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

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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

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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

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Budget, Govt Shutdown, Wall: Wealth Economic Update Dec. 31, 2018

U.S. and World News

  • wall-813556790The U.S. federal government will remain closed until after the new year as negotiations over a budget deal have made no progress. According to the Department of Agriculture, the new $12 billion trade aid relief package that includes government payments to farmers will be temporarily suspended as the federal shutdown continues. Also, some economic data figures normally published by the U.S. Commerce Department will not be published during this time. Negotiations for a budget deal remain at a standstill as President Trump refuses to budge on a deal without border security funding, while Democrats continue to strongly oppose funding a wall. Democrats will assume control of the House on January 3rd and have discussed plans for a budget deal, however, none of these plans include $5 billion for a border wall.


Markets

  • Stocks rebounded sharply this week after last week’s declines. The S&P 500 rose 2.89% and closed at 2,486. The Dow Jones jumped 2.75% and closed at 23,062. Year to date, the S&P is down 5.02% and the Dow Jones is down 4.39%.
  • Yields continued their declines this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.56% and 2.72%, respectively.
  • The spot price of WTI Crude Oil fell further this week. Prices fell 1.12% and closed at $45.08 per barrel. Year to date, Oil prices are down 25.00%.
  • The spot price of Gold rose 1.76% this week and closed at $1,279.07 per ounce. Year to date, Gold prices are down 1.82%.

Economic Data

  • Initial jobless claims decreased by 1,000 to 216,000 for the week ended December 22nd from an upwardly revised 217,000. The four-week moving average of claims fell by 5,000 to 218,000. Claims rose by 4,000 in New Jersey and by 2,000 in California but fell by 2,000 in Michigan and Texas.
  • The Conference Board index of consumer confidence fell 8.3 points to 128.1 in December versus expectations for a reading of 133.5.
  • The FHFA house price index rose by 0.3% in October, in-line with expectations. The year-over-year rate declined to 5.7% from 6.1%.
  • Pending home sales fell by 0.7% in November, versus expectations for a 1.0% increase.

Fact of the Week

  •  On Wednesday, the Dow Jones Industrial Average closed up 1086 points, a daily change of 4.98%. While it was the largest one day return in terms of points, it doesn’t even rank in the top 20 all time of daily percentage gains for the Dow Jones.

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

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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

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Travel Ban, One China: Wealth Economic Update Feb. 10, 2017

U.S. and World News

  • scales_gavel-509557490_360Three judges in the U.S. Appeals Court upheld the suspension of President Trump’s travel ban this week. The government now has 14 days to ask the 9th Circuit to have a larger panel of judges review the decision or appeal directly to the U.S. Supreme Court, which would likely determine the case’s final outcome. Expressing his displeasure with the Circuit Court’s decision, Trump tweeted, “SEE YOU IN COURT, THE SECURITY OF OUR NATION IS AT STAKE!”
  • In his first phone call with Chinese President Xi Jinping, President Trump said that he would honor the nation’s “One China” policy which considers Taiwan as one with China and not a separate nation. Trump also urged closer ties between the U.S. and China. The clarification on the “One China” policy ends weeks of uncertainty regarding Washington’s approach to China.
  • According to a new U.S. Department of Homeland Security report, President Trump’s wall along the U.S.-Mexico border would be a series of fences and walls that would cost as much as $21.6 billion and take more than three years to construct. The projected price tag is much higher than the $12 billion figure cited on the campaign trail and the $15 billion estimated by Republican Congressional leaders.

Markets

  • Markets rose this week with continued low volatility. The S&P 500 gained 0.87% and closed at 2,316 which is an All-Time High. The Dow Jones followed suit by rising 1.13% and closing at 20,269, also an All-Time High. Year to date, the S&P is up 3.66% and the Dow is up 2.83%.
  • Interest rates fell this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.89% and 2.41%, respectively.
  • The spot price of WTI Crude Oil was unchanged this week, closing at $53.81 per barrel. Year to date, Oil prices have risen 0.18%.
  • The spot price of Gold increased by 1.09% this week, closing at $1,233.62 per ounce. Year to date, Gold prices are up 7.51%.

Economic Data

  • Initial jobless claims fell 12,000 from last week, coming in at 234,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 244,000 which marks a new 40-year low.
  • The University of Michigan consumer sentiment index fell to 95.7 in the preliminary February report following increases in the previous three months. Both consumers’ assessment of current conditions and expectations for the future declined with the expectations component falling further.

Fact of the Week

  • Equity market volatility has been very low for the last portion of 2016 extending into 2017. The S&P 500 has now gone 39 consecutive trading days without experiencing an intraday range of greater than +/- 1% which is the longest stretch that has occurred since 1982. (Source: Strategas Research Partners)

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@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

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Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.