Wealth Management Economic Update July 7, 2014

U.S. and World News

  • Tensions are mounting in Ukraine again, as the extended cease-fire agreement between the Ukrainian government and pro-Russian separatists has expired. Both sides were accused of violating the agreement while it was in place which has added to the strained situation. In a four-way phone call with Vladimir Putin and German and French leaders, Ukrainian President Petro Poroshenko accused separatists of not staying on track with the agreed upon peace plan.
  • argentina_000041006656SmallArgentina has entered a state of technical default, as the $832 million payment given to holders of the country’s restructured bonds was declared illegal last week. The dispute continues as the New York judge that is presiding over the case insists that holdout creditors must be paid $1.5 billion before any other payments can be made. The country will have a 30 day grace period until it enters a formal default. Ratings agency Standard & Poor’s has responded by placing Argentina’s current CCC- rating on watch for downgrade.
  • The Iraqi parliament failed to elect a new speaker this week, postponing the opportunity to form a new government. The Obama administration is still urging Iraqi leaders to overcome sectarian divides and to quickly create a more politically inclusive regime. Escalating violence has led to an estimated 2,417 Iraqis killed in June, as ISIS insurgents continue to overrun many cities and regions within the country.

Markets

  • Markets made new All-Time Highs this holiday shortened week as the Dow Jones surpassed the 17,000 barrier.  The S&P 500 gained 1.28% and closed at a record high 1,985 while the Dow Jones followed suit by rising 1.31% and closing at 17,068, also a record high. Year to date, the S&P is up 8.53% and the Dow is up 4.17%.
  • Interest rates rose this week on stronger economic data including the monthly employment report. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.74% and 2.64%, respectively.
  • The spot price of WTI Crude Oil fell a bit this week due to waning concerns about Iraqi oil supplies in the near term. Prices fell 1.74%, closing at $103.90 per barrel. Year to date, Oil prices have climbed 8.68%.
  • The spot price of Gold increased by 0.28% this week, closing at $1,319.83 per ounce. Year to date, Gold prices are up 9.84%.

Economic Data

  • Initial jobless claims edged up a bit from last week, coming in at 315,000 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 315,000.
  • The June nonfarm payrolls report was better than expected, showing an increase of 288,000 jobs vs. expectations of 215,000. The report brings the three month average job gains up to 272,000.
    • The unemployment rate unexpectedly fell to 6.1% from 6.3% last month. Labor force participation remained unchanged and at a very low level of 62.8%.
    • Average hourly earnings slightly outpaced expectations by rising 0.25% vs. 0.2%. Over the last year, wage growth has been 2.0% which is consistent with subdued wage growth but is slightly above expectations of +1.9%.
  • Pending home sales came in better than expected his month, rising 6.1% vs. expectations of a 1.5% gain. Pending home sales are based on contract signings rather than closings and are a decent leading indicator of future existing home sales. Despite the recent improvement, over the last year pending home sales have declined by 6.9%.

Fact of the Week

  • According to a study by the Employee Benefit Research Institute, more than half (56%) of Americans at least age 25 have never attempted (nor has their spouse attempted) to calculate how much they will need to accumulate for their eventual retirement.

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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