Europe COVID, Wildfires: O2 Wealth Economic Update, Sept. 25, 2020

U.S. and World News

  • iStock-1206774789_370Fears of another lockdown grips Great Britain amid record levels of new daily cases of coronavirus. Similar to March and April, the U.K. is seeing a run on supermarkets which led to large grocery chain Tesco to place limits on customers to 3 items each of flour, dried pasta, toilet paper, baby wipes, and anti-bacterial wipes. Surging new daily cases of coronavirus and hospitalizations are sweeping across Europe with Spain, France, and Poland all experiencing similar situations to the U.K. This morning, Madrid imposed a local lockdown of more than 1 million people following Marseille’s decision to close bars and restaurants earlier in the week. Poland is expected to announce new restrictions next week as a result of rising new daily cases and hospitalizations. New York City announced that health inspectors will enter private schools in Brooklyn and Queens to ensure that personnel are complying with mask and social distancing requirements after both areas have experienced outbreaks. Florida Governor Ron DeSantis announced today that Florida will move to “Phase 3”, which involves lifting all restrictions on bars and restaurants that were limited to 50% capacity. The new “Phase 3” stage also prevents local governments from closing businesses and enforcing social distancing without an economic and health justification.
  • In California, over 8,000 wildfires have burned over 3.6 million acres throughout the state so far this year and there are currently roughly 17,500 firefighters battling 25 major wildfires. Since August 15th, 26 people have died as a result of the wildfires and about 7,000 structures have been destroyed. Red flag warnings are in effect from Saturday through Monday as temperatures of over 100 degrees are expected in some areas along with gusty winds, increasing the risk of wildfires. Five of the wildfires currently burning in California are among the list of the largest wildfires in state history. The August Complex is the largest wildfire, and is about 45% contained and responsible for burning around 860,000 acres.

Markets

  • Markets continued trending lower this week. The S&P 500 fell -0.61% and closed at 3,298. The Dow Jones dropped -1.75% and closed at 27,175. Year-to-date, the S&P 500 is up 3.53% and the Dow Jones is down -3.07%.
  • Interests rates fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.26% and 0.65%, respectively.
  • The spot price of WTI Crude oil fell this week. Prices fell -2.98% and closed at $40.09 per barrel. Year to date, Oil prices are down -34.34%.
  • The spot price of Gold dropped -4.53% and closed at $1,862.56 per ounce. Year to date, Gold prices are up 22.76%.

Economic Data

  • Initial jobless claims rose by 4,000 to 870,000 and the four-week moving average of claims fell by 35,000 to 878,000. Claims fell by 6,000 in Michigan, 5,000 in Illinois, and by 4,000 in Florida. Claims rose by 9,000 in New York, 6,000 in Georgia, and by 4,000 in Massachusetts.
  • Existing home sales rose by 2.4% to a seasonally-adjusted-annualized rate of 6.0 million units, in-line with expectations
  • The FHFA house price index rose by 1.0% versus expectations for an increase of 0.5%
  • Sales of new single-family homes rose by 4.8% to a seasonally-adjusted-annualized rate of 1.01 million versus expectations for a decline of -1.2%
  • New orders for durable goods rose by 0.4% versus expectations for an increase of 1.5%
  • Durable goods ex-transports rose by 0.4% versus expectations for an increase of 1.0%
  • Core capital goods orders rose by 1.8% versus expectations for an increase of 1.0%
  • Core capital goods shipments rose by 1.5% versus expectations for an increase of 0.8%

Fact of the Week

  • After adjusting numerical data from the past for the impact of inflation, the median household income in 2019 ($68,703) is the highest ever recorded in the USA and is the 4th consecutive year (2016-2019) that produced an all-time inflation-adjusted record. Before 2016, the peak for median household income was $62,641 set in 1999 (source: Federal Reserve Bank of St. Louis).

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 CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

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TikTok, Federal Reserve: O2 Wealth Economic Update, Sept. 18, 2020

U.S. and World News

  • This morning, a Reuters report confirmed that the U.S. Department of Commerce will take action to prevent future downloads of the popular application TikTok if a deal isn’t made by Sunday evening. Additionally, Chinese application WeChat will be shut down in the United States by Sunday if a deal is not made by then according to Commerce Secretary Wilbur Ross. Talks between TikTok and a number of U.S. companies have been ongoing, however, China has indicated that they do not want TikTok’s content-recommendation algorithm not be transferred to the United States as part of any deal. The Department of Commerce stated that “The Chinese Communist Party CCP has demonstrated the means and motives to use these apps to threaten the national security, foreign policy, and the economy of the U.S.”. The actions that have been threatened are only to prevent downloads and updates of the applications, and not an outright ban of use. The administration stated that TikTok would be banned in the United States if no deal is reached by November 12th, leaving more time for negotiations.
  • Federal Chairman Jerome Powell stated at this week’s FOMC meeting that “over coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses.” The purchases of Treasuries and mortgage-backed securities by the Federal Reserve has been done at a pace of $80 billion and $40 billion a month respectively. Also, the Federal Reserve is forecasting the fed funds rate to remain at 0% through 2023.

Markets

  • Markets moved lower this week. The S&P 500 fell -0.61% and closed at 3,319. The Dow Jones inched lower by -0.01% and closed at 27,657. Year-to-date, the S&P 500 is up 4.16% and the Dow Jones is down -1.35%.
  • Interests rates rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.28% and 0.69%, respectively.
  • The spot price of WTI Crude oil fell surged week. Prices rose 9.64% and closed at $40.93 per barrel. Year to date, Oil prices are down -32.97%.
  • The spot price of Gold rose 0.65% and closed at $1,810.42 per ounce. Year to date, Gold prices are up 19.32%.

Economic Data

  • Initial jobless claims fell by slightly less than expected to 860,000 and the four-week moving average of claims fell by 61,000 to 912,000. Claims fell by 15,000 in Texas, 9,000 in Louisiana, and by 8,000 in Georgia. Claims rose by 3,000 in Indiana, 3,000 in Kansas, and by 3,000 in Nevada.
  • The level of housing starts fell by -5.1% to a seasonally-adjusted-annualized rate of 1,416,000 versus expectations for a decline of -0.6%
  • Building permits fell by -0.9% versus expectations for a 2.0% increase
  • The Philadelphia Fed manufacturing index fell by 2.2 points to 15.0, in-line with expectations
  • Import prices rose by 0.9% versus expectations for an increase of 0.5%
  • Import prices ex-petroleum rose by 0.7% versus expectations for an increase of 0.3%
  • Industrial production rose by 0.4% versus expectations for an increase of 1.0%
  • Retail sales rose by 0.6% versus expectations for an increase of 1.0%
  • Retail sales core/control fell -0.1% versus expectations for an increase of 0.3%
  • Business inventories rose by 0.1%, in-line with expectations
  • The current account balance came in at -$170.5 billion for the second quarter versus expectations for a reading of -160.0 billion
  • The University of Michigan’s index of consumer sentiment rose by 4.8 points to 78.9 in the preliminary report versus expectations for a reading of 75.0

Fact of the Week

  • The World Health Organization (WHO) declared the COVID-19 outbreak a pandemic on 3/11/20. In the 6 months from 3/11/20 through last Friday 9/11/20, the S&P 500 has gained +23.0% (total return) (source: BTN Research).

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 CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

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NFL fans, Brexit, COVID Vaccine: O2 Wealth Economic Update, Sept. 11, 2020

U.S. and World News

  • iStock-1227588054_370The NFL regular season kicked off last night, with the defending Super Bowl Champion Kansas City Chiefs beating the Houston Texans 34-20. About 17,000 fans attended the kickoff of the 2020 season at Arrowhead Stadium, which is one of only two venues that will be allowing any fans at all this week. The Jacksonville Jaguars will also be allowing some fans a chance to watch the opener live on Sunday, limiting capacity at 25%.
  • The EU and the U.K. are holding emergency talks after the latter published its Internal Market Bill, which would undercut parts of the Withdrawal Agreement agreed to in January. The news could also damage trade talks as both sides work to secure a new deal. Without an agreement, nearly $1T in trade could be thrown into chaos at the beginning of the year, but some say it may be part of the negotiating strategy. Adding to the turmoil, U.S. House Speaker Nancy Pelosi said any potential U.S.-U.K. trade deal would not pass Congress if Britain undermines the Good Friday peace agreement.
  • On Tuesday, drug maker Astrozeneca paused clinical trials of its experimental COVID-19 vaccine, with a participant in a U.K. study experiencing an unexplained illness. British health minister Matt Hancock explained that the procedure is “not necessarily” a setback and it “depends on what they find when they do the investigation.” AstraZeneca confirmed that the pause “is a routine action” and it was trying to expedite the review to “minimize any potential impact on the trial timeline.”

Markets

  • Markets stumbled this week. The S&P 500 fell -2.49% and closed at 3,340. The Dow Jones dropped -1.61% and closed at 27,665. Year-to-date, the S&P 500 is up 4.67% and the Dow Jones is down -1.35%.
  • Interests rates fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.25% and 0.67%, respectively.
  • The spot price of WTI Crude oil fell this week. Prices dropped -5.7% and closed at $37.50 per barrel. Year to date, Oil prices are down -38.6%.
  • The spot price of Gold rose 0.52% and closed at $1,933.56 per ounce. Year to date, Gold prices are up 28.0%.

Economic Data

  • The core consumer price index (CPI) rose 0.39% in August, well above consensus expectations for a two-tenths rise.
  • Wholesale inventories decreased by 0.3% in the final July report, below consensus expectations and the previously-reported 0.1% decline
  • The producer price index (PPI) increased by 0.3% in August, one tenth above consensus expectations.
  • Initial jobless claims were unchanged from an upwardly-revised level and above consensus expectations at 884k in the week ended September 5
  • The ISM non-manufacturing index fell by 1.2 points to 56.9 versus expectations for a reading of 57.0

Fact of the Week

  • Of the 130 FBS college football teams, 76 are playing a fall 2020 season while 54 are not currently scheduled to play at all. In 2019, college football generated over $4 billion in revenue. (Source: NCAA, ESPN)

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 CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

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Coronavirus housing rentals, TikTok deal: O2 Wealth Economic Update, Sept. 4, 2020

U.S. and World News

  • iStock-1215329461_370As Congress is unable to come close to finding any common ground on another coronavirus related relief package, the CDC announced that they would suspend most rental evictions for people struggling to pay rent through the end of 2020. In order to receive protection, a renter must prove that they have taken “best efforts possible to seek government assistance to make their rental payments” and “declare that they are unable to pay rent due to COVID fiancial hardship” and must prove that they “will likely become homeless or move into congregate housing settings if they are evicted.” Originally, under the CARES act, rental evictions were suspended only for people living in federally-backed rental units and federally-backed single-family homes. The CDC has full authority to enact this policy as they have been tasked with using reasonable efforts to combat the spread of communicable diseases and if people are evicted, they may land in an overcrowded living facililty or homeless shelter, leading to further spread of the coronavirus.
  • Just as a deal seemed imminent for TikTok, China has required the parent company ByteDance to obtain a license before it can sell TikTok’s algorithm to another company. China did not comment on its motivation for the requirement, but one Wall Street analyst made a case that the Chinese company would likely not be sold until after the U.S. election as a result of lengthy regulatory procedures. Three weeks ago, President Trump signed an executive order that would require Apple and Google to remove TikTok from their app stores by September 15th. TikTok, among other Chinese apps, have already been banned in India.

Markets

  • Markets pared their gains this week. The S&P 500 fell -2.27% and closed at 3,427. The Dow Jones dropped -1.73% and closed at 28,133. Year-to-date, the S&P 500 is up 7.32% and the Dow Jones is up 0.27%.
  • Interests rates finished the week mostly unchanged. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.72%, respectively.
  • The spot price of WTI Crude oil fell this week. Prices dropped -8.05% and closed at $39.51 per barrel. Year to date, Oil prices are down -35.29%.
  • The spot price of Gold fell -1.59% and closed at $1,933.56 per ounce. Year to date, Gold prices are up 27.44%.

Economic Data

  • Initial jobless claims fell by 130,000 to 881,000 and the four-week moving average of claims fell by 17,000 to 994,000. Claims fell by 12,000 in Florida, 6,000 in Georgia, and by 5,000 in Michigan. Claims rose by 41,000 in California.
  • Nonfarm productivity rose by 10.1% versus expectations for an increase of 7.5%
  • Unit labor costs rose by 9.0% versus expectations for an increase of 12.0%
  • The ISM manufacturing index rose by 1.8 points to 56.0 versus expectations for a reading of 54.8
  • The ISM non-manufacturing index fell by 1.2 points to 56.9 versus expectations for a reading of 57.0
  • Factory orders rose by 6.4% versus expectations for an increase of 6.1%
  • Construction spending rose by 0.1% versus expectations for an increase of 1.0%
  • Private sector employment in the ADP rose by 428,000 versus expectations for an increase of 1 million
  • Nonfarm payrolls rose by 1.37 million versus expectations for an increase of 1.35 million
  • Average hourly earnings rose by 0.4% versus expectations for a flat reading
  • The unemployment rate fell to 8.4% versus expectations for a reading of 9.8%

Fact of the Week

The median sales price of existing homes sold in the United States was $304,100 in July 2020, the first time in US history that the median sales price has exceeded $300,000. The $304,100 median price is also a record on an inflation-adjusted basis, besting the inflation-ajusted $293,096 from July 2006. (source: Nat’l Association of Realtors).

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 CFA®, CFP® – (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.

Hurricane Laura, Monetary Policy: O2 Wealth Economic Update, August 28, 2020

U.S. and World News

  • iStock-1174130246_370Hurricane Laura made landfall in Western Louisiana Thursday morning as a Category 4 storm. The storm, that brought maximum sustained winds of 150 mph, caused catastrophic damage that is estimated to cost billions of dollars. The hurricane left six people dead and caused a hazardous chemical fire at a BioLab plant, however, the damage was not as bad as what was expected. Louisiana Governor John Bel Edwards said “It is clear that we did not sustain and suffer the absolute catastrophic damage that we thought was likely based on the forecast that we had last night”. Hurricane Laura was the strongest hurricane to ever hit Louisiana, surpassing Katrina which was a Category 3 storm. This year is expected to be the worst ever for hurricanes, as Laura was the seventh named storm to hit the United States before the end of August, a record.
  • In a historic Jackson Hole speech this week, the Federal Reserve issued an update to its longer-term goals on Monetary Policy. The Fed stated that its policy decision will be affected by its “assessments of the shortfalls of employment from its maximum level” instead of “deviations” above or below its maximum level. Also, the Fed announced a more flexible approach to price stability, stating that “following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.” Additionally, the Fed stated that it will respond to “risks to the financial system that could impede the attainment of the Committee’s goals.” The changes that were made to Monetary Policy will likely lead to low interest rates for the foreseeable future.

Markets

  • Markets rose higher every day of the week this week. The S&P 500 surged 3.29% and closed at 3,508, AN ALL-TIME HIGH. The Dow Jones spiked 2.64% and closed at 28,653. Year-to-date, the S&P 500 is up 9.96% and the Dow Jones is up 2.03%.
  • Interests rates moved higher this week and the curve steepened. The 5 year and 10 year U.S. Treasury Notes are yielding 0.27% and 0.72%, respectively.
  • The spot price of WTI Crude oil rose this week. Prices rose 1.51% and closed at $42.98 per barrel. Year to date, Oil prices are down -29.61%.
  • The spot price of Gold jumped 1.23% and closed at $1,964.27 per ounce. Year to date, Gold prices are up 29.46%.

Economic Data

  • Initial jobless claims fell by 98,000 to 1 million and the four-week moving average of claims fell by 68,000 to 882,000. Claims fell by 28,000 in Florida, 18,000 in New York, and by 11,000 in Texas. Claims rose by 22,000 in California.
  • Second-quarter real GDP growth was revised up by 1.2% to -31.7%, versus expectations for a reading of -32.5%
  • The core PCE price index rose by 0.4% versus expectations for an increase of 0.5% and the year-over-year rate rose 1.3% versus expectations for an increase of 1.2%
  • Personal income rose by 0.4% versus expectations for a decline of -0.2%
  • Personal spending rose by 1.9% versus expectations for an increase of 1.6%
  • Retail inventories rose by 1.2%, in-line with expectations
  • Wholesale inventories fell by -0.1% versus expectations for a decline of -0.9%
  • The FHFA house price index increased by 0.9% versus expectations for a decline of -0.2% and the year-over-year rate rose by 5.7%
  • Sales of new single-family homes rose by 13.9% to a seasonally-adjusted-annualized-rate of 901,000 units versus expectations for 790,000 units
  • Pending home sales rose by 5.9% versus expectations for an increase of 2.0%
  • New orders for durable goods increased by 11.2% versus expectations for an increase of 4.8%
  • Durable goods orders ex-transports rose by 2.4% versus expectations for an increase of 2.0%
  • Core capital goods orders rose by 1.9% versus expectations for an increase of 1.7%
  • Core capital goods shipments rose by 2.4% versus expectations for an increase of 1.8%
  • The Conference Board index of consumer confidence fell by 6.9 points to 84.8 versus expectations for a reading of 93.0
  • The University of Michigan’s index of consumer sentiment rose by 1.3 points to 74.1 versus expectations for a reading of 72.8

Fact of the Week

  • Apple surpassed $2 trillion market cap last week, becoming the first company to be valued at $2 trillion. Apple became the most valuable publicly traded company on July 31st, when it passed oil giant Saudi Aramco. Apple was also the first company to pass $1 trillion back in 2018 (Source: CNBC).

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 CFA®, CFP® – (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.

2 Tropical Storms, COVID: O2 Wealth Economic Update, August 21, 2020

U.S. and World News

  • weather-1180882223Two tropical depressions are being watched closely as computer models show a high probability of one making landfall in Texas and one making landfall in Florida on Monday. University of Miami meteorologist Brian McNoldy stated that “We could actually have Laura and Marco sharing the Gulf of Mexico on Monday, and both making U.S. landfalls on Monday”. The National Hurricane center is forecasting that both tropical systems will develop into mild hurricanes. If computer models and forecasts are correct, it would mark the first time in history that two hurricanes move through the Gulf of Mexico.
  • The latest U.S. COVID-19 data updates suggest that the second wave of the virus, particularly in the Sun Belt region, is subsiding. California and Florida saw a sharp decline in hospitalizations yesterday with Florida’s positivity rate coming in at under 10% for the second day in a row. Robert Redfield, head of the CDC, stated that infections in the southern-states are slowing and that the deaths should start to fall over the next week. Meanwhile, Notre Dame and the Univeristy of Pittsburgh are among several schools that have announced that effective immediately, all in-person classes will be suspended after coronavirus outbreaks at the campuses.

Markets

  • Markets continued to rally this week. The S&P 500 rose 0.77% and closed at 3,397. The Dow Jones rose 0.09% and closed at 27,930. Year-to-date, the S&P 500 is up 6.46% and the Dow Jones is down -0.59%.
  • Interests rates moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.27% and 0.63%, respectively.
  • The spot price of WTI Crude oil fell this week. Prices fell -0.14% and closed at $42.25 per barrel. Year to date, Oil prices are down -30.81%.
  • The spot price of Gold dropped -0.31% and closed at $1,939.09 per ounce. Year to date, Gold prices are up 27.81%.

Economic Data

  • Initial jobless claims increased by 135,000 to 1.1 million and the four-week moving average of claims increased by 51,000 to 942,000 million. Claims rose by18,000 in New York, 16,000 in California, and by 15,000 in Texas. Claims fell by 5,000 in Michigan.
  • The level of housing starts rose by 22.6% to a seasonally-adjusted-annualized-rate of 1.496 million versus expectations for an increase of 5.0%
  • Building permits rose by 18.8% versus expectations for an increase of 5.4%
  • Existing home sales rose by 24.7% to a seasonally-adjusted-annualized-rate of 5.86 million units versus expectations for an increase of 14.6%

Fact of the Week

  • Thursday marked 100 days since the March 23rd lows we saw in the market. The last 100 days have been the best performing 100 day period in market history, with the S&P 500 returning 50.8% over the period. The previous best was the 100 day period ending 7/30/2009, when the market returned 45.9% (Source: Strategas Research Partners)

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 CFA®, CFP® – (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.

Middle East Peace Deal, China Trade: O2 Wealth Economic Update, August 14, 2020

U.S. and World News

  • dubai-467829216_370Yesterday, a historic diplomacy deal was agreed too between the United States, Israel, and the United Arab Emirates (UAE). The agreement marks a significant step towards peace in the Middle East and a path towards economic growth and technological innovation between the two countries. Israel and the UAE plan to sign bilateral agreements in the near future for investment, tourism, direct flights, security, telecommunications, technology, energy, healthcare, and more. Israel has also agreed to suspend its planned annexation of areas in the West Bank. Israel, the UAE, and the United States plan to work together on the expansion of diplomacy, trade, and security cooperation in the Middle East, while also sharing a common view of the threats that exist in the region.
  • Representatives from the United States and China were set to hold a video conference tomorrow for a review of the Phase 1 trade deal, until late this morning when it was announced that the meeting will be rescheduled. As part of the agreement, China agreed to purchase an additional $200 billion in goods compared to 2017, a level that was originally seen as unrealistic and that it remains far from achieving. The goal seems even more far-fetched now as a result of a significant global economic setback. Tensions have been rising between the two countries for a variety of reasons, one of them being recent U.S. actions on Chinese tech companies such as bans on TikTok and WeChat that are set to go into effect in September. Other issues that are expected to be discussed when the meeting takes place is Chinese communications firm Huawei and China’s new national security law for Hong Kong.

Markets

  • Markets rose again this week. The S&P 500 rose 0.69% and closed at 3,373. The Dow Jones rose 1.87% and closed at 27,931. Year-to-date, the S&P 500 is up 5.65% and the Dow Jones is down -0.68%.
  • Interests rates spiked this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.71%, respectively.
  • The spot price of WTI Crude oil rose this week. Prices rose 2.26% and closed at $42.17 per barrel. Year to date, Oil prices are down -30.97%.
  • The spot price of Gold dropped -4.44% and closed at $1,945.21 per ounce. Year to date, Gold prices are up 28.20%.

Economic Data

  • Initial jobless claims fell by 228,000 to 963,000 and the four-week moving average of claims fell by 158,000 to 872,000 million. Claims fell by 34,000 in New York, 25,000 in Florida, and by 23,000 in California. Claims rose by 7,000 in Nevada and by 4,000 in Kansas.
  • Job openings rose by 518,000 to 5.889 million versus expectations for 5.3 million
  • The producer price index (PPI) rose by 0.6% versus expectations for an increase of 0.3%
  • Core PPI rose by 0.3% versus expectations for an increase of 0.2%
  • The consumer price index (CPI) rose 0.6% versus expectations for an increase of 0.3% and the year-over-year rate rose 1.0% versus expectations for an increase of 0.7%
  • Core CPI rose by 0.6% versus expectations for an increase of 0.2% and the year-over-year rate rose by 1.6% versus expectations for an increase of 1.1%
  • Retail sales rose by 1.2% versus expectations for an increase of 2.1%
  • Core retail sales rose by 1.4% versus expectations for an increase of 0.8%
  • Nonfarm productivity rose by 7.3% versus expectations for an increase of 1.5%
  • The University of Michigan’s index of consumer sentiment rose by 0.3 points to 72.8 in its preliminary reading versus expectations for a reading of 72.0
  • Industrial production rose by 3.0%, in-line with expectations
  • Business inventories fell by -1.1%, in-line with expectations

Fact of the Week

  • Thursday marked 100 days since the March 23rd lows we saw in the market. The last 100 days have been the best performing 100 day period in market history, with the S&P 500 returning 50.8% over the period. The previous best was the 100 day period ending 7/30/2009, when the market returned 45.9% (Source: Strategas Research Partners)

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 CFA®, CFP® – (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.

Coronavirus, Russia/Syria: Wealth Economic Update Feb. 21, 2020

U.S. and World News

  • virus-1202030778_370Apple is the first major U.S. company to announce that they will not meet their revenue projections for the current quarter as a result of the coronavirus outbreak, now called COVID-19. China announced that they would consider direct cash infusions and mergers to bail out its airline industry, which is estimated to be hit by losses of $28 billion in 2020. Data releases from China this morning show that Chinese car sales fell by 92% so far in the month of February. As of this morning, there have been more than 76,000 cases, and 2,247 deaths according to the World Health Organization. China had also reported 271 infections among prisoners, raising additional questions about the spread of the virus. Outside of China, there are 1,152 cases across 26 countries, including eight deaths. Coronavirus cases have increased rapidly in South Korea and Iran recently, with the number of cases in South Korea doubling overnight to 204. World health officials announced that there are 18 new cases and four deaths in Iran within just two days. Two clinical trials are currently underway to test treatments for the virus and preliminary results are expected to be released in three weeks.
  • This morning, the United Nations warned that the conflict in northwest Syria could “end in a bloodbath”, calling for a ceasefire. There were reports of civilians fleeing a Russian-led Syrian attack in large numbers, but Russia has denied these reports. Syrian troops have been working to eliminate rebel strongholds in northwest Syria with the help of Russian war planes and has left an estimated 400,000 Syrians dead, millions displaced, and landscapes destroyed. Approximately 1 million people, mostly women and children, have fled these areas seeking asylum north of the Turkish border. The front lines of the offensive, which includes frequent bombardments, is moving very close to areas packed with the displaced civilians. Turkey has indicated that it cannot handle any more refugees and that it will use military power to stop the Syrian offensive.

Markets

  • Markets pulled back this week. The S&P 500 lost 1.22% and closed at 3,338. The Dow Jones fell 1.36% and closed at 28,992. Year-to-date, the S&P is up 3.58% and the Dow Jones is up 1.94%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.32% and 1.47%, respectively.
  • The spot price of WTI Crude rose this week. Prices rose 1.95% and closed at $53.34 per barrel. Year to date, Oil prices are down 12.64%.
  • The spot price of Gold rose by 3.77% and closed at $1,643.71 per ounce. Year to date, Gold prices are up 8.33%.

Economic Data

  • Initial jobless claims rose by 4,000 to 210,000 and the four-week moving average of claims fell 3,000 to 209,000. Claims rose by 2,000 in California.
  • The Philadelphia Fed manufacturing index rose by 19.7 to 36.7 versus expectations for a rise of 11.0
  • Housing starts fell by 3.6% to a seasonally-adjusted-annualized rate of 1,567k versus expectations for a decline of 11.2%
  • Building permits rose by 9.2% versus expectations for an increase of 2.1%
  • The producer price index rose by 0.5% and the year-over-year rate rose by 2.1% versus expectations for an increase of 0.1%
  • Existing home sales fell by 1.3% to a seasonally-adjusted-annualized rate of 5.46 million units versus expectations for a decline of 1.8%

Fact of the Week

The House passed HR # 2534 on 12/5/19. The bill explicitly defines and prohibits “insider trading”. There is currently no federal statute that explicitly prohibits “insider trading” ( Source: Insider Trading Prohibition Act)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.

Coronavirus, Oil Prices: Wealth Economic Update Feb. 14, 2020

U.S. and World News

  • Researchers across the world are quickly working to develop a vaccine for the coronavirus that has infected more than 64,000 and has killed 1,380, more than double the figures from last week. About 80% of patients infected with the coronavirus show mild symptoms of the common cold, while about 15% end up with a pneumonia and 3% to 5% need intensive care, a World Health Organization official told reporters. Health and Human Services Secretary Alex Azar told CNBC that the American public’s risk of getting infected with the coronavirus is “very low”, but that could change “rapidly”. The primary issue with the coronavirus is the transmissibility, measured by the R0, with a measure of R1 indicating that an infected person would transmit it to one other person throughout the course of the infection. According to a variety of sources, the coronavirus is around an R4, while the common flu is R1.3 and SARS was R2. The virus is expected to negatively affect the Chinese economy in the first quarter as economists are estimating a growth rate around 4%, compared to pre-virus forecasts around 6%.
  • Global oil demand is set to see its first quarterly decline in more than 10 years as a result of the coronavirus and major cities being locked down in China. The International Energy Agency cut its 2020 growth forecast by 365,000 barrels per day to 825,000. Areas other than China have also been affected, with the Mobile World Congress located in Barcelona being canceled this month. Last week, OPEC+ recommended an output cut of 600,000 barrels per day, adding to the existing production cut of 1.7 million barrels per day.

Markets

  • Markets continued higher this week. The S&P 500 gained 1.65% and closed at 3,380. The Dow Jones rose 1.17% and closed at 29.398. Year-to-date, the S&P is up 4.86% and the Dow Jones is up 3.34%.
  • Yields were relatively unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.42% and 1.59%, respectively.
  • The spot price of WTI Crude rebounded this week. Prices rose 3.74% and closed at $52.20 per barrel. Year to date, Oil prices are down 14.51%.
  • The spot price of Gold rose by 0.87% and closed at $1,584.06 per ounce. Year to date, Gold prices are up 4.40%.

Economic Data

  • Initial jobless claims rose by 2,000 to 205,000 and the four-week moving average of claims fell remained unchanged at 212,000. Claims did not increase or decrease by more than 1,000 in any particular state.
  • The consumer price index (CPI) rose by 0.2%, in-line with expectations and the year-over-year rate rose by 2.5%, versus expectations for an increase of 2.4%
  • Core CPI rose by 0.2%, in-line with expectations and the year-over-year rate rose by 2.3% versus expectations for an increase of 2.2%
  • Retail sales rose by 0.3%, in-line with expectations
  • Core retail sales rose by 0.1%, versus expectations for a rise of 0.3%
  • Industrial production fell by 0.3% in January versus expectations for a decline of 0.2%
  • The University of Michigan’s index of consumer sentiment rose by 1.1 points to 100.9 in the preliminary report versus expectations for a reading of 99.5

Fact of the Week

  • Fidelity announced that a record 441,000 retirement accounts on that they manage have balances of $1 Million or more, an all-time high. The average retirement account at fidelity has a balance of $112,300. (Source: CNBC)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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 virus, Boeing: Wealth Economic Update January 31, 2020

U.S. and World News

  • Wall Street sold off to end the week and month, as investors grew increasingly fearful about the potential global economic impact of China’s spreading coronavirus. Worries were exacerbated by increasing reports of worldwide cases, with 9800 confirmed cases and 200 people dead. Delta, United and American Airlines are suspending U.S.-China flights, and the U.S. Centers for Disease Control and Prevention saying it would quarantine Americans evacuated from Wuhan, the epicenter of the outbreak.
  • iStock-1159624289After more than three years of economic uncertainty, political division and missed deadlines, the U.K. is set to leave the EU at the stroke of midnight Brussels time. A potentially volatile new chapter lies ahead: London and Brussels will try to hash out a trade deal by the end of the year as Britain enters a transition phase. On the eve of Brexit, the Bank of England opted to leave interest rates on hold at 0.75%, citing a pickup in business activity since the election of Boris Johnson and defying some market speculation that a cut was in the cards.
  • Five Katyusha rockets were fired at the fortified Green Zone in Baghdad last night, one directly hitting the U.S. Embassy building. The rare direct targeting of the compound wounded three people, adding to the bearish market turn being seen around the world. News reports also suggested that Iraqi security forces in Baghdad killed an anti-government protester, adding to the months-long civil unrest that has seen the death of 500 people since Oct. 1.

Markets

  • Markets pulled back again this week over concerns about the coronavirus. The S&P 500 lost 2.1% and closed at 3,225. The Dow Jones fell 2.5% and closed at 28,256. Year-to-date, the S&P is about flat, down 0.04% and the Dow Jones is down 0.9%.
  • Yields fell noticeably this week. The 5 year and 10 year U.S. Treasury Notes are yielding 1.31% and 1.42%, respectively.
  • The spot price of WTI Crude fell this week. Prices fell 4.8% and closed at $51.59 per barrel. Year to date, Oil prices are down 15.5%.
  • The spot price of Gold rose by 1.1% and closed at $1,589.16 per ounce. Year to date, Gold prices are up 4.7%.

Economic Data

  • Real GDP rose by 2.1% in the fourth quarter, one tenth above expectations.
  • Initial jobless claims declined to 216k, roughly as expected, and continuing claims fell by 44k further to 1,703k.
  • New home sales decreased by 0.4% to 696k in December, and the levels of home sales in prior months were revised down.
  • Pending home sales fell 4.9% in December, mirroring the pullback in new homes sales and perhaps influenced by storms in the South region.

Fact of the Week

  • Only 1 out of every 222 individual tax returns (0.45%) was subject to an audit during the US government’s fiscal year that ended 9/30/19. (source: Internal Revenue Service)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@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.