their decline this week. The Hang Seng officially entered the bear market territory as it has plummeted over 20% from its high in April. The IMF has given a sign that it will be at least another year until the Chinese currency will be added to its basket of reserve currencies. Concerns about China’s economy has rattled markets globally this week and has been blamed for the sharp decline of the S&P 500 which is down over 6% from its high in May.
  • Germany has voted in favor of the bailout package for Greece by a large margin, putting an end to negotiations lasting months. The first disbursement of €13B of funds from the bailout package was received by Greece just in time to make a €3.2B payment due to the ECB. €12B of this amount will be used to pay down debt. Greek Prime Minister Alexis Tsipras announced his resignation shortly after receiving the first disbursement of the €86B bailout deal.
  • oil_drill_320For the first time ever, the U.S. will allow limited sales of crude oil to Mexico. The oil that will be exported is expected to be high-quality shale which will help Mexico produce premium fuel. The U.S. will continue to receive the heavy oil coming from Mexico which is better for U.S refiners than the light oil they receive from Texas and North Dakota. WTI crude declined for the eighth straight week after the U.S revealed a large supply of 2.6M barrels.

Markets

  • Equity markets plunged this week amid global worries. The S&P 500 lost 5.77%, closing at 1,971. Similarly, the Dow Jones fell 5.82% and closed at 16,460. Year to date, the S&P is down 4.27% and the Dow is down 7.65%.
  • Yields in the Treasury markets fell this week. The 10 year Treasury bond now yields 2.05% while the 5 year Treasury bond now yields 1.43%.
  • The spot price of WTI Crude Oil continued its decline, and dropped by 6.73% closing at $40.21 per barrel. In 2015, WTI Oil prices are down 30.81%.
  • The spot price of Gold continued its weekly increase and gained 4.00% closing at $1,159.70 per ounce. Year to date, gold prices are down 2.09%.

Economic Data

  • Initial jobless claims came in at 277,000 which was an increase from the prior week’s figure of 273,000. 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 271,500.
  • Existing home sales rose 2.0% in July vs. consensus of -1.1% to a high of 5.59 million. Single family homes sales are up 2.7% and condo and co-op sales fell -3.1%.
  • Housing starts were up 0.2% month-over-month in July, slightly higher than consensus forecasts.
  • The Consumer Price Index (CPI) increased 0.1% month-over-month in July, slightly lower than expected.

Fact of the Week

  • 64% of Millennials (ages 18-34 in 2015) believe they have a greater chance of winning the lottery than ever receiving a penny from Social Security once they retire. (T. Rowe Price)

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.

Wealth Management Economic Update August 10, 2015

U.S. and World News

  • greece_000044812184_320The Athens Stock Exchange reopened on Monday after being closed for more than a month during the most recent Greek debt crisis. The benchmark index in Greece saw significant losses, falling by as much as 30% in its first day of resumed trading. Volatility has subsided somewhat after Greece and its lenders stated they were optimistic they could broker the final details of a bailout within days. A funding deal worth up to €86 billion must be settled by August 20th so that Greece can pay off €3.5 billion in debt it owes to the European Central Bank.
  • Puerto Rico announced that over the weekend it failed to make a debt payment, placing the U.S. commonwealth into default for the first time in its history. What happens next is unclear. Congress may assist the territory by passing a bankruptcy bill, allowing Puerto Rico to restructure its debts; however that effort has faced opposition. Another option may be for the Treasury Department to guarantee Puerto Rico’s debt when it seeks to borrow from the market again, significantly lowering the country’s future borrowing costs.
  • The Federal Reserve meeting this month produced little insight into when the Committee plans on raising the Federal Funds Rate. Policymakers continued to see an improving economy and labor situation but said that it requires additional improvement in labor market conditions before ‘liftoff’. The Committee also noted concerns about ‘international developments’, most likely referencing the summer’s Greek drama and the volatility in China’s stock markets.

Markets

  • Equity markets dwindled this week. The S&P 500 lost 1.25%, closing at 2,078. Similarly, the Dow Jones fell 1.79% and closed at 17,374. Year to date, the S&P is up 0.91% and the Dow is down 2.52%.
  • Yields in the Treasury markets went in opposite directions this week. The 10 year Treasury bond fell and now yields 2.16%. On the other hand, the 5 year Treasury bond rose and now yields 1.57%.
  • The spot price of WTI Crude Oil plummeted this week, dropping 6.98% and closed at $43.83 per barrel. In 2015, WTI Oil prices are down 23.77%.
  • The spot price of Gold continued its decline, dropping 0.13% and closing at $1,094.35 per ounce. Year to date, gold prices are down 7.60%.

Economic Data

  • Initial jobless claims came in at 270,000 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 268,250.
  • The July jobs report showed a gain of 215,000 nonfarm payrolls, lower than expectations of 225,000. The figures were revised up by 14,000 to prior months.
    • The headline unemployment rate remained unchanged at 5.30%. The labor force participation rate also remained unchanged at 62.60%.
    • Average hourly earnings rose by 0.20% vs. consensus estimates of 0.20%.

Fact of the Week

  • Approximately 21% of 401(k) plan participants who are eligible to borrow from their balances have outstanding loans. Additionally, participants in the U.S. left $24 billion in company matching funds unused because they didn’t save enough to claim the full match. (Source: ThinkAdvisor)

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.

Wealth Management Economic Update August 3, 2015

U.S. and World News

  • SHANGHaiHeightened volatility continued in Chinese equity markets this week as government intervention was unable to prevent the Shanghai Composite from posting its worst month in six years as the index fell 14%. Chinese regulators said they were prepared to lend further support to markets, while the central bank injected cash into the money markets and hinted at further easing. In addition, China’s securities regulators said it has launched a probe into automated trading, restricting accounts suspected of “influencing securities trading prices.”
  • Greece’s financial markets are finally set to reopen on Monday August 3rd after being closed since June 28th. Already dealing with dissention in his own Syriza party, Prime Minister Alexis Tsipras was informed on Friday by the International Monetary Fund that Greece’s high debt levels and current record of implementing reforms disqualify it from a third bailout. The IMF will still take part in the bailout negotiations that are underway, but will not decide whether to agree to a new program for a few months.
  • The Federal Reserve meeting this month produced little insight into when the Committee plans on raising the Federal Funds Rate. Policymakers continued to see an improving economy and labor situation but said that it requires additional improvement in labor market conditions before ‘liftoff’. The Committee also noted concerns about ‘international developments’, most likely referencing the summer’s Greek drama and the volatility in China’s stock markets.

Markets

  • Equity markets rose moderately this week. The S&P 500 gained 1.18%, closing at 2,104. Likewise, the Dow Jones rose 0.69% and closed at 17,689. Year to date, the S&P is up 3.35% and the Dow is up 0.56%.
  • Yields in the Treasury markets dipped this week. The 10 year Treasury bond now yields 2.19% and the 5 year Treasury bond yields 1.54%.
  • The spot price of WTI Crude Oil fell again this week, dropping 2.72% and closed at a 52-week low of $46.83 per barrel. In 2015, WTI Oil prices are down 18.56%.
  • Once again, the spot price of Gold fell, decreasing by 0.30% and closing at $1,095.80 per ounce. Year to date, gold prices are down 7.48%. 

Economic Data

  • Initial jobless claims came in at 267,000 which was an increase from the prior week’s figure of 255,000. 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 275,000.
  • Real Gross Domestic Product increased by 2.3% (quarter over quarter) in the 2nd quarter, boosted by a solid increase of 2.9% in consumer spending. The figure for the 1st quarter GDP was revised upwards from -0.2% to +0.6%.
  • The Case-Shiller home price index declined 0.2% in May, disappointing against consensus estimates of a gain of 0.3%. Half of the 20 cities in the index showed price gains. Over the last 12 months, home prices in the index have risen 4.9%.
  • The Employment Cost Index (measure of wage growth) rose just 0.2% in the 2nd quarter which was below consensus expectations. With the Federal Reserve signaling that more improvement in inflation data is necessary for a September increase in the Fed Funds Rate, many analysts believe that this data point bring down the odds of that occurring, pushing the most likely ‘liftoff’ date to December.

Fact of the Week

  • The United States’ total outstanding debt has increased 91% over the last 7 years, an increase of 9.7% per year. The national debt has risen from $9.49 trillion on June 30, 2008 to $18.15 trillion as of June 30, 2015. (Source: Treasury Department)

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.