China, Budget: Wealth Economic Update Mar. 23, 2018

U.S. and World News

  • The trade negotiations heated up this week as the newly imposed steel and aluminum tariffs come closer to taking effect. China continues to be the main target after an investigation into their practices revealed evidence of unfair terms on U.S. companies and foreign ownership restrictions. The United States filed a complaint at the World Trade Organization (WTO) over allegations that China is breaking WTO rules by denying basic patent rights that would stop Chinese entities from eventually using the technology of foreign patent holders. China responded on Thursday evening by revealing a specific list of 128 U.S goods that they plan to tariff in two steps. The plan includes a 15% tariff on 120 goods totaling $1 billion and a 25% tariff on eight goods totaling $2 billion.
  • self-driving-829192480_360Early this morning, the Senate passed a $1.3 trillion spending bill that would fund the government until September 30th, putting an end to the fuss about a potential government shutdown. The bill includes an increase in defense spending of $80 billion, domestic spending of $63 billion, $1.6 billion to fund a border wall with Mexico, and $100 million for research and testing of autonomous cars. Before President Trump signed the bill, he threatened to veto it citing lack of funding for the border wall with Mexico and no consideration for undocumented immigrants.

Markets

  • The markets experienced another selloff this week. The S&P 500 plummeted 93% and closed at 2,588.26. The Dow Jones also experienced a sharp decline this week losing 5.67% and closed at 23,533.20. Year to date, the S&P is down 2.74% and the Dow Jones is down 4.25%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 60% and 2.81%, respectively.
  • The spot price of WTI Crude Oil rose 70% this week, closing at $65.97 per barrel. Year to date, Oil prices are up 9.75%.
  • The spot price of Gold moved higher this week gaining 55%, closing at $1,347.80 per ounce. Year to date, Gold prices are up 3.45%.

Economic Data

  • Initial jobless claims rose by 3,000 from last week, coming in at 229,000. The four-week moving average moved slightly higher to 224,000. Layoffs remain at a very low pace and continue to fall further.
  • Existing home sales increased by 3.0% in February to a seasonally adjusted rate of 5.54 million units, beating expectations of a 0.4% increase. Sales in the West largely contributed to the increase.
  • Sales of new single-family homes fell 0.6% in February to a seasonally adjusted rate of 618,000 units slightly missing expectations of a 620,000 increase.
  • The Federal Open Market Committee (FOMC) raised the Fed Funds rate by 0.25% to a range of 1.50-1.75% in a widely expected move on Wednesday. The meeting had a more hawkish tone than expected, signaling 8 cumulative hikes in 2018-2020 when 6.75 were previously expected. The Fed now expects inflation to rebound in “the coming months” as opposed to “this year”.
  • Durable goods orders rose 3.1% in the month of February, beating expectations of a 1.6% increase. Durable goods orders continue to trend higher and a 25.5% increase in aircraft orders contributed to much of the increase.

Fact of the Week

  • As of last Friday (3/16/18), no US bank had failed YTD and required a financial bailout from the FDIC. This is the latest in any calendar year with no bank failures YTD since 2006, the last year in which no bank failures occurred during the entire year. Over the last 5 calendar years (2013-17), 63 banks failed in the United States, an average of 13 per year (source: Federal Deposit Insurance Corporation).

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, 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.

Kudlow, Japan/EU: Wealth Economic Update Mar. 19, 2018

U.S. and World News

  • economics_telescope-687981332_360CNBC Commentator Larry Kudlow has accepted the role of Chief Economic Advisor to President Trump after the departure of Gary Cohn amidst conflicting opinions on steel and aluminum tariffs. Larry Kudlow will first be tasked with negotiating the issue on tariffs while being particularly tough on China and he stated on Wednesday, “China can expect the U.S. to take a tough stance when it comes to international trade.” Larry Kudlow has been known to dislike tariffs and disagree with the President on this issue, however, after learning of the Canada and Mexico exemptions he has softened his view stating “I must say as somebody who doesn’t like tariffs, I think that China has earned a tough response not only from the United States.”
  • Japan and the European Union have pressured the United States to exempt them from the new steel and aluminum tariffs during a meeting in Brussels on Saturday. This was expected to come up as the United States has left further exemptions up for discussion after signing into law the new tariffs last week. The three countries agreed to take joint steps to combat steel overcapacity and attempt to regulate market prices with stronger subsidy rules.

Markets

  • Markets ended the week lower. The S&P 500 lost 20% and closed at 2,752.01. The Dow Jones also fell by 1.51% and closed at 24,946.51. Year to date, the S&P is up 3.37% and the Dow Jones is up 1.46%.
  • Yields were once again relatively unchanged this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 64% and 2.84%, respectively.
  • The spot price of WTI Crude Oil rose 24% this week, closing at $62.19 per barrel. Year to date, Oil prices are up 3.48%.
  • The spot price of Gold was down for the week losing 77%, closing at $1,313.70 per ounce. Year to date, Gold prices are up 0.84%.

Economic Data

  • Initial jobless claims fell by 4,000 from last week, coming in at 226,000. The four-week moving average was unchanged at 222,000. Layoffs remain at a very low pace and continue to fall further.
  • The Consumer Price Index rose by 0.15% in February, slightly below expectations of 0.2%. The rise in February was mostly influenced by rising energy prices and the year-over-year rate remained at 1.8%.
  • The Producer Price Index rose by 0.2% in the month of February driven by core producer price inflation. This was higher than expectations of a 0.1% increase and the year-over-year rate stands at 2.9%.
  • Retail Sales declined by 0.1% in February coming in short of expectations of a 0.3% increase and the previous two months were revised down slightly.
  • Housing starts declined by -7% in February to 1,236, below consensus expectations of a -2.7% decrease. The decline of housing starts in the west largely contributed to the February figure.

 

Fact of the Week

  • Just 2.2% of the banks and savings institutions in the United States hold 83% of the deposits maintained in FDIC-insured institutions nationwide as of 12/31/17. There are a total of 5,670 banks and savings institutions holdings $17.4 trillion of deposits as of the end of last year (Source: FDIC).

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, 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.

Steel, North Korea: Wealth Economic Update Mar. 9, 2018

U.S. and World News

  • After more than 100 House Republicans had signed a letter to President Trump objecting the proposed steel and aluminum tariffs, the President signed an order imposing a 25% tariff on steel and a 10% tariff on aluminum excluding Canada and Mexico. Canada, the United States biggest source of aluminum and steel, threatened to reciprocate the trade tariffs if they were included. The order was much less aggressive than originally intended after some drama in the White House which included Chief Economic Advisor Gary Cohn resigning over a dispute with President Trump over the planned tariffs. The order also includes the potential for other nations to be reduced to a lower rate down the road.
  • north_korea-672521128_360North Korean leader Kim Jong-un has invited President Trump to meet and discuss denuclearization on the heels of some of the toughest sanctions placed on North Korea by the United States. Kim Jong-un stated that North Korea would suspend missile tests while talks are ongoing. President Trump responded by saying he would meet by May and the time and place of the meeting is to be determined.

Markets

  • Markets surged higher this week. The S&P 500 soared 59% and closed at 2,786.57. The Dow Jones also rose higher by 3.01% and closing at 25,335.74. Year to date, the S&P is up 4.62% and the Dow Jones is up 3.01%.
  • Yields held relatively steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 65% and 2.90%, respectively.
  • The spot price of WTI Crude Oil rose 39% this week, closing at $62.10 per barrel. Year to date, Oil prices are up 2.81%.
  • The spot price of Gold was unchanged for the week increasing by just 06% this week, closing at $1,323.58 per ounce. Year to date, Gold prices are up 1.60%.

Economic Data

  • Initial jobless claims increased 21,000 from last week, coming in at 231,000. The four-week moving average moved up to 223,000. Layoffs remain at a very low pace and continue to fall further.
  • Nonfarm payrolls rose 313,000 in the month of February, soaring past consensus expectations of 108,000.
  • Average hourly earnings rose 0.1% which was lower than the consensus estimates of 0.2%. Previous months were revised lower, bringing the year-over-year rate down to 2.6% from 2.9%.
  • The unemployment rate remained at 4.1%.

Fact of the Week

  • There are currently 1,510 cryptocurrencies in the world with a market capitalization of 392 billion. About 1,000 users control 40% of the cryptocurrency. (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
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.

Steel, Powell: Wealth Economic Update Mar. 5, 2018

U.S. and World News

  • steel-656657304_370President Trump stated on Thursday that the U.S. will impose tariffs of 25 percent on imported steel and 10 percent on aluminum or a “long period of time.” Stock and bond yields plummeted on the news as fear of a larger trade war could hinder the economy.
  • New Chairman Jerome Powell delivered his second round of semi-annual testimony to Congress on Tuesday and Thursday. Powell told lawmakers on Tuesday the next two years for the economy will be “good” ones. If he is right, it will be the longest expansion in record.

Markets

  • Markets fell this week. The S&P 500 dropped 1.98% and closed at 2,691.25. The Dow Jones followed suit and decreased by -2.96% and closing at 24,538.06. Year to date, the S&P is up 1.01% and the Dow Jones down -0.30%.
  • Yields held relatively steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.63% and 2.87%, respectively.
  • The spot price of WTI Crude Oil fell 3.62% this week, closing at $61.25 per barrel. Year to date, Oil prices are up 1.90%.
  • The spot price of Gold decreased by 0.45% this week, closing at $1,322.75 per ounce. Year to date, Gold prices are up 1.53%.

Economic Data

  • Initial jobless claims decreased 12,000 from last week, coming in at 210,000, lower than consensus estimates – lowest since 1969.
  • January durable goods fell more than expected posting a -3.7% loss compared to a -2.0% loss surveyed by economists.

Fact of the Week

  • Aggregate household debt in the USA reached $13.15 trillion as of 12/31/17, the highest level ever recorded.  Household debt has now increased for 14 consecutive quarters. (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
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.