NAFTA: Wealth Economic Update Jan. 16, 2018

U.S. and World News

  • NAFTA-655951028Negotiators have set a March deadline to rewrite NAFTA (North American Free Trade Agreement) amid an increasingly contentious process between the U.S., Mexico and Canada. This also comes amid reports of Canadian officials believing President Trump could pull the U.S. out of the deal altogether. Regarding the timeline, Trump told the Wall Street Journal that he was a ‘little flexible’ on it given Mexico’s July 1 presidential election. On the topic of the border wall between the U.S. and Mexico, Trump said, “They can pay for it indirectly through NAFTA…We make a good deal on NAFTA, and, say, I’m going to take a small percentage of that money and it’s going toward the wall. Guess what? Mexico’s paying.” The next round of negotiations will be taking place in Montreal in two weeks.

Markets

  • Markets continued their upward move to start 2018. The S&P rose 1.61%, closing at a new All-Time High of 2,786. The Dow Jones gained 2.02% for the week, also closing at a new All-Time High of  25,803.
  • Interest rates generally rose again this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.35% and 2.55%, respectively.
  • The spot price of WTI Crude Oil rose by 4.66% this week, closing at $64.30 per barrel.
  • The spot price of Gold ended the week up by 1.37%, closing at $1,337.64 per ounce.

Economic Data

  • Initial jobless claims were up 11,000 from last week, coming in at a three-month high of 261,000. The largest increases were in California (10k), Pennsylvania (3k) and Wisconsin (3k). The four week moving average for claims rose to 251,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.15% in December, beating expectations of 0.1%. A 1.2% drop in energy prices partially offset a 0.2% rise in food prices. Headline inflation rose 2.1% in 2017.
    • Core CPI (excludes food and energy) rose 0.3% in December, higher than the expected 0.2%. During 2017, Core CPI rose 1.8%.
  • Retail sales rose 0.4% in December, a bit below consensus expectations of 0.5%. The largest December gains were at nonstore retailers (+1.2%) and building materials stores (+1.2%) while sales declined at clothing (-0.3%) and sporting goods (-1.6%) stores.

Fact of the Week

  • During the 2000-2002 bear market, the S&P 500 hit a bear market low on October 9, 2002. The headline in USA Today the following morning (10/10/02) was, “Where’s the bottom? No end in sight.” The S&P rose 102% from that point on until peaking five years later in 2007.

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

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

Visit Old Second Wealth Management

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

 

Dow 20,000, 1st Week: Wealth Economic Update Jan. 27, 2017

U.S. and World News

  • dow_20000The Dow Jones Industrial Average finally eclipsed the 20,000 mark for the first time, having flirted with the mark for more than a month. The benchmark index took 103 years to reach the 10,000 level in March 1999 and another 17 years to double. The latest 1,000 points added to the Dow came in the last 42 trading days as a post-election stock market rally sent major U.S. indices to new all-time highs.
  • In his first full week in office, President Trump has been very busy enacting many of the initiatives that he laid out on the campaign trail. He began by withdrawing the U.S. from the TPP trade agreement that had been established with many Asian nations like Japan and promising to renegotiate the NAFTA trade deal currently in place with Canada and Mexico. This was followed by executive orders clearing the path for the Keystone XL and Dakota Access Pipeline projects to move forward after they had been blocked by the Obama administration. Finally, Trump reiterated his intention on building a border wall between the U.S. and Mexico and insisted that Mexico would be footing the bill for the massive project. These statements resulted in Mexican President Enrique Pena Nieto cancelling a planned trip to meet with Trump and tensions rose further when White House spokesman Sean Spicer suggested Trump was considering a 20% tax on Mexican imports to pay for the wall. On tap for next week will be Trump’s nomination for the vacant Supreme Court seat.

Markets

  • This week the S&P 500 rose by 1.04%, closing at 2,295. The Dow Jones Industrial Average surpassed the 20,000 mark, increasing by 1.34% and closed at 20,094.
  • Interest rates were mostly unchanged this week. The 5 year and 10 year U.S. Treasury Notes now yield 1.95% and 2.48%, respectively.
  • The spot price of WTI Crude Oil increased by 1.29% this week and closed at $53.12 per barrel.
  • The spot price of Gold dropped by 1.51% this week, closing at $1,191.35 per ounce.

Economic Data

  • Weekly initial jobless claims came in at 259,000, an increase from last week’s reading of 235,000. The Labor Department noted no major distortions to the data this week. The four week moving average for jobless claims now stands at 245,000 setting a new low mark since 1973.
  • New home sales fell by 10.4% in December which was worse than consensus expectations. Only new home sales in the Northeast region rose during the month as the Midwest, South and Wet all saw declines.
  • Real GDP in the 4th quarter grew by an annualized 1.9%, missing expectations for a 2.2% gain. This brings full year 2016 growth to just under 2.0%.

Fact of the Week

  • The Dow Jones Industrial Average was launched in 1896 and consisted of 12 companies. The index expanded to 20 companies in 1916 and grew to its current size of 30 companies in 1928 when the components of the index started being referred to as “Blue Chips”. General Electric is the only stock currently in the index that was part of the original 12, although it was removed from the index twice (in 1898 and in 1901) but returned to the index both times.
  • CORRECTION: Last week’s fact incorrectly stated market returns during the Obama presidency in relation to other Presidents. A total return (includes dividends) was quoted for Obama while comparing it to Clinton’s price-only returns. The correct figures were 13.8% annualized returns during Obama’s tenure and 15.2% annualized returns during Clinton’s.

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
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

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.