U.S. and World News
China’s chief trade negotiator, Vice Premier Liu He, will come to Washington D.C. for the next round of trade talks on January 30-31. The visit comes after some surprisingly negative economic data coming out of China this week that showed sharp contractions in both imports and exports. The poor numbers have led to stimulus measures such as tax cuts by the People’s Bank of China and figure to make it even more pressing for some sort of deal to be struck. The U.S. side isn’t necessarily presenting a unified front however, with Treasury Secretary Steve Mnuchin saying that Washington could ease tariffs on China, while U.S. Trade Representative Robert Lighthizer pushed back on this suggestion and continues to take a hardline stance.- British Prime Minister Theresa May submitted a Brexit proposal to Parliament this week which was soundly voted down and prompted a no-confidence motion from the opposition Labour Party. While May was able to survive the no-confidence vote, she now has a Monday deadline to set out her Brexit Plan B. She may be forced budge on certain items to get her opponents on her side, such as keeping closer ties to the European Union or postponing Britain’s separation from the economic bloc. However, with less than 70 days remaining until “Brexit Day”, if the two sides do not come together it becomes more likely that Parliament will take control of the Brexit process.
- The partial government shutdown carries on through its 28th day, extending the record long impasse. Estimates for the cost of the shutdown have been increased from an initial figure of a -0.1% impact on GDP every two weeks it was in force, to -0.1% every week. The January employment report figures to show job growth being slashed by nearly 500,000 and the headline unemployment rate rising to 4.0% if the situation isn’t resolved quickly.
Markets
- Stocks rose higher again this week, continuing the bounce off of the Christmas Eve lows. The S&P 500 rose 2.90% and closed at 2,670. The Dow Jones increased 3.01% and closed at 24,706. Year to date, the S&P is up 6.63% and the Dow Jones is up 6.02%.
- Yields were on the rise this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.62% and 2.78%, respectively.
- The spot price of WTI Crude Oil rose sharply this week, continuing its recent upward trend. Prices jumped another 4.17% and closed at $53.74 per barrel. Year to date, Oil prices are up 18.28%.
- The spot price of Gold fell 0.63% this week and closed at $1,282.11 per ounce. Year to date, Gold prices are unchanged.
Economic Data
- Initial jobless claims fell by 3,000 to 213,000 for the week. The four-week moving average of claims decreased by 1,000 to 221,000. Claims fell by 3,000 in New York and by 2,000 in Connecticut and Pennsylvania.
Fact of the Week
- If calendar year 2018 GDP growth, which is released on 1/30, is reported above 3%, it will break a 12 year streak of “sub 3%” growth (2006-2017). This is the longest such streak in US history, with the next longest “sub 3%” streak taking place in the 4 your period from 1930-1933 during the Great Depression. (Source: Commerce 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
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.
With no end in sight, the partial government shutdown now ties the record for longest in American history, on its 21st day. Effects of a lengthened government shutdown are forgone pay from millions of federal employees, delayed business permits and visas, delayed IPO’S, and mergers and acquisitions. Withheld pay from federal employees could potentially impact consumer spending, a significant portion of the United States economy. Fitch’s global head of sovereign ratings stated that the United States triple-A credit rating could be in question because of the inability to pass a budget. The two government parties remain at an impasse over President Trump’s request for border wall funding.
President Trump said that he had a “very good call” with Chinese President Xi Jinping on Saturday regarding trade and that “big progress” was being made. Earlier this week, China released disappointing manufacturing data that showed a contracting Manufacturing Purchasing Managers Index, rather than growing. However, Chinese Services Purchasing Managers Index jumped to a six-month high. This morning, China’s commerce ministry announced that vice-ministerial-level trade discussions will be held with the United States on January 7-8 in Beijing. The meeting is a continuation of an ongoing effort to reach a deal on trade during a 90-day truce period that postponed additional tariffs until March 1st.
