Blog Post

Wild Week

The week started off with a large drop on Monday as Saudi Arabia and Russia started a price war over crude oil.  Talks between OPEC and the so-called Plus nations headed by Russia failed to agree to a temporary production cut.  Then both Saudi Arabia and Russia pledged to maximize production to capture more market share.  Oil prices sank nearly 25% on Monday.  This threatens U.S. shale production as prices fell below the price of production for shale oil. 

On Thursday, stocks had their largest drop since the 1987 crash following what was perceived to be underwhelming responses from the President’s Wednesday night’s address and from the European Central Bank.  Fear reigned following many major league sporting events being postponed or cancelled due to Covid-19.  Schools and universities have closed in many places as the virus spreads. 

The Federal Reserve responded Thursday by extending $119.5BN of repurchase agreements and on Friday by accelerating Treasury purchases buying $37BN of government bond with the intent to address highly unusual disruptions in the Treasury market associated with Covid-19.

While the market reaction on Thursday was negative, markets responded very positively to the President’s press conference late Friday with stocks regaining 90% of what they lost on Thursday.  The President finally declared a state of emergency for the virus which will free up funding for various initiatives.  Before the markets closed the presentations instilled confidence and included various administration officials and health industry representatives.  In addition to the numerous health initiatives, the main economic points driving the markets were:

  1. Temporarily waiving interest on student debt.
  2. Replenishing the strategic oil reserve to take advantage of cheap oil prices.
  3. Lower rates on small business loans.
  4. Potentailly backstoping the travel industry if needed.

Looking in the rear view mirror, we are yet to see bad economic numbers.  However, economists are forecasting at least one quarter of gross domestic product decline.  We are optimisting we will get through this.  However, it will be months before the coronavirus effects on the economy will abate.

Treasury yields rallied by weeks end with the 30-year bond ending at 1.58% and the 10-Year note at 0.987%.  Crude oil ended down to $33.43 a barrel and natural gas rose to $1.891 MMBTUs.  The U.S. dollar rose sharply against a basket of currencies and gold prices fell to $1522.90 an ounce.

In economic numbers this week:

  • China reported:
    • The consumer-price index was up 5.2% in February from a year earlier, down from 5.4% in January.  Food prices were up 21.9% as pork prices rose 135.2% from the African Swine Fever.  Non-food prices rose only 0.9% in February down from 1.4% in January.
    • The producer-price index fell 0.4% in February from a year earlier down from a 0.1% increase in January.
  • Germany reported industrial production fell 1.3% in January from last January.
  • The Labor Department Reported:
    • First time jobless claims in the prior week fell 4,000 to a seasonally adjusted 211,000.  The four-week moving average of claims rose to 214,000.
    • Consumer prices rose 0.1% in February and 2.3% over the past year.  Excluding volatile food and energy prices were up 0.2% in February and 2.4% from a year earlier.
  • The EIA weekly oil report is attached.  Also, the EIA reported in the past week:
    • Field production of crude oil fell from 13.1MM barrels per day to 13.0MM bpd.
    • Natural gas storage fell by 48BN cubic feet and is above the five year average at this time of year.
  • Baker Hughes reported the number of active oil rigs rose 1 to 683 and the number of active gas rigs fell 2 to 107.

Remember, we are here to support you, to answer your questions and address your needs.  Please don’t hesitate to call us.

Best Regards,

Loren C. Rex, CFP®, AIF®, MA                                                          Erik A Smith AIF®

President                                                                                               Managing Partner

Generations Financial Planning & Wealth Management           269-441-4143

77 E. Michigan Ave, Suite 140

Battle Creek, MI  49017

Tel 269-441-4090

Carrie Fuce, Assistant 269-441-4091

Toll Free: 800-513-8180

Fax 866-381-2301

Visit our Website:  www.genfinplan.com

Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated. 

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.

The information in this email is confidential and is intended solely for the addressee.  If you are not the intended addressee and have received this email in error, please reply to the sender to inform them of this fact.  We cannot accept trade orders through email. Important letters, email, or fax messages should be confirmed by calling 269-441-4091. This email service may not be monitored every day, or after normal business hours.

RESERVE A CONFIDENTIAL DISCUSSION NOW

If you are serious about planning for your future, we want to meet with you. We ask that you provide us with some basic information so we can assess your needs and schedule a meeting. Please follow the link below to complete our survey.