Boeing, Brexit, Venezuela: Wealth Economic Update Mar. 15, 2019

U.S. and World News

  • boeing-172946037On Sunday, an Ethiopian Airlines flight transporting 157 people on a Boeing 737 MAX 8 crashed during takeoff, killing all passengers on board. The incident occurred less than five months after another Boeing 737 MAX 8 crashed in Indonesia killing 189 people and investigators have drawn similarities between the two crashes, especially since both took place during the take-off phase. Immediately following the crash, several countries grounded the aircraft and placed a ban on the 737 MAX 8 from flying into and out of the country. On Wednesday, Boeing announced that they would temporarily suspend the entire fleet “out of an abundance of caution and in order to reassure the flying public of the aircraft’s safety”. Boeing is expected to perform a software update on the entire fleet in mid-April.
  • The U.K. parliament rejected Prime Minister Theresa May’s withdrawal accord on Tuesday as expected. It is now clear that the U.K. will likely not leave the European Union by March 29th and Prime Minister Theresa May will be asking for an extension after a no-deal Brexit has also been rejected. The European Union must unanimously approve an extension, which would be in their best interests. Theresa May plans to bring her Brexit deal, which was already rejected twice, to parliament for one more vote before meeting with the European Union on March 21st.
  • Self-declared interim president Juan Guaido of Venezuela has announced a “state of national emergency” as a result of ongoing power outages throughout the country. At least 15 people have died and the private sector continues to lose hundreds of millions of dollars as a result of the blackouts. Current President Nicolas Maduro is blaming the United States for the power outages. State owned PDVSA and its joint venture partners are struggling to produce oil and the government is now said to be rationing electricity in an effort to supply power to the Jose oil export terminal, a major source of revenue for Venezuela.


Markets

  • Stocks picked up steam again having a very strong week. The S&P 500 jumped 2.95% and closed at 2,822. The Dow Jones rose higher, but was held lower by Boeing, gaining 1.64% and closing at 25,849. Year to date, the S&P is up 13.09% and the Dow Jones is up 11.45%.
  • Yields continued to fall this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.40% and 2.59%, respectively.
  • The spot price of WTI Crude Oil rose much higher this week. Prices rose 4.14% and closed at $58.39 per barrel. Year to date, Oil prices are up 28.58%.
  • The spot price of Gold rose 0.32% this week and closed at $1,302.40 per ounce. Year to date, Gold prices are up 1.55%.

Economic Data

  • Initial jobless claims rose by 6,000 to 229,000 for the week. The four-week moving average of claims fell by 2,000 to 224,000. Claims rose by 5,000 in Illinois and by 2,000 in Ohio and Washington.
  • Import prices rose by 0.6% in February versus expectations for a 0.3% increase.
  • Retail sales rose by 0.2% in January versus expectations for a flat reading. The rise reflected a rise in ex-auto and gas sales.
  • Core retail sales rose by 1.1% versus expectations for a 0.6% increase.
  • The consumer price index (CPI) rose by 0.17%, in-line with expectations. The year-over-year measure rose to 1.50% versus expectations for 1.60%.
  • Core CPI rose by 0.11% versus expectations for a 0.2% increase. The year-over-year measure rose to 2.08% versus expectations for a 2.2% increase.
  • The producer price index (PPI) rose by 0.1% versus expectations for a 0.2% increase.
  • PPI ex-food, energy, and trade services rose by 0.1% versus expectations for a 0.2% increase.
  • Durable goods orders rose by 0.4% versus expectations for a decline of 0.4%.
  • Construction spending rose by 1.3% versus expectations for a 0.5% increase.
  • Sales of new single-family homes fell by 6.9% to a seasonally-adjusted annualized rate of 607k versus an estimate of 622k units.
  • Industrial production rose by 0.1% versus expectations for a 0.4% increase.
  • Manufacturing production fell by 0.4% versus expectations for a 0.1% increase.
  • The University of Michigan’s index of consumer sentiment rose 4 points to 97.8 in the March preliminary report versus expectations for a reading of 95.6.

Fact of the Week

  • The average single-family home in the USA increased in value +5.7% during 2018. Home values in Idaho increased +11.9% (top state) while home values in North Dakota were flat (bottom state) (source: FHFA).

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, Venezuela: Wealth Economic Update Mar. 2, 2019

U.S. and World News

  • china_us-1035146880Earlier this week, President Trump extended the March 1st trade truce deadline between the United States and China, citing “substantial trade progress”. If the deadline had not been extended, the tariff rate on $200 billion in Chinese products would have been increased to 25% from 15%. Chinese equities soared over 5% on the news into bull market territory. U.S. Trade Representative Robert Lighthizer stated that it’s too early to draw conclusions on a trade deal between the two countries and that even if a deal was made, the United States would need to maintain the threat of tariffs.
  • In an effort to stop Britain from leaving the European Union without a deal, British Prime Minister Theresa May has pushed back a vote on her next Brexit deal to as late as March 12, about two and a half weeks before Britain leaves the European Union. European parliament had created rules that requires the U.K. financial services industry to abide by European Union standards after Brexit in order to keep control of market access. The U.K.’s main opposition Labour Party is also committed to having a second Brexit referendum, surprising doubters.
  • The United States is continuing to find new ways to aid economically devastated Venezuela after last weekend’s attempt to send aid resulted in two people killed and 300 people wounded. The U.S. is working with Venezuelan opposition leader Juan Guaido to pressure Nicolas Maduro to step down by means of sanctions. Vice President Mike Pence is calling on allies to freeze assets of state-owned oil company PDVSA. As a response, Venezuela is now exporting crude from India and Europe instead of the United States, however, this is predicted by analysts to be ineffective in generating profits.


Markets

  • Stocks marched higher again this week. The S&P 500 rose 0.45% and closed at 2,804. The Dow Jones gained 0.07% and closed at 26,026. Year to date, the S&P is up 12.24% and the Dow Jones is up 12.08%.
  • Yields spiked this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.56% and 2.75%, respectively.
  • The spot price of WTI Crude Oil declined this week. Prices fell 2.65% and closed at $55.74 per barrel. Year to date, Oil prices are up 22.75%.
  • The spot price of Gold fell 2.70% this week and closed at $1,293.44 per ounce. Year to date, Gold prices are up 0.85%.

Economic Data

  • Initial jobless claims rose by 9,000 to 225,000 for the week. The four-week moving average of claims fell by 7,000 to 229,000. Claims rose by 5,000 in Kentucky, 4,000 in New York, and fell by 3,000 in Washington.
  • Real GDP rose by 2.6% in the 4th quarter versus expectations of a 2.2% increase. The rise was driven by a surprise in personal consumption led by autos and financial services, offsetting the weak December retail sales figure.
  • Personal income fell 0.1% in January versus expectations for a 0.3% increase, but rose by 1.0% in December.
  • Personal spending fell by 0.5% in December versus expectations for a 0.3% decrease.
  • Wholesale inventories rose by 1.1% in December versus expectations for a 0.4% increase.
  • Housing starts fell by 11.2% in December versus expectations for a 0.1% drop. The drop was led by the multi-family category in the West and Midwest regions.
  • The Conference Board index of consumer confidence rose by 9.7 points to 131.4 in February versus expectations for a reading of 124.9.
  • Pending home sales rose by 4.6% in January versus expectations for a 1.0% increase.
  • Factory orders rose by 0.1% in December versus expectations for a 0.6% increase.
  • The University of Michigan’s index of consumer sentiment fell 1.7 points to 93.8 in February versus expectations for a reading of 95.9.

Fact of the Week

  • 69% of 1,017 adults surveyed in January 2019 believe that they will be “financially better off in 1 year,” a result that is 2 percentage pointsless than the all-time record of 71%recorded in March 1998. This survey has been conducted since August 1977. The 1998 record was achieved during a stretch for the S&P 500 that produced annual returns of at least +20% (total return) for 5 consecutive years(1995-1999) (source: Gallup).

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 deal, Venezuela protests: Wealth Economic Update Feb. 8, 2019

U.S. and World News

  • As the March 1st deadline for a trade truce between the United States and China approaches, the chances for a trade deal to be made are growing much smaller. White House Economic Advisor Larry Kudlow stated this week that a “pretty sizable distance” remains between the two sides. President Trump followed up on Larry Kudlow’s comment by announcing that he will not be meeting with Chinese President Xi Jinping before March 1st. These comments from the White House have arisen following a few weeks of renewed optimism over trade negotiations, changing the tone ahead of the deadline. President Trump is set to sign an executive order next week that would ban Chinese telecom equipment from United States wireless networks in an effort to combat cyber threats.
  • CARACAS-500750930Western nations continue to push for the resignation of socialist leader Nicolas Maduro of Venezuela as hundreds of thousands of protestors blanketed the streets of Caracas last weekend. The protestors are in support of self-proclaimed President Juan Guaido. The United States has announced that military intervention in Venezuela is an option and have placed extreme sanctions on the country and the state owned oil firm PDVSA, whose 2026 maturity debt is now trading at 23.75 cents on the dollar. The new sanctions have crippled the liquidity on Venezuelan sovereign debt and has caused JPMorgan to consider removing the securities from its popular emerging-market bond indexes. This action would force the largest holders of Venezuelan sovereign debt to sell in a market where it is unclear if there is any buying interest for the securities.


Markets

  • Stocks continued rallying this week before retreating in the second half of the week over concerns of slowing global growth and U.S China trade. The S&P 500 gained 0.11% and closed at 2,708. The Dow Jones increased 0.32% and closed at 25,106. Year to date, the S&P is up 8.24% and the Dow Jones is up 7.90%.
  • Yields declined further this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.44% and 2.63%, respectively.
  • The spot price of WTI Crude Oil dropped this week over concerns of growing supply. Prices fell 4.60% and closed at $52.72 per barrel. Year to date, Oil prices are up 16.10%.
  • The spot price of Gold fell 0.30% this week and closed at $1,314.08 per ounce. Year to date, Gold prices are up 2.46%.

Economic Data

  • Initial jobless claims fell by 19,000 to 234,000 for the week. The four-week moving average of claims rose by 5,000 to 225,000. Claims fell by 3,000 in Florida and New Jersey.
  • Factory orders fell by 0.6% in November versus expectations for a small increase.
  • The ISM non-manufacturing index fell to 56.7 versus expectations for a reading of 57.1.
  • The trade balance for November fell $6.4 billion to -$49.3 billion versus expectations for a reading of -$54.0 billion.

Fact of the Week

  • 27% of millennials surveyed in July 2018 spend more money on coffee per month than they put away and invest for retirement (Source: Lendedu)

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 deal, Venezuela oil, Brexit: Wealth Economic Update Feb. 1, 2019

U.S. and World News

  • china-945440206_370President Trump is optimistic that the world’s two largest economies could reach “the biggest deal ever made” and confirmed that a U.S. delegation will visit China in mid-February for a new round of trade talks. The feeling is mutual. China’s trade delegation said the latest negotiations with the U.S. in Washington made “important progress” and focused on three key themes – “trade, structural issues and enforcement.”
  • Despite the rhetoric between Nicolas Maduro and President Trump, U.S. refineries are still buying Venezuelan petroleum. But with the crisis escalating after Washington backed opposition leader Juan Guaido, a new round of sanctions is expected in the coming days. The U.S. on Saturday called on the world to “pick a side” on Venezuela and urged countries to financially disconnect from the Maduro government. “The U.S. has decided to follow the path of stealing Citgo from Venezuela,” President Nicolas Maduro declared after the Trump administration imposed sanctions on its parent company – state-owned oil giant PDVSA. While the sanctions will hit Citgo, the penalties will have a minimal effect on other American refiners, according to Treasury Secretary Steven Mnuchin.
  • In an attempt to break the deadlock over Brexit, Theresa May will seek legally binding changes from the EU regarding the Irish backstop, lawmaker Boris Johnson wrote in The Telegraph, citing senior government sources. “If the PM secures a ‘Freedom Clause’ – for the U.K. to escape the backstop without reference to the bloc – I have no doubt that she will have the whole country full-throatedly behind her.”


Markets

  • • Stocks had a good week following comments from the Fed. The S&P 500 gained 1.62% and closed at 2,706.53. The Dow Jones increased 1.33% and closed at 25,063.89. Year to date, the S&P is up 8.12% and the Dow Jones is up 7.56%.
  • Yields fell again week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.51% and 2.69%, respectively.
  • The spot price of WTI Crude Oil extended its gains this week. Prices rose 6.39% and closed at $55.31 per barrel. Year to date, Oil prices are up 20.98%.
  • The spot price of Gold rose 0.99% this week and closed at $1,318.21 per ounce. Year to date, Gold prices are up 2.79%.

Economic Data

  • Sales of new single-family homes sharply rebounded 16.9% in November to a seasonally-adjusted annualized rate of 657k units, significantly above expectations. November sales increased month-over-month in three of four regions, with the largest increase in the South (+64k) that likely reflected a rebound following Hurricane Michael.
  • The FOMC left the funds rate target range unchanged, as universally expected. The post-meeting statement continued to describe job gains and household spending as “strong” but downgraded its characterization of overall growth to “solid”.
  • The Conference Board index of consumer confidence declined 6.4pt to 120.2 in January, an 18-month low and against consensus expectations for a more modest decrease. The decline reflected a large decrease in the household expectations sub-index (-10.4pt to 87.3) and a small decrease in the household perceptions of present economic conditions sub-index (-0.3pt to 169.6).

Fact of the Week

  • In preparation of the Super Bowl, it is anticipated that Americans will consume 100 million pounds of guacamole. At an average weight of 150 grams per avocado, this equates to over 300 million avocados. (Source: Produce News)

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 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.