Wealth Management Economic Update June 23, 2014

U.S. and World News

  • NATO has announced that Russia has begun increasing troops again on its border with Ukraine. Vladimir Putin has blamed Ukraine for the escalation, saying that Ukraine has been holding military exercises on the eastern border for days. Threats of new Western sanctions have been made, but while the U.S. can choose to institute them at any time, the European Union nations will have to wait until a meeting of top country leaders in Brussels on June 26-27.
  • The Federal Reserve announced another $10 billion dollar tapering of its monthly asset purchases, bringing the amount down to $35 billion per month. The announcement was largely expected and the comments about the economy given by Chairwoman Janet Yellen were slightly dovish. Yellen also discounted the possibility of inflationary pressures reentering the U.S. economy following higher than expected inflationary data earlier in the week.
  • internet_high-tech_000010815543After their 2010 version was rejected by an appeals court in January, the FCC is now revising the web’s “net neutrality” rules – the regulatory laws which ensure internet providers do not block or slow down users’ access to content on the web. With lobbies on both sides of the spectrum, the agency is considering whether to apply the new regulations to wireless internet traffic as well, due to the rise in mobile internet use.
  • With the escalating violence in Iraq and uncertainty of future crude oil prices, the Keystone XL pipeline is once again coming into focus. Supporters of the project are pointing to tensions in Iraq and possible supply cut-offs as a reason to push forward with the $5.3 billion pipeline, which has faced numerous delays over the last six years. This week the Senate Energy and Natural Resources committee voted to advance the bill toward a construction approval.

Markets

  • Markets rose this week, ending at All-Time Highs for the S&P 500 and Dow Jones Industrial Average. The S&P 500 gained 1.40% and closed at 1,963 while the Dow Jones followed suit by rising 1.02% and closing at 16,947. Year to date, the S&P is up 7.24% and the Dow is up 3.41%.
  • The 5 year and 10 year U.S. Treasury Notes held steady this week and are now yielding 1.69% and 2.61%, respectively.
  • The spot price of WTI Crude Oil remained elevated this week on reports of conflict in Iraq. Prices rose 0.44%, closing at $106.64 per barrel. Year to date, Oil prices have climbed 11.55%.
  • The spot price of Gold increased by 2.97% this week, closing at $1,314.87 per ounce. Year to date, Gold prices are up 9.89%.

Economic Data

  • Initial jobless claims fell by 5,000 from last week, coming in at 312,000 vs. consensus estimates of 313,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 312,000.
  • The headline Consumer Price Index (measure of inflation) increased by 0.4% in May vs. consensus estimates of 0.2%, boosted in part by increases in food (+0.5%) and energy (+0.9%) prices. Core CPI, which does not consider food and energy, was also up a bit more than expected showing an increase of 0.3% vs. expectations of 0.2%.

Fact of the Week

  • A study of retirement investments showed that in 2013, nearly 35% of workers participating in a 401(k) programs who had changed jobs in that year opted to cash out their balance as opposed to leaving the money in their former employer’s plan or rolling it over into a new 401(k) or IRA. Employees doing so before they reach age 59 ½ are subjected to a 10% penalty on the balance, as well as being responsible for paying any taxes on capital gains the account may have accumulated. Younger participants were guiltier of this behavior, with workers between ages 20-39 cashing out 401(k) balances over 40% of the time when they change jobs.

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 – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

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