China, Brazil election: Wealth Economic Update Nov. 3, 2018

U.S. and World News

  • China made progress this week towards making its financial markets more investor friendly. The China Securities Regulatory Commission said that it will begin increasing liquidity, reduce unnecessary interference in trading, and increase fairness in the markets for investors. President Trump ramped up trade threats if negotiations with Chinese President Xi fail, stating that the U.S. is planning tariffs on the remaining $257 billion in Chinese goods. Reports surfaced early this morning that President Trump had asked U.S. officials to draft a trade agreement with China, however, a few members of the administration later said that an agreement is not imminent.
  • brazil-676361592_370In a controversial victory, right winged presidential candidate Jair Bolsonaro won Brazil’s presidential election with 55% of the vote. The Brazilian Real gained 9.7% against the U.S. Dollar and the Bovespa stock index rose 13.5% in the last 30 days as the market predicted a Bolsonaro victory leading up to the election. Brazil has gone through years of corruption scandals, brutal elections and protests, the impeachment of a president, and negative economic growth. Bolsonaro campaigned on restoring discipline and law-and-order, putting an end to the corruption.


Markets

  • Stocks rebounded from correction levels this week as volatility remains elevated. The S&P 500 rose 2.45% and closed at 2,723. The Dow Jones gained 2.36% and closed at 25,271. Year to date, the S&P is up 3.47% and the Dow Jones is up 4.03%.
  • Yields also rebounded dramatically from their lows last week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.04% and 3.22%, respectively.
  • The spot price of WTI Crude Oil continued its slide this week, losing a whopping 6.92% and closing at $62.91 per barrel. Year to date, Oil prices are up 4.66%.
  • The spot price of Gold ended the week almost unchanged from last week, losing 0.05% and closing at $1,232.94 per ounce. Year to date, Gold prices are down 5.36%.

Economic Data

  • Initial jobless claims fell by 2,000 to 214,000 this week. The four-week moving average of claims increased by 2,000 to 214,000. Claims fell by 3,000 in California and by 2,000 in Georgia. Jobless claims still remain high in hurricane affected states.
  • The core PCE index (excluding food and energy) rose by 0.15% month-over-month in September and the year-over-year figure came in at 1.97%, in line with expectations.
  • Personal income rose by 0.2% month-over-month in September versus expectations for a 0.4% increase.
  • Personal spending rose by 0.4% month-over-month in September, in-line with expectations.
  • The Conference Board index of consumer conference rose to 137.9 versus expectations for a reading of 135.9. This is the highest level since 2000.
    Private sector employment rose 227,000 in October versus expectations for a 187,000 increase.
  • Factory orders increased by 0.7% month-over-month in September versus expectations for a 0.5% increase.
  • Nonfarm payrolls rose by 250,000 in October month-over-month versus expectations of a 200,000 increase.
    • The unemployment rate remained unchanged at 3.7%, in-line with expectations.
    • Average hourly earnings rose by 0.2% month-over-month in October and the year-over-year figure rose by 0.3% to 3.1%, a new cycle-high.
    • The trade deficit rose by $700 million to $54 billion in September, versus expectations for a $300 million increase.

Fact of the Week

  • The last time Amazon saw a 20% drawdown in stock price was in February of 2016, when its market cap was $227 Billion. In the period from September 4th to October 30th, Amazon fell nearly 25% and lost $249 Billion in market cap.

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

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Saudis, Turkey, Khashoggi: Wealth Economic Update Oct. 26, 2018

U.S. and World News

  • iStock-927165528Saudi Arabia’s handling of the death of Jamal Khashoggi, a journalist working for the Washington Post, is under sharp criticism as the story continues to change nearly every day. The latest announcement from Saudi prosecutors was yesterday, when they stated that the killing was in fact premeditated. This morning, President Erdogan of Turkey stated that “Turkey has other information and evidence about the killing by Saudi officials after Khashoggi entered the consulate on October 2nd, and it will eventually reveal that information”. Whether the crown prince of Saudi Arabia knew of the murder and the location of the body are the two mysteries that remain. The incident has put a strain on a long standing strong relationship with the United States and Saudi Arabia.


Markets

  • Stocks plummeted this week as volatility picked up further. The S&P 500 lost 3.93% and closed at 2,659. The Dow Jones fell by 2.97% and closed at 24,688. Year to date, the S&P is up 1.03% and the Dow Jones is up 1.67%.
  • Yields also fell sharply this week as investors piled into bonds this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.91% and 3.08%, respectively.
  • The spot price of WTI Crude Oil was down for yet another week, losing 2.32% and closing at $67.67 per barrel. Year to date, Oil prices are up 12.58%.
  • The spot price of Gold rose 0.61% this week, and closed at $1,233.95 per ounce. Year to date, Gold prices are down 5.28%.

Economic Data

  • Initial jobless claims rose by 5,000 to 215,000 this week. The four-week moving average of claims remained unchanged at 212,000. Claims rose by 4,000 in Florida and by 3,000 in Georgia as a result of Hurricane Michael.
  • Durable goods orders rose by 0.8% in September versus expectations of a -1.5% decrease. This was led by defense aircraft.
    • Durable goods orders ex-transports rose by 0.1% in September versus expectations of a 0.4% increase.
  • Core capital goods orders fell by 0.1% in September versus expectations for a 0.5% increase.
  • New home sales fell 5.5% in September to a seasonally-adjusted rate of 553,000 units versus expectations for 625,000 units. Sales fell the most in the Northeast region (-40.6%).
  • Pending home sales rose by 0.5% in September versus expectations for no change. Pending home sales rose the most in the West region (+4.5%).
  • Real GDP rose by 3.5% in the third quarter, beating expectations of a 3.3% increase.
    • Personal consumption rose by 4.0% versus expectations of 3.3%, the fastest pace since the fourth quarter of 2014.
    • The Core PCE Price index rose by 1.6% in the third quarter versus expectations for a 1.8% increase.
  • The University of Michigan’s index of consumer sentiment fell by 0.4 points to 98.6 in October versus expectations for a reading of 99.0.

Fact of the Week

  • The largest one day decline in the S&P 500 happened on “Black Monday” (10/19/87), when the index dropped 20.5%, equal to 58 points. A 20.5% drop today would be equal to 545 points. The largest one day drop so far this year was 113 points. (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

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Interest rates, Midterms, NAFTA, Saudis: Wealth Management Special Update Oct. 26, 2018

Following a largely positive 3rd quarter during which the S&P 500 set a new all-time high, markets have moved sharply lower to begin the month of October. Gains in both the S&P and Dow have been wiped out, while the Nasdaq is clinging to a ~2% gain. The recent weakness has been heaviest in those Nasdaq/Growth stocks which have been leadership for the last few years. While there is no clear cause of the near 10% correction in stocks, there are a number of factors that may be contributing:

  • Recent communication from the Federal Reserve indicates a commitment to further rate hikes which the markets have perceived as too aggressive. To borrow from our research partner Strategas, “The level of interest rates that the economy can take is higher that the interest rate financial markets are comfortable with.” So despite an otherwise strong economy which justifies further rate increases, the markets have responded poorly to the perceived path of hikes. With the recent market downturn, implied odds of a December rate hike have fallen from over 80% to 69%, though the Fed seems intent on one more hike in 2018.
  • ballot-884243522_370October tends to be a weak time seasonally for equity markets, in particular during midterm election years. Markets don’t like uncertainty, so a midterm election that has the potential to swing the balance of power in Congress could be a source of heightened volatility. While there may be some specific industries or sectors that win or lose based on the outcomes, historically the broad market indices rally into year-end following the midterms once the results are clear.
  • Trade continues to be an issue. The USMCA agreement (updated NAFTA), which has been agreed to in principle by the U.S., Mexico and Canada, won’t be voted on until 2019 when the new Congress comes in, raising fears that its passage may be impeded if the Democrats are to take control. The tariff war with China continues on and little to no progress towards a resolution has been made.
  • The situation with Saudi Arabia has intensified and fears of isolation of that country and its potential effect on oil prices is a cause for concern.

Despite these concerns, the underlying fundamental data of the economy remains strong. Growth (GDP), employment and earnings figures continue to be solid and valuations are reasonable. With interest rates rising and the real rate of interest now positive (rates exceed inflation) for the first time since the financial crisis, companies are no long enjoying a near zero cost of capital. This results in more rationed allocations of capital and greater volatility as there is less margin for error for companies from more expensive capital and cash as an asset class is more viable. Increased volatility and lower correlations between assets is likely here to stay throughout the remainder of this cycle and benefits the active management approach.

 

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, Saudi relations: Wealth Economic Update Oct. 19, 2018

U.S. and World News

  • Brexit negotiations have been a story of two steps forward, one step back and the discussion over the Irish border situation has been a roadblock for reaching a deal. Businesses, consumers, and investors have become increasingly concerned that more delays will only result in unresolved differences. European Union Chief Negotiator Michel Barnier stated that “A Brexit deal with the U.K. is 90% done” while debates continue over the Irish border and Theresa May attempts to create yet another delay and extend the post-Brexit transition period until 2021.
  • saudi-629324102_370Tensions rose rapidly this week between the United States and Saudi Arabia amidst the unexplained sudden disappearance of an American journalist. Secretary of State Mike Pompeo traveled to Saudi Arabia to meet with King Salman bin Abdulaziz earlier this week to discuss the issue, at which time the King denied allegations that Saudi Arabia orchestrated the disappearance of the American journalist. Reports surfaced during the week stating that Khashoggi was killed as a result of an interrogation that went wrong. President Trump stated that he wants to get to the bottom of what actually happened and if Saudi Arabia is found responsible, that the American response would be “very severe”. Saudi Arabia has shared interests with the United States that include containing Iran and sharing defense contracts.


Markets

  • Stocks were relatively unchanged from last week after another very volatile week. The S&P 500 rose 0.05% and closed at 2,768. The Dow Jones rose by 0.45% and closed at 25,444. Year to date, the S&P is up 5.10% and the Dow Jones is up 4.73%.
  • Yields climbed higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.05% and 3.19%, respectively.
  • The spot price of WTI Crude Oil continued its slide this week, losing 2.89% and closing at $69.28 per barrel. Year to date, Oil prices are up 15.26%.
  • The spot price of Gold rose 0.08% this week, and closed at $1,226.75 per ounce. Year to date, Gold prices are down 5.84%.

Economic Data

  • Initial jobless claims fell by 5,000 to 210,000 this week. The four-week moving average of claims increased by 2,000 to 212,000. Claims fell by 4,000 in North Carolina, and by 8,000 in Kentucky.
  • The Philadelphia Fed manufacturing index fell by 0.7 points to 22.2 for October versus expectations for a reading of 20.0.
  • Retail sales rose 0.1% month-over-month in September versus expectations for a 0.6% increase. The weaker than expected figure reflects lower sales at gas stations.
    • Retail sales core/control (ex-autos, gasoline, and building materials) increased 0.5% month-over-month in September versus expectations for a 0.4% increase.
  • Job openings increased to 7,136k in August versus expectations for 6,900k.

Fact of the Week

  • In 2008, Japan’s economy was larger that China’s economy ($4.9 trillion vs $4.5 trillion). China’s $12 trillion economy is now more than double that of Japan, who’s economy is $5 trillion. (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, Hurricane Michael: Wealth Economic Update Oct. 12, 2018

U.S. and World News

  • Former British Prime Minister Tony Blair stated that there is a 50-50 chance of reaching another Brexit referendum as it is doubtful that Theresa May will secure a majority vote for a divorce deal with only six months until the deadline. Many issues remain unresolved before the deadline, including trade issues, security issues, regulatory uncertainty, and whether there will be a border separating Ireland. Japanese Prime Minister Shinzo Abe stated that Britain will be welcome to join the Trans-Pacific Partnership after it leaves the European Union, allowing it to retain its “global strength”.
  • hurricane-1035765586_370Rescuers have begun searching for survivors after Hurricane Michael flattened towns along the coast of the Florida panhandle. The hurricane made landfall early afternoon on Wednesday in Mexico Beach, Florida as a strong Category 4 storm with sustained winds of 155 miles per hour and knocked out power in about 1.5 million homes and businesses in the Southeast region. The storm is responsible for 12 deaths across Florida, Georgia, North Carolina, and Virginia and that number is expected to rise according to FEMA Administrator Brock Long. Offshore oil rigs in the Gulf were evacuated as the hurricane approached Florida, cutting oil production by over 40% and natural gas output by 33%.


Markets

  • Stocks plunged this week following last week’s declines. The S&P 500 fell 4.06% and closed at 2,767. The Dow Jones declined by 4.17% and closed at 25,340. Year to date, the S&P is up 5.06% and the Dow Jones is up 4.27%.
  • Yields pulled back this week after rising rapidly last week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.02% and 3.17%, respectively.
  • The spot price of WTI Crude Oil also fell dramatically, losing 3.81% this week to close at $71.51 per barrel. Year to date, Oil prices are up 18.97%.
  • The spot price of Gold rose 1.20% this week, and closed at $1,218.04 per ounce. Year to date, Gold prices are down 6.51%.

Economic Data

  • Initial jobless claims increased by 7,000 to 214,000 this week. The four-week moving average of claims increased by 3,000 to 210,000. Claims rose by 7,000 in Kentucky, and by 4,000 in North Carolina.
  • The consumer price index (CPI) rose by 0.06% in September versus expectations for a 0.2% increase. The weaker figure was driven by lower energy prices. The year-over-year rate came in at 2.27% versus 2.4% expected.
    • Core CPI rose by 0.12% in September versus expectations of a 0.2% increase. The year-over-year rate in Core CPI remains at 2.2%.
  • The producer price index (PPI) increased by 0.2% in September, in-line with expectations.
    • PPI ex-food and energy rose by 0.2% in September, in-line with expectations.
  • Import prices rose by 0.5% in September month-over-month versus expectations for a 0.2% increase. The higher than expected reading was led by the foods, feeds, and beverages category.
  • The University of Michigan’s index of consumer sentiment declined 1.1 points to 99.0 in the October preliminary reading against expectations for a reading of 100.5.

Fact of the Week

  • A greater percentage of Millennials have all of their pre-tax retirement money invested in cash and bonds (20%) than those that have all of their pre-tax retirement money invested in stocks (19%). 2,593 Millennials (ages 20-36 in 2017) were surveyed in the 4th quarter 2017 (source: Transamerica Retirement Survey).

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

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NAFTA, Italy, EU: Wealth Economic Update Oct. 5, 2018

U.S. and World News

  • cow-184614299_370On Sunday night, the United States and Canada reached an agreement for the revised North American Free Trade Agreement just before the deadline of October 1st. The new agreement that includes Mexico will be called the U.S.-Mexico-Canada Agreement or USMCA. Canada agreed to open its dairy market to the United States while the United States agreed to keep the dispute-resolution process in the deal which would provide Canada protection from potential tariffs imposed by the United States. President Trump calls the deal the “most important deal we’ve ever made by far” and stated that he is skeptical of congress passing the deal as a result of political motives.
  • Italy has given into pressure put on by the European Central Bank and reduced its growth forecasts. The Euro fell dramatically and the Italian 10-year yield hit a four-year high as the second largest debt laden European country was closely reaching an October 15th deadline for submitting its final budget deal. The new growth forecast for this year was cut to 1.2% from a previous estimate of 1.5% and the budget deficit target was assumed at 2.4% of GDP for 2019, 2.1% for 2020, and 1.8% for 2021. Italy’s stock market declined this morning as a result of the lower growth forecasts.


Markets

  • Stocks continued their slide this week. The S&P 500 fell 0.95% and closed at 2,886. The Dow Jones declined by 0.36% and closed at 26,447. Year to date, the S&P is up 9.44% and the Dow Jones is up 8.73%.
  • Yields rallied dramatically this week, spooking the domestic stock market. The 5 year and 10 year U.S. Treasury Notes are yielding 3.07% and 3.23%, respectively.
  • The spot price of WTI Crude Oil finished the week higher again, gaining another 1.49% this week to close at $74.34 per barrel. Year to date, Oil prices are up 23.67%.
  • The spot price of Gold rose 1.08% this week, and closed at $1,203.77 per ounce. Year to date, Gold prices are down 7.60%.

Economic Data

  • Initial jobless claims fell by 7,000 to 207,000 this week. The four-week moving average of claims remained unchanged at 207,000. Claims fell by 6,000 in North Carolina, rebounding this week after Hurricane Florence.
  • The ISM manufacturing index fell 1.5 points to 59.8 in September versus expectations for a reading of 60.0.
  • The ISM non-manufacturing index rose by 3.1 points to 61.6 in September versus expectations for a reading of 58.0.
  • Construction spending rose by 0.1% month-over-month in August versus expectations for a 0.4% increase. Private residential construction was weaker in August.
  • Private sector employment rose by 230,000 in September month-over-month versus expectations for a 184,000 gain. This was led by professional and business services.
  • Nonfarm payrolls rose by 134,000 in September month-over-month versus expectations of an increase of 185,000.
    • The Bureau of Labor Statistics noted that Hurricane Florence had an estimated impact of around 50,000-60,000 jobs. The figure was also affected by the number of employees not at work due to weather.
    • These estimates would result in an actual figure of about 190,000
    • The unemployment rate declined to 3.7% versus 3.8% expected
    • Average hourly earnings rose 0.3% month-over-month, in-line with expectations.

Fact of the Week

  • The Small Business Optimism Index reached its all-time high in August, surpassing the mark set in July 1983. The index measures small business owners expectations for hiring, business growth, and profitability. (Source: National Federation of Independent Businesses)

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

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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.

China tariffs, OPEC: Wealth Economic Update July 6, 2018

U.S. and World News

  • shipping-868192010_370Just after midnight Washington time, a 25% tariff on $34 billion of Chinese goods went into effect as scheduled. Also expected, China hit back with tariffs of the same scale on goods such as soybeans and automobiles. Neither side is showing signs of backing down as the Trump administration is already discussing $16 billion in additional tariffs on Chinese goods. During a rally in Montana on Thursday, President Trump threatened that tariffs on Chinese goods could reach $500 billion, which is almost equal to what the United States imports from China in total. Markets did not react to the tariffs taking affect as investors were aware of the event, however, risk arises from higher prices passed on to companies and consumers.
  • On Saturday, President Trump made an agreement with Saudi Arabia that gives the kingdom a 2 million barrel per day spare capacity output to use if and when necessary, to make up for the lost supply from Iran and Venezuela. OPEC members, particularly Iran, have responded negatively to President Trump’s tweets directed at OPEC. The United States is attempting to stop all allies from importing oil from Iran, while President Trump is directing tweets at OPEC to influence them to lower oil prices. Iranian Revolutionary Guards commander Ismail Kowsari said that Tehran will block oil shipments through the Strait of Hormuz in the Gulf if the U.S. bans Iranian oil sales.

Markets

  • Stocks rebounded this week. The S&P 500 increased by 1.56% and closed at 2,760. The Dow Jones rose 0.82% and closed at 24,456. Year to date, the S&P is up 4.23% and the Dow Jones is up 0.10%.
  • Stocks rebounded this week. The S&P 500 increased by 1.56% and closed at 2,760. The Dow Jones rose 0.82% and closed at 24,456. Year to date, the S&P is up 4.23% and the Dow Jones is up 0.10%.
  • Yields fell slightly this week and the yield curve continued to flatten. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.72% and 2.82%, respectively.
  • The spot price of WTI Crude Oil was relatively calmer, losing 0.39% this week and closing at $73.86 per barrel. Year to date, Oil prices are up 22.87%.
  • The spot price of Gold increased 0.20% this week, closing at $1,255.08 per ounce. Year to date, Gold prices are down 3.66%.

Economic Data

  • Initial jobless claims rose by 3,000 to 231,000 this week. The four-week moving average of claims moved up by 3,000 to 225,000. Jobless claims fell by 6,000 in California and rose by 2,000 in Ohio and Massachusetts.
  • Private payrolls increased by 177,000 in June versus expectations of a 190,000 increase. The gains were mostly balanced across sectors.
  • The ISM manufacturing index rose by 1.5 points to 60.2 in June against expectations of 58.5. The increase was led by supplier deliveries.
  • The ISM non-manufacturing index rose by 0.5 points to 59.1 against expectations of 58.3. The report was mostly mixed.
  • Nonfarm payrolls rose by 213,000 in June versus consensus expectations of 195,000, and previous months were revised up by a net 37,000. The positive payrolls figure was led by jobs in the manufacturing sector.
    • The unemployment rate came in at 4.0% versus expectations of 3.8%, this was led higher by a higher labor force participation rate.
    • Average hourly earnings rose by 0.2% in June and the year-over-year rate remained at 2.7%. The consensus estimate was for 0.3% in June.
  • The trade deficit declined to -$43.1 billion in May from -$46.1 billion in April. The decline in the trade balance came from non-petroleum categories.

Fact of the Week

  • The S&P 500 has closed at its calendar year high in the second half of the year (i.e., during the 6 months of July-December) 74% of the time since 1950. In 15 of the last 25 years, the index’s calendar year high has occurred during the month of December. The S&P 500 consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (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

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.

 

Climate, Illinois downgraded: Wealth Economic Update June 3, 2017

U.S. and World News

  • weather-171576532_360President Trump has announced that the United States will withdraw from the Paris Climate Accord. The landmark 2015 agreement between 195 nations aimed at fighting climate change and promoting clean energy, however Trump has been staunchly against the deal as he feels that it puts America at an economic disadvantage compared to many of the other countries in the agreement. While according to the language of the agreement makes it so the U.S. can’t officially withdraw until 2020, the administration says they will simply not enforce any of the provisions of the deal until that time. Trump added that the U.S. could begin negotiations to re-enter the Paris accord down the road or “a new transaction on terms that are fair to the United States, its businesses, its workers, its people, its taxpayers.”
  • Standard and Poor’s has downgraded the debt rating of the State of Illinois down to BBB- from BBB, one notch above ‘Junk’ status. This was the third downgrade of Illinois’ debt by S&P in the past year. Illinois is by far the lowest rated state and it is the only state that S&P has in the BBB tier and indications are that the rating could fall further in what was described as a ‘negative credit spiral’. Gabriel Patek of S&P noted, “If lawmakers fail to reach agreement on a budget with provisions designed to reduce the state’s structural deficit, it’s likely we will again lower the ratings.”

Markets

  • Markets ended the week on a positive note. The S&P 500 rose by 1.01% and closed at 2,430. The Dow Jones gained 0.69% for the week and closed at 21,144. Year to date, the S&P is up 9.87% and the Dow is up 8.48%.
  • Interest rates edged higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.72% and 2.16%, respectively.
  • The spot price of WTI Crude Oil lost 4.14% this week, closing at $47.74 per barrel. Year to date, Oil prices have fallen 11.13%.
  • The spot price of Gold ended the week higher, closing at $1,279.17 per ounce. Year to date, Gold prices are up 11.47%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 248,000. Most of the increases in claims were attributed to California and Tennessee. The four week moving average for claims ticked up to 238,000.
  • The Headline PCE index (measure of inflation) rose 0.2% in April, in line with expectations. Over the last year, PCE inflation has risen 1.7%.
    • Core PCE (excludes food and energy, preferred inflation measure of the Federal Reserve) rose by 0.15% in April, slightly better than expectations of 0.1%. Core PCE has risen 1.5% over the last 12 months.
  • The Case Shiller home price index rose by 0.9% in April, in line with expectations. Prices rose in all 20 cities measured with Minneapolis (+1.3%), Detroit (+1.2%), Seattle (+1.1%) and New York (+1.1%) showing the largest monthly increases. Over the last 12 months, home prices as measured by the index have risen 5.9%.

Fact of the Week

  • Apple (AAPL) reported cash and cash equivalents of $256.8B at the end of Q1. That is enough cash to purchase any company held in the S&P 500, outside of the top 10 holdings. Alternatively, Apple could purchase all of the bottom 45 companies held in the S&P 500. (Based on Market Capitalization)

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.

OPEC, Budget, Manchester: Wealth Economic Update May 29, 2017

U.S. and World News

  • oil-518901244The OPEC meeting on Thursday concluded with an agreement to extend oil production cuts for an additional nine months, however crude oil prices fell sharply on the day despite the positive result as expectations were high after OPEC displayed unusual optimism prior to the meeting. Iraq was surprisingly in support of the production cuts as they have been one of the more hesitant OPEC members to favor production cuts in the past. There still remain OPEC members that will not be required to comply with the extension cap such as Libya, Iran, and Nigeria.
  • President Trump has submitted a budget proposal that aims to cut $3.6 trillion in spending over the next ten years which includes cutting Medicaid and other social programs. The budget entails a $4.1 trillion spending allowance in 2018 which includes defense, border security, and infrastructure.
  • The U.K.’s terror threat level was raised to “critical” after an explosion following the Ariana Grande concert in Manchester, England killed 22 people and injured 59. Salman Abedi is the name of the man believed to be responsible for the attack and Prime Minister Theresa May raised the U.K. threat level to its maximum level of “critical” implying that another attack is potentially imminent.

Markets

  • Markets ended the week on a positive note. The S&P 500 rose by 1.47% and closed at 2,416. The Dow Jones gained 1.35% for the week and closed at 21,080. Year to date, the S&P is up 8.78% and the Dow is up 7.75%.
  • Interest rates edged higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.79% and 2.25%, respectively.
  • The spot price of WTI Crude Oil lost 1.74% this week, closing at $49.79 per barrel. Year to date, Oil prices have fallen 7.32%.
  • The spot price of Gold ended the week higher, closing at $1,267.14 per ounce. Year to date, Gold prices are up 10.43%.

 Economic Data

  • Initial jobless claims increased by 1,000 from last week, coming in at 234,000. Most of the increases in claims were attributed to California and Michigan. The four week moving average for claims dropped to 235,000.
  • Sales of new single-family homes fell 11.4% in April reaching a four-month low, however, new home sales in the prior three months were all revised upwards. The decline in April was largely attributed to new single-family home sales in the West.
  • Existing home sales fell 2.3% in April, but still remains at a March cycle-high. Existing sales of single-family units fell by 2.4%, while sales of condos declined by 1.6%. Existing home sales decreased in the South, West, and Northeast, but increased in the Midwest region.
    • The recent loss of momentum in the housing market and existing home sales is believed to be the negative affect from higher mortgage rates.
  • During the May Federal Open Market Committee meeting on Thursday, the Fed concluded that “it would soon be appropriate” for another rate hike. There is an 80% probability of a rate hike in June and another hike is expected in September. The Fed also noted that the weak Q1 GDP figure was likely transitory.

Fact of the Week

  • There was approximately $1.54 trillion in circulation as of April 5, 2017, of which $1.49 trillion was in Federal Reserve notes (Dollars). (Source: Board of Governors of the Federal Reserve System.)

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.