Wealth Management Economic Update October 27, 2014

U.S. and World News

  • pipeline_000039527184_300Russia and Ukraine failed to reach a gas deal during EU-brokered talks this week but agreed to meet again next week. Negotiations regarding prices for the winter supply of gas from Russia through Ukraine and the rest of Europe stalled when Russia added new conditions to the deal. Russia cut off supplies to Ukraine in June, demanding that Ukraine pay a debt of $5 billion which Russia is still requiring before any deal is made.
  • The panel chosen to pick candidates for Hong Kong’s 2017 election could be made more democratic according to the territory’s leader Leung Chun-ying. The comment was made just before the start of the first public talks between pro-democracy student leaders and government officials. Expectations are low for any major breakthroughs during the talks, but the mere concession that the candidate selection process could be more open is a step towards a more democratic process in Hong Kong.

Markets

  • The markets bounced back this week with the S&P 500 coming up 4.12% and closed at 1,965. Likewise, the Dow Jones Industrial Average climbed up 2.59% and closed at 16,805. Year to date, the S&P 500 is up 6.29% and the Dow Jones is up 1.38%.
  • Yields in the treasury markets also increased. The 10 year treasury came up to 2.27% and the 5 year treasury is yielding 1.50%.
  • The spot price of WTI Crude Oil fell slightly this week, dipping 0.95%, closing at $81.28 per barrel. Year to date, Oil prices are down 12.34%.
  • The spot price of Gold fell 0.59% this week, closing at $1,231.01 per ounce. Year to date, Gold prices are up 2.44%.

Economic Data

  • Initial jobless claims rose a bit from last week but remain quite low overall, coming in at 283,000 vs. consensus estimates of 281,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 283,000, which is the lowest it’s been since May 2000.
  • The Headline Consumer Price Index (measure of inflation) rose 0.1% in September vs. consensus expectations of it being flat. Core CPI (excludes food and energy) was also up 0.1% in September, picking up from a flat August. Over the past year, both headline and core CPI have risen a modest 1.7%.

Fact of the Week

  • According to Forbes, Bill Gates is the richest person in the world today with a net worth of $81 billion. The six living heirs of Sam Walton (Wal-Mart founder) who died in 1992 are worth a combined $153 billion.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update October 20, 2014

Comments on Recent Market Activity

  • Volatility in the markets continued this week as major indices reached correction territory before stabilizing later in the week. It’s the first significant market correction that’s been experienced since 2011. Factors at play could be fears of the Ebola outbreak spreading more widely in the U.S., drastic declines in oil prices which could be a deflationary signal and the struggles of policy makers in Europe to spur growth in the stagnant economies of the region. Earnings releases and recent economic data continue to show improvement in the U.S., but markets recently have been trading on sentiment and macro headlines. Case in point, the market declines ceased on news that St. Louis Fed president James Bullard (who is a non-voting member of the Federal Reserve) suggested that although U.S. fundamentals remain strong, it may be “a logical policy response at this juncture to delay the end of QE,” which is set to be terminated at the end of this month.

 U.S. and World News

  • A second healthcare worker from the Texas Health Presbyterian Hospital has contracted Ebola after caring for Thomas Duncan, who died of the virus earlier this month. The diagnosis and the revelation that the CDC allowed the woman to fly on a commercial flight to Ohio has increased fears of the virus spreading further. President Obama has promised to ramp up the government’s response to Ebola in an effort to contain the spread of the virus. Obama will reportedly appoint Ron Klain as the “Ebola Czar” to coordinate the U.S. response to the virus. Klain’s resume includes being former chief of staff for VP’s Biden and Gore and being general counsel for a large investment organization but does not include any sort of medical background.
  • In further efforts to kick start the Eurozone economies, the ECB will reportedly start buying asset-backed securities and covered bonds. Executive Board member of the central bank, Benoit Coeure, said that the purchases could start as soon as the next few days and that “the object is to steer the balance sheet toward higher levels and improve the transmission to the real economy.” Previous efforts in Europe similar to this one have so far failed to generate real economic growth.

Markets

  • After another volatile week, the markets recouped some of their losses but the S&P 500 still declined 1.00% and closed at 1,887. Similarly, the Dow Jones Industrial Average fell by 0.96% and closed at 16,544. Year to date, the S&P 500 is up 3.71% and the Dow Jones is up 0.60%.
  • It was also a very volatile week in the treasury markets which saw the 10 year treasury dip below 2% during some of the panic selling of stocks. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.43% and 2.20%, respectively.
  • The spot price of WTI Crude Oil continued to fall this week, dropping 3.32%, closing at $82.97 per barrel. Saudi Arabia has reportedly been telling oil market investors that it is ready to accept oil prices below $90 per barrel, and even as low as $80 for a couple of years it an attempt to retain market share. The world is currently flush with oil supply which has led to the steep decline in oil as well as gas prices which have fallen to a national average of $3.14/gallon compared to $3.37/gallon one month ago (Source: AAA). Year to date, Oil prices are down 11.11%.
  • The spot price of Gold increased by 1.22% this week, closing at $1,238.09 per ounce. Year to date, Gold prices are up 3.03%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 264,000 vs. consensus estimates of 290,000. Initial claims now stand at a 14 year low. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 283,500, which is the lowest it’s been since June 2000.
  • Housing starts rose 6.3% in September vs. expectations of 5.4%. This was a welcome bounce back from last month’s report. Multifamily starts rose 16.7%, while single family starts rose a more modest 1.1%.
  • University of Michigan consumer sentiment rose to a reading of 86.4 vs. expectations of 84. The increase was due to better expectations for the future, while the assessment of current conditions was unchanged. The commentary noted that the recent developments have had a limited effect on sentiment thus far and that sentiment may be aided by recently dropping gas prices.

Fact of the Week

  • It was 6 years ago (10/16/08) that Warren Buffet wrote his “Buy America, I Am” op-ed article in the New York Times. Buffet encouraged investors to “be fearful when others are greedy, and be greedy when others are fearful. Since he penned this letter, the S&P 500 has gained 130.9% total return through the close of trading Friday 10/17/14.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update October 13, 2014

U.S. and World News

  • hong_kong_boat_320The crowds of pro-democracy protestors in Hong Kong have started to dwindle this week, after activist leaders agreed to talks with the government which are unlikely to go anywhere. Talks will center on “the basis for political development”, referring to plans for an open 2017 election of Hong Kong’s leader. The discussions are set against a backdrop of mistrust, with protesters accusing the government of insincerity, and the government complaining that pro-democracy leaders continue to encourage protestors to remain in the streets. Protest spokespeople have claimed that if these meetings are unsuccessful, they may take the campaign beyond street occupations that would include pro-democracy lawmakers getting involved with “non-cooperative actions.”
  • The Obama administration has called for new protocols to help stop the spread of Ebola, including additional passenger screening at airports and increased efforts to educate medical providers on how to handle cases. This comes following the death of the man who was hospitalized in Dallas with the virus and a nurse in Spain becoming the first person to contract the virus outside of West Africa.
  • Minutes released from the most recent Federal Reserve meeting showed the committee’s concern with slowing growth overseas, the strengthening dollar and weakening inflationary pressures. These issues indicate that the Fed will move cautiously on raising rates following the end of its Quantitative Easing program, which is set to terminate at the end of this month. The release of these minutes led to a strong rally in stock markets on Wednesday, but those gains were short lived.

Markets

  • After quite a volatile week, the markets tumbled with the S&P 500 declining 3.14% and closed at 1,906. Similarly, the Dow Jones Industrial Average dwindled down 2.74% and closed at 16,544. Year to date, the S&P is up 3.13% and the Dow is down .20%.
  • Following the Federal Reserve’s announcement, interest rates continued their decline this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.54% and 2.29%, respectively.
  • The spot price of WTI Crude Oil continued to fall this week, dropping 4.68%, closing at $85.54 per barrel. Year to date, Oil prices are down 8.36%.
  • The spot price of Gold increased by 2.65% this week, closing at $1,222.96 per ounce. Year to date, Gold prices are up 1.77%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 287,000 vs. consensus estimates of 295,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 288,000, which is an 8 year low.

Fact of the Week

  • The national debt as of September 30th stood at $17.824 trillion, a more than $1 trillion increase from last year when it stood at $16.738 trillion. Ten years ago the national debt was at $7.379, meaning that it has increased $10.445 trillion over that time.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update October 6, 2014

U.S. and World News

  • Pro-democracy demonstrations have been taking place in Hong Kong for more than a week, blocking many central transportation routes with tens of thousands joining in the protests. Leaders of the protests are calling for Hong Kong Chief Executive Leung   Chun-ying to resign and for the government in Beijing to drop its plans to control the 2017 Hong Kong leadership election. Crowds began to dissipate a bit late in the week as Chun-ying agreed to meet with protest leaders over their demands for electoral reforms, which would include open nominations for Hong Kong’s first election to choose the territory’s leader.
  • ebola_virus_320The Centers for Disease Control and Prevention announced this week that a patient being treated at a Dallas hospital has tested positive for Ebola, the first case diagnosed in the U.S. The patient was placed under strict isolation. The CDC and Texas health officials are also monitoring anyone who may have come in contact with the affected man and remain confident in their ability to confine the spread of the virus in the country.
  • In another attempt to do “whatever it takes” to jumpstart the stagnant Eurozone economies, ECB President Mario Draghi announced this week that the central bank intends to purchase junk-rated Greek and Cypriot bank loans to give those nations more liquidity. Germany opposes the plan for the ECB to relax its existing requirements for quality of assets purchased by the bank, but they are likely to be outvoted by other members of the EU.

Markets

  • Markets fell this week despite rallying on Friday, the S&P 500 fell 0.73% and closed at 1,968. The Dow Jones Industrial Average followed suit and decreased 0.58% and closed at 17,009. Year to date, the S&P is up 8.10% and the Dow is up 4.40%.
  • Interest rates moved down this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.73% and 2.44%, respectively.
  • The spot price of WTI Crude Oil fell sharply this week, dropping 4.05%, closing at $89.75 per barrel. Year to date, Oil prices are down 3.85%.
  • The spot price of Gold fell by 2.24% this week, closing at $1,217.60 per ounce. Year to date, Gold prices are up 1.33%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 287,000 vs. consensus estimates of 297,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 295,000, near the post-crisis lows.
  • The September non-farm payroll report showed job gains of 248,000 vs. consensus expectations of 215,000. The July and August numbers were revised up a combined 69,000, bringing the three month average of job growth to a solid 224,000.
    • The unemployment rate fell to 5.9% vs. expectations of 6.1%. This was aided in part by a 0.1% drop in the labor force participation rate to 62.7%, a new cycle low.
    • Average hourly earnings disappointed and were flat for the month vs. expectations of a 0.2% gain. Over the last year, hourly earnings have increased 2.0%, a sluggish pace of wage growth.
  • Pending home sales declined 1.0% in August vs. expectations of -0.5%. Sales declined in the Northeast, Midwest and South, while rising in the West. Pending home sales are viewed as a leading indicator of existing home sales.
  • The Case-Shiller home price index declined by 0.5% in July vs. expectations of flat prices. This is the third consecutive monthly decline and home prices have now risen 6.7% over the past year.

Fact of the Week

  • According to the Federal Reserve, the top 3% of household income earners owned 54.4% of the wealth in the country last year, up from 44.8% in 1989. This is largely a function of a rising stock market disproportionately benefitting the top group.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update September 29, 2014

U.S. and World News

  • syria_000034095892SmallThe U.S., joined by five Arab allies, launched the first air strikes on Islamic State (ISIS) targets in Syria early this week. This marked the first U.S. military intervention in Syria since the start of the country’s civil war. About 190 air strikes have already been carried out in Iraq since August, so these new strikes open up a new front to this conflict. The strikes are on top of the extra funding approved by Congress last week to train Syrian rebels to combat Islamic State.
  • Treasury Secretary Jack Lew announced new rules this week that would deter U.S. companies from moving their country of domicile overseas to benefit from lower tax rates abroad. The changes to tax treatment make it harder for companies to complete these overseas mergers, and if they do decide to invert, new restrictions limit the use of untaxed cash that has been accumulated overseas to complete the transaction. The new rules are effective immediately and apply to all deals not yet closed. Despite the new rules, Lew warned that lawmakers will have to complete the job, “Administrative action cannot shut the door completely, and Congress will still need to act.”

Markets

  • Markets fell this week as the S&P 500 shed 1.36% and closed at 1,983. The Dow Jones Industrial Average followed suit and decreased 0.96% and closed at 17,113. Year to date, the S&P is up 8.88% and the Dow is up 5.01%.
  • Interest rates moved down modestly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.80% and 2.53%, respectively.
  • The spot price of WTI Crude Oil climbed by 1.93% this week, closing at $93.42 per barrel. Year to date, Oil prices are virtually unchanged.
  • The spot price of Gold rose slightly by 0.16% this week, closing at $1,217.60 per ounce. Year to date, Gold prices are up 1.33%.

 Economic Data

  • Initial jobless claims rose from last week, coming in at 293,000 vs. consensus estimates of 296,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 299,000, near the post-crisis lows.
  • New home sales rose 18.0% in August (vs. consensus of 4.4%), the largest monthly gain since 1991. Although this economic data point is volatile and often significantly revised in later months, the report is a welcome surprise in the face of recent mixed housing data.

Fact of the Week

  • According to a report released by the Government Accountability Office, the total outstanding student loan debt held by seniors (65+) has risen from $2.8 billion in 2005, to $18.2 billion today. While around 20% of this outstanding debt was taken out for the benefit of their children or other dependents, the other 80% came from loans seniors took out for their own education. These older borrowers are more likely to hold defaulted loans and due to the fact that student loans can’t be discharged in bankruptcy like other debt, more and more seniors are seeing a portion of their Social Security benefits garnished to pay back the debt.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update September 22, 2014

U.S. and World News

  • Following a two day policy meeting, the Federal Reserve announced another $10 billion reduction of its asset purchases and announced that they are on pace to completely end its quantitative easing purchases at its next policy meeting in October. Fed Chairperson Janet Yellen renewed her pledge to keep short term interest rates at zero for a “considerable time” after asset purchases have stopped, but did not provide any clarification as to how long of a time that would be. Yellen also made dovish comments regarding the labor market, saying that the slow increase in wages was indicative of labor market slack, laying the groundwork for delaying the raising of interest rates.
  • Ukraine and the European Union ratified their long awaited association and free trade agreement this week. This agreement was largely responsible for sparking the Ukrainian revolution last February. Ukrainian President Petro Poroshenko announced after the signing that by ratifying the agreement, the country is on course for membership in the EU. The deals implementation will be postponed until December 2015 however, as they are currently facing immense pressure from Russia and pro-Russian separatists in Ukraine.
  • Residents of Scotland have voted to remain a part of the United Kingdom. The independence referendum showed a very close race at times but with 55% of the vote, “No” to Scotland’s independence won out. UK Prime Minister David Cameron said that he was delighted by the referendum result and added that it was time for the UK to come together and move forward.
  • Stock_000001029623_320Today, the stock market closely monitored the biggest IPO in America’s history. Chinese internet retailer, Alibaba, made its debut today and closed at $93.89. This closing price was about a 38% increase from the original stock price of $68.

Markets

  • Markets improved this week as the S&P 500 gained 1.25% and closed at 2,010. The Dow Jones Industrial Average followed suit and increased 1.72% and closed at 17,280. Year to date, the S&P is up 8.77% and the Dow is up 4.24%.
  • Interest rates didn’t change much this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.81% and 2.58%, respectively.
  • The spot price of WTI Crude Oil climbed up slightly by 0.36% this week, closing at $92.60 per barrel. Year to date, Oil prices are down 1.49%.
  • The spot price of Gold continued its decline and fell by 1.06% this week, closing at $1,216.65 per ounce. Year to date, Gold prices are up 1.25%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 280,000 vs. consensus estimates of 305,000. The Labor Department noted that claims are difficult to measure around the Labor Day holiday. The four week moving average for claims now stands at 300,000.
  • Housing starts fell 14.4% in August vs. consensus estimates of a drop of 5.2%. Most of the decline occurred in the more volatile multifamily category which fell 31.7%, while single family starts moved down a more moderate 2.4%. Building permits also disappointed, declining 5.6% vs. expectations of -1.6%, again mainly due to the multifamily category.
  • The headline consumer price index declined 0.2% in August vs. expectations of flat prices, due in part to a 2.6% decline in energy prices. Core CPI, which doesn’t include volatile food or energy prices, was flat for the month and was disappointing compared to expectations of +0.2%. Over the past year, headline and core consumer prices both rose at a subdued rate of 1.7%.

Fact of the Week

  • According to a Federal Reserve Economic Well-Being Survey, 34% of Americans surveyed said that they have gone without some form of medical care (i.e. medication, surgery, therapy) in the last 12 months because they could not afford to pay for the product or service.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update September 15, 2014

U.S. and World News

  • President Obama announced his four pronged plan for dealing with terrorist group Islamic State (ISIS) in an address this week. The plan includes training Iraqi and Kurdish forces fighting ISIS, increasing counterterrorism efforts by working with allies to prevent foreign fighters from joining ISIS, humanitarian assistance to those in danger from ISIS and finally, ramping up airstrikes wherever the terrorists are, including in Syrian land. The four point plan has the objective to “degrade and ultimately destroy” ISIS. President Obama stressed in his address that this action was different from prior wars with Iraq and Afghanistan, and highlighted prior examples of Yemen and Somalia as successful operations that were similar in nature.
  • The European Union is set to implement new sanctions on Russia but officials say that they will determine the application of the sanctions based on Russia’s cooperation with the ceasefire agreement that was reached last week. The sanctions would hit Russia’s state-controlled banks and oil companies. In response to the new sanctions, Russia has indicated that it may ban Western airlines from flying over its territory. The U.S. announced its own new round of sanctions on Friday, which target Russian financial services, energy and defense and seek to further isolate Russia from the global financial system until they genuinely work towards a diplomatic resolution of the crisis.
  • bagpipe_333Residents of Scotland will go to the polls next Thursday to vote on a referendum that could make them an independent country, breaking up the United Kingdom. Polling has shown increasing support for independence, with several polls indicating it’s a 50-50 proposition. Several issues lie ahead for Scotland should they vote for their independence, including choosing a currency, whether to join the European Union, the sharing of North Sea oil revenue and its share of the British national debt. UK Prime Minister David Cameron made a plea to the Scots to vote down independence, saying “We do not want this family of nations to be ripped apart. If the U.K. breaks apart, it breaks apart forever.”

Markets

  • Markets lost ground this week as the S&P 500 fell 1.05% and closed at 1,986. The Dow Jones Industrial Average lost 0.81% and closed at 16,987. Year to date, the S&P is up 9.01% and the Dow is up 4.25%.
  • Interest rates rose again this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.82% and 2.61%, respectively.
  • The spot price of WTI Crude Oil continued its decline and fell by 1.19% this week, closing at $92.18 per barrel. Year to date, Oil prices have decreased 1.94%.
  • The spot price of Gold dropped by 3.04% this week, closing at $1,230.29 per ounce. Year to date, Gold prices are up 2.38%.

Economic Data

  • Initial jobless claims rose a bit from last week, coming in at 315,000 vs. consensus estimates of 300,000. The Labor Department noted that claims are difficult to measure around the Labor Day holiday. The four week moving average for claims now stands at 304,000.

Fact of the Week

  • According to the Federal Reserve Bank of New York, as of 6/30/12, 8.9% of student loan debt (measured by dollar amount outstanding) was at least 3 months delinquent or is in default. Two years later, the proportion of student loan debt that is delinquent or in default has risen to 10.9%. With an estimated $1.08 trillion of student loan debt outstanding, this leaves nearly $118 billion of delinquent or defaulting debt that isn’t dissolvable in bankruptcy.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update September 8, 2014

U.S. and World News

  • The European Central Bank announced this week a series of surprising and aggressive policy moves intended to stimulate growth in the stagnated region. The ECB announced three rate cuts, lowering its main refinancing rate from 0.15% to 0.05%, lowering the marginal lending facility rate from 0.4% to 0.3% and lowering the deposit facility rate from -0.1% to -0.2% (banks have to pay to hold deposits with the central bank). ECB President Mario Draghi also announced that the central bank would begin to buy bonds (similar to the quantitative easing seen here in the U.S.), specifically covered and asset-back bonds. Draghi hopes the measures will boost inflation by keeping credit markets liquid and interest rates very low.
  • handshake_320Ukraine’s government and pro-Russian separatist leaders signed a ceasefire deal on Friday after talks in Belarus yielded an agreement. There is hope that the deal will bring peace to the eastern Ukraine region that has been embroiled in conflict for nearly five months. Separatist leaders were quick to point out that the ceasefire does not mean an end to the separatists groups like the Dontesk People’s Republic and the Luthansk People’s Republic. European leaders will wait and see how the situation progresses before implementing a new round of economic sanctions on Russia. Some of the proposed restrictions include banning Russian companies from accessing the European capital markets, denying use of European oil companies for deep-sea drilling and possibly boycotting Russia from hosting the 2018 World Cup.
  • The Federal Reserve is increasing its efforts to find an alternative to LIBOR (London Interbank Offered Rate), in a potential transition that would affect trillions of dollars in U.S. and worldwide contracts and derivatives. Many financial products use this rate as a benchmark in their structures and Fed Governor Jerome Powell warns that reliance on this one rate could result in a “horrible mess”. The Fed and large financial firms will meet and discuss this over the next year to work toward an alternative benchmark.

Markets

  • Markets were positive this week despite continued geopolitical turmoil. The S&P 500 closed at a new All-Time High on Friday, gaining 0.24% this week and closing at 2,008. The Dow Jones Industrial Average gained 0.25% and closed at 17,137. Year to date, the S&P is up 10.14% and the Dow is up 5.09%.
  • Interest rates rose this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.69% and 2.46%, respectively.
  • The spot price of WTI Crude Oil fell by 2.61% this week, closing at $93.46 per barrel. Year to date, Oil prices have decrease 0.57%.
  • The spot price of Gold decreased by 1.47% this week, closing at $1,268.46 per ounce. Year to date, Gold prices are up 5.56%.

Economic Data

  • Initial jobless claims rose a bit from last week, coming in at 302,000 vs. consensus estimates of 300,000. The level of claims remains near the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 303,000.
  • The ISM manufacturing index increased to 59.0 in August vs. expectations of 57. This is close to the post-recession high of 59.3 set in February 2011. 17 of 18 manufacturing industries reported growth in August and most of the commentary in the report was very positive.
    • The ISM non-manufacturing index also beat expectations by rising to 59.6 in August vs. the consensus estimate of 57.7. This brings the ISM Composite Index, which incorporates both surveys, to near an all-time high.
  • Monthly non-farm payrolls increased by less than expected in August, rising by 142,000 vs. consensus estimates of 230,000. There were also net revisions of -28,000 applied to the prior two months.
    • The unemployment rate fell by 0.1%, down to 6.1%. This was aided by a 0.1% drop in the labor force participation rate, which now stands at 62.8%.
    • Average hourly earnings rose 0.2%, in line with expectations but still somewhat subdued by historical standards. Hourly earnings have increased by 2.1% over the past 12 months.

Fact of the Week

  • According to the Census Bureau, there are 76 million homeowners in the United States. Of the 76 million, 24 million have no housing debt (ie. own it free and clear). Of the remaining 52 million that do have housing debt, 9 million (12.5%) homeowners have mortgage debt that exceeds the value of their homes (ie. mortgage is underwater).

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update September 2, 2014

U.S. and World News

  • The hostilities between Ukraine and Russia continued this week on reports of Russian tanks, artillery and infantry being passed over the border of eastern Ukraine. This follows an in-person meeting between Ukrainian President Petro Poroshenko and Russia’s Vladimir Putin which failed to yield any substantial progress between the two nations as Putin claimed that it is ultimately up to Kiev to work out conditions for a ceasefire with separatist rebels. The United States and European Union are now considering another round of sanctions on Russia based on NATO reports that well over 1,000 Russian troops have breached the border. Despite the recent escalation, President Obama has ruled out military intervention in the region.
  • drone_000030705766_330The U.S. is preparing to expand its military air campaign beyond Iraq. This week, President Obama authorized surveillance flights to gather intelligence on Islamic State (formerly ISIS) targets in Syria. A decision to launch air strikes in Syria has not been made yet as the drones being utilized are just collecting information at this time.

Markets

  • Markets were positive this week despite continued geopolitical turmoil. The S&P 500 closed at a new All-Time High on Friday, gaining 0.79% this week and closing at 2,003. The Dow Jones Industrial Average gained 0.63% and closed at 17,098. Year to date, the S&P is up 9.87% and the Dow is up 4.84%
  • Interest rates dipped a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.63% and 2.35%, respectively.
  • The spot price of WTI Crude Oil rose by 2.33% this week, closing at $95.84 per barrel. Year to date, Oil prices have increased 1.96%.
  • The spot price of Gold increased by 0.49% this week, closing at $1287.32 per ounce. Year to date, Gold prices are up 7.13%.

Economic Data

  • Initial jobless claims held steady from last week, coming in at 298,000 vs. consensus estimates of 300,000. The level of claims remains near the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 300,000.
  • Several reports on housing data were released this week, showing a mixed but possibly improving picture:
    • New home sales declined by 2.4% in July vs. consensus estimates of a gain of 5.8%.
    • The Case-Shiller home price index declined by 0.2% in June vs. expectations of remaining flat. Over the past year, the home price index has risen 8.1%.
    • Pending home sales rose 3.3% in July vs. expectations of 0.5%. This number, which is based on contract signings instead of closings, is a good leading indicator of existing home sales one to two months in the future.

Fact of the Week

  • According to the Office of Management and Budget, the government is projecting a $525 billion deficit for fiscal year 2014 (the government’s fiscal year ends on September 30). If that amount comes to fruition, this would be the smallest national budget deficit since fiscal 2008.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update August 25, 2014

U.S. and World News

  • Middle_East_000038001262_320President Obama says that the U.S. will continue limited airstrikes against Islamic State militants. The efforts have helped Iraqi and Kurdish forces retake the vital Mosul dam and halted the advance of Islamic State on the city of Erbil. News of the recaptured dam has helped to push down oil prices this week.
  • The latest cease-fire in the Gaza Strip has collapsed, after rocket fire from the Palestinians resumed eight hours before the cease-fire was due to expire. Israel responded with airstrikes and ordered its delegates back from Cairo saying they will not negotiate under fire. Egyptian officials have been struggling to mediate during the conflict, striking several temporary cease-fires, but not achieving a permanent truce as of yet.
  • Vladimir Putin is scheduled to meet face to face with Ukrainian President Petro Poroshenko in Belarus on August 26th. Among the issues surely to be discussed will be stabilizing the border situation with Ukraine and addressing Ukraine’s energy concerns. Ukraine’s energy sector is faltering considerably and estimates suggest that coal supplies to electricity producers may run out in about a month due to rail lines that were damaged by pro-Russian separatists.
  • The annual retreat in Jackson Hole, Wyoming where central bankers, finance ministers and academics from all around the world come to discuss global economic issues went on this week without too many market moving headlines. Fed Chairwoman Janet Yellen’s comments noted both a more rapid than expected pace of recent labor market improvements, as well as the still significant level of labor underutilization. She continued to emphasize that future policy decisions will be data driven and that the Fed could raise rates earlier than expected should the data improve more than expected but that it could also raise rates later than expected if labor and inflation data disappoints.

Markets

  • Markets were positive this week despite continued geopolitical turmoil. The S&P 500 closed at a new All-Time High on Thursday but lost ground on Friday, gaining 1.74% this week and closing at 1,988. The Dow Jones Industrial Average gained 2.07% and closed at 17,001. Year to date, the S&P is up 9.00% and the Dow is up 4.16%
  • Interest rates floated back up a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.66% and 2.40%, respectively.
  • The spot price of WTI Crude Oil fell by 1.91% this week, closing at $93.50 per barrel. Year to date, Oil prices have dipped 0.53%.
  • The spot price of Gold decreased by 1.89% this week, closing at $1280.04 per ounce. Year to date, Gold prices are up 6.52%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 298,000 vs. consensus estimates of 303,000. The level of claims is near the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 301,000.
  • Nearly all of the 2nd quarter earnings reports from the S&P 500 have come out with 94% of companies reporting. Overall, 67% of companies exceeded earnings expectations with healthcare and financial stocks beating the highest percentage of the time and telecommunication stocks performing the worst. On the top line, 63% of companies beat revenue expectations, again with healthcare leading the way while telecom and staples lagged.
  • Housing starts rose a stronger than expected 15.7% in July vs. consensus expectations of 8.1%. Both single family and multifamily starts contributed to the gains and left the level of housing starts just shy of the post-recession high seen last November.

Fact of the Week

  • According to a study conducted by Reuters, 40% of people identifying themselves as retired reported that they had stopped working involuntarily. Additionally, 30% of those retired people surveyed said that if the labor market improved and a job became available, they would effectively “unretire” and rejoin the workforce. These findings show that headline unemployment rate isn’t always a representative statistic, as those 30% are currently not counted as being in the workforce but would reenter it if conditions improve.

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
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management