China, Brexit, Shutdown: Wealth Economic Update Jan. 18, 2019

U.S. and World News

  • beijing-482334184_370China’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.

China, Brexit, Shutdown: Wealth Economic Update Jan. 11, 2019

U.S. and World News

  • The trade negotiation with China shifted to a more positive tone this week after U.S. Commerce Secretary Wilbur Ross stated that the United States and China could reach a deal that “we could live with”. China’s foreign ministry stated that China has “good faith” to work with the United States to reach a deal. Some meaningful progress was made this week during a prolonged meeting that included China’s purchases of U.S. farm and energy products and expanded access to China’s markets. However, negotiations over forced U.S. technology transfer did not improve. Chinese Vice Premier Liu He is expected to visit the United States in the near future for further negotiations.
  • British Prime Minister Theresa May finds herself in a tough spot in the days leading up to the January 15th vote on her Brexit deal as a result of lawmakers restricting her tax-varying powers in the event of no agreement. The last vote on a Brexit deal was delayed as there was not enough support and things have failed to improve since. The pressure for a deal to be made grows by the day as the March 29th deadline nears.
  • capitol-621851478With 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.


Markets

  • • Stocks rose higher again this week as tensions with China have eased and the Fed provided some calming language regarding policy. The S&P 500 rose 2.58% and closed at 2,596. The Dow Jones increased 2.42% and closed at 23,996. Year to date, the S&P is up 3.63% and the Dow Jones is up 2.93%.
  • Yields rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.53% and 2.70%, respectively.
  • The spot price of WTI Crude Oil rose sharply this week. Prices jumped 6.41% and closed at $51.63 per barrel. Year to date, Oil prices are up 13.70%.
  • The spot price of Gold rose 0.13% this week and closed at $1,287.68 per ounce. Year to date, Gold prices are up 0.40%.

Economic Data

  •  Initial jobless claims fell by 17,000 to 216,000 for the week. The four-week moving average of claims rose by 3,000 to 222,000. Claims fell by 3,000 in California and fell by 2,000 in Florida, Illinois, and New Jersey.
  • The ISM non-manufacturing index fell by 3.1 points to 57.6 versus expectations for a reading of 58.5.
  • The consumer price index (CPI) fell by 0.06% in December, in-line with expectations. The year-over-year rate rose 1.95% versus expectations of a 1.9% increase.
    • Core CPI rose by 0.21% in December, in-line with expectations. The year-over-year rate rose by 2.21% in December, in-line with expectations.

Fact of the Week

  • Today marks the 21st day of the government shutdown, which ties the shutdown spanning December 16, 1995 to January 6th, 1996 under President Bill Clinton as the longest shut down in history. During the ’95-’96 shutdown, the S&P 500 returned 0.156%. As of the close today, the S&P 500 is up 7.54% since the government shutdown at midnight on December 22. (Source: 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
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.

China, Congress, Wall, Budget: Wealth Economic Update Jan. 4, 2019

U.S. and World News

  • great_wall-899508826President 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.
  • Democrats had officially taken control of the House on Thursday and have found themselves at an impasse with Congress and President Trump on funding the government, which has now been partially shut down for 14 days. President Trump has stated that he will not sign a bill that does not include $5 billion for a wall along the southern border, something that the Democrats strongly oppose. The Democrats have passed a funding package that would reopen the government and the Department of Homeland Security until February 8th, but would not satisfy the President’s demand. Bipartisan congressional leaders are meeting today at the White House to continue negotiations.


Markets

  • Stocks continued climbing higher in yet another volatile week. The S&P 500 rose 1.90% and closed at 2,532. The Dow Jones increased 1.65% and closed at 23,433. Year to date, the S&P is up 1.03% and the Dow Jones is up 0.50%.
  • Yields fell further this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.50% and 2.67%, respectively.
  • The spot price of WTI Crude Oil rebounded this week. Prices jumped 6.57% and closed at $48.31 per barrel. Year to date, Oil prices are up 6.39%.
  • The spot price of Gold rose 0.42% this week and closed at $1,286.05 per ounce. Year to date, Gold prices are up 0.28%.

Economic Data

  • Initial jobless claims rose by 10,000 to 231,000 for the week. The four-week moving average of claims rose by 1,000 to 219,000. Claims rose by 2,000 in Connecticut and fell by 2,000 in California and North Carolina.
  • Private sector employment rose by 271,000 in December versus expectations for a 180,000 increase.
  • The ISM manufacturing index fell 5.2 points to 54.1 in December versus expectations for a reading of 57.5. This is the largest one-month decline in ten years.
  • Nonfarm payrolls rose by 312,000 in December, far exceeding expectations of 195,000. Prior months were revised up by a net 58,000.
    • The unemployment rate rose 0.2% to 3.9% due to a higher labor participation rate.
    • Average hourly earnings rose by 0.4% in December versus expectations for a 0.3% increase and the year-over-year rate rose to 3.2%, a cycle high.

Fact of the Week

  • This weekend’s playoff matchup between the Chicago Bears and the Philadelphia Eagles will be the fourth time the teams have meet in the post season. Previous match-ups include the infamous “Fog Bowl” on New Year’s 1988, and the Eagles hold a 1-2 series advantage over the Bears. The teams will face off at Soldier Field at 3:40pm on Sunday.

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 November 10, 2014

U.S. and World News

  • senateThe midterm elections resulted in large gains for the Republican Party. Republicans won control of the Senate and expanded their margin in the House. This leaves the Democratic Party without a majority in either chamber of Congress for the first time since 2006. Lawmakers will now try to come together to pass legislation that has stalled in the face of partisan brinksmanship. Key issues include infrastructure spending, healthcare, the Keystone XL pipeline and tax reform.
  • China’s top regulator is working to loosen restrictions on foreign investment in certain sectors of the Chinese economy. The move is aimed at adapting to a more globalized economy and improving the efficiency of its domestic companies. The proposal from the National Development and Reform Commission includes new rules that would cut the number of sectors where China limits foreign investment to 35 from the current 79, opening up areas such as oil refining, paper making, steel and premium spirits.

Markets

  • Equity markets continued to rally this week as both the S&P 500 and Dow Jones Industrial Average closed at new All-Time Highs. The S&P 500 advanced 0.75% and closed at 2,032. Likewise, the Dow Jones climbed up 1.14% and closed at 17,574. Year to date, the S&P 500 is up 11.83% and the Dow Jones is up 8.07%.
  • Yields in the treasury markets traded down a bit this week. The 10 year treasury now yields 2.31% and the 5 year treasury yields 1.59%.
  • The spot price of WTI Crude Oil fell again this week, dipping 2.56%, closing at $78.48 per barrel. Year to date, Oil prices are down 15.36%.
  • The spot price of Gold increased marginally this week, advancing by 0.39% this week, closing at $1,177.56 per ounce. Year to date, Gold prices are down 2.00%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 278,000 vs. consensus estimates of 285,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 279,000, which is the lowest it’s been since April 2000.
  • Non-farm payroll jobs increased by 214,000 in October vs. consensus expectations of 235,000. Including revisions of previous months’ figures, the three-month average pace of job gains stands at a solid 224,000.
    • The headline unemployment rate unexpectedly fell to 5.8%. The drop was especially surprising given that the labor force participation rate went up by 0.1% to 62.8% (still a very low level).
    • Average hourly earnings rose only 0.1% vs. expectations of 0.2%. Over the last 12 months, hourly earnings have grown a subdued 2.0%.

Fact of the Week

  • Since 1946, the S&P 500 has never had a decline in the 12 months following a midterm election. There have been 16 midterm elections in that span and the S&P has risen by an average of 16.1% in the 12 months following these elections.

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® – (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

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