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

Wealth Management Economic Update August 18, 2014

U.S. and World News

  • The reported de-escalation of the Russia/Ukraine situation did not last very long as reports surfaced on Friday of Ukraine destroying several Russian convoy vehicles. A convoy of 280 trucks carrying “humanitarian” aid for Ukraine left from Russia on Tuesday, reaching the border on Friday morning. Ukrainian reports say that the convoy crossed the Ukrainian border and several were armored vehicles, resulting in Ukrainian military destroying part of the convoy. The situation continues to develop and it remains to be seen if Vladimir Putin will attempt to use this attack as an excuse for a larger scale invasion of Ukraine.
  • Iraqi Prime Minister Nouri al-Maliki announced on Thursday that he would step down after eight years in office. This comes after saying he would not step down following the nomination of Haider al-Abadi, the deputy speaker of parliament, to be the new head of government. This opens a new political chapter in Iraq that U.S. officials hope will decrease Iraq’s sectarian divisions. New Obama-approved PM al-Abadi is faced with the daunting task of moving the country toward a united front and fighting Islamic State (formerly ISIS).

Markets

  • finance_chart_250pxMarkets were positive this week despite continued geopolitical turmoil. The S&P 500 gained 1.27% and closed at 1,955. The Dow Jones followed suit by rising 0.74% and closing at 16,663. Year to date, the S&P is up 7.12% and the Dow is up 2.00%
  • Interest rates fell sharply this week, particularly after the reports of Ukraine destroying the Russian convoy. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.54% and 2.35%, respectively.
  • The spot price of WTI Crude Oil fell by 0.68% this week, closing at $96.99 per barrel. Year to date, Oil prices have risen 2.35%.
  • The spot price of Gold decreased by 0.39% this week, closing at $1,304.41 per ounce. Year to date, Gold prices are up 8.55%.

Economic Data

  • Initial jobless claims rose from last week, coming in at 311,000 vs. consensus estimates of 295,000. 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 296,000.
  • University of Michigan consumer sentiment moved down to 79.2 vs. 81.8 in July and consensus estimates of 82.5. Expectations for the future fell sharply from last month, but consumers’ assessment of current conditions actually improved.
  • Japan’s 2nd quarter GDP shrank by 6.8% on an annualized basis. The sharp contraction comes after a new national sales tax of 3% was instituted in April and triggered a steep decline in consumer spending. Prime Minister Shinzo Abe will need to address the tax issue again soon as the country has already approved another sales tax hike that is set to take effect in October 2015.

Fact of the Week

  • The most recent Medicare Trustees report found that the Medicare trust fund that supports Medicare Part A (hospital coverage) is projected to be depleted by 2030. The shortfall in the trust fund could be corrected by either an immediate 0.87% increase in combined Medicare payroll taxes (up from current 2.90% to 3.77%) or an immediate 19% reduction in Medicare expenditures.

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 4, 2014

U.S. and World News

  • Negotiations with holdout investors and a last minute Argentine bank proposal fell through this week, triggering a default of Argentina’s sovereign debt. The default will further harm Argentina’s economy which is already in recession. It will also prolong the country’s return to the global credit markets, which it has been isolated from since its $100 billion default in 2002.
  • european_union_flag320The U.S. and now the European Union have placed tougher sanctions on Russia this week, aimed at the finance, defense and energy sectors of the country’s economy. The EU, which is highly dependent on Russia’s energy supplies, had previously been reluctant to impose any real sanctions on the Russians. Russia responded by saying that the sanctions would lead to higher energy prices in Europe and damage cooperation with the U.S. on international affairs. Some of Russia’s largest companies are acting as well, beginning to move their cash reserves to Asian banks in fear that Russia could eventually be completely shut out of U.S. dollar markets.
  • The Federal Reserve met this week and announced they will continue to taper its monthly asset purchases, reducing them from $35 billion to $25 billion as was expected. This makes the central bank on pace to completely cease its purchases in October, which is when discussion about raising short term interest rates will heat up. The Committee’s statement took note of firming inflation data and that “a range of labor market indicators suggest that there remains significant underutilization of labor resources.”
  • A tanker loaded with $40 million of ultralight oil departed from Texas heading to South Korea this week, marking the first unrefined American oil export since the 1970s. Although the U.S. policy on oil exports wasn’t explicitly changed, the Commerce Department announced last month that it would be relaxing its definition of “unrefined oil” to include oil condensate that has been minimally refined.

Markets

  • Markets fell significantly this week amid the sanctions on Russia, deflation worries in Europe and Argentina’s default. The S&P 500 dropped 2.66% and closed at 1,925. The Dow Jones followed suit by falling 2.74% and closing at 16,493. Year to date, the S&P is up 5.36% and the Dow is up 0.78%.
  • Interest rates remained steady this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.67% and 2.50%, respectively.
  • The spot price of WTI Crude Oil plunged by 4.40% this week, closing at $97.60 per barrel. Year to date, Oil prices have risen 3.00%.
  • The spot price of Gold decreased by 1.05% this week, closing at $1,293.55 per ounce. Year to date, Gold prices are up 7.65%.

Economic Data

  • Initial jobless claims rose a bit more than expected, coming in at 302,000 vs. consensus estimates of 300,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 297,000, the lowest it’s been since April 2006.
  • Monthly nonfarm payrolls increased by 209,000 in July vs. consensus expectations of 230,000. Despite the modest disappointment in July, the last three months have averaged a solid 245,000 gain.
    • The unemployment rate moved up 0.1% to 6.2% aided by a 0.1% increase to the labor force participation rate, bringing it to 62.9%.
    • Average hourly earnings disappointed, coming in flat on the month vs. expectations of a 0.2% gain. The year over year rate of wage growth stands at a subdued 2.0%.
  • The first estimation of 2nd quarter GDP was released this week, showing growth of 4.0% vs. expectations of 3.0%. A significant bounce back was to be expected given the -2.9% print in the 1st quarter, which now appears to be the result of weather distortion.
  • The Case-Shiller home price index declined by 0.3% in May vs. expectations of an increase of 0.3%, the weakest print since December 2011. Home prices fell in 14 of 20 cities covered by the report which adds to recent mixed housing data.

Fact of the Week

  • Nearly three years ago (8/5/2011), ratings agency Standard & Poor’s downgraded the quality of the debt of the USA from its top rating of AAA to AA+ and has yet to restore the country’s AAA status. At the time, the yield on the 10-year Treasury note was 2.57%. As it stands today, the yield on that same 10-year note has actually fallen (price has gone up), and today sits at 2.50%

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 July 28, 2014

World News*

  • ukraine_moscow_mapThe Ukrainian government said Friday it regained control of the separatist stronghold of Lysychansk after several days of fierce fighting, a move it said would pave the way to take back a string of other important rebel-held positions.   Kiev has reported steady progress in its fight against the separatists. But its efforts have been hampered by what it says is a flow of weapons and artillery fire from across the border that hasn’t stopped even after last week’s downing of Malaysia Airlines Flight 17–an allegation the U.S. backed on Thursday but that Russia has repeatedly denied.
  • Hundreds of Palestinians in the West Bank protested Israel’s military operation in the Gaza Strip on Friday, as an 18th day of fighting in the coastal territory claimed the life of an Israeli soldier, an Islamic Jihad official, and Palestinian civilians. Protesters waving the green flag of Hamas marched through the center of Ramallah, calling on Israeli forces to get out of Gaza and urging the leaders of the Fatah movement, a longtime rival of Hamas, to support Gaza’s Islamist leaders. One of the West Bank’s largest street protests in years on Thursday ended in clashes with the Israeli army that left two Palestinians dead. The West Bank, separated from Gaza by Israeli territory, had remained relatively calm this month as Palestinian Authority President Mahmoud Abbas’s security forces, with the urging of Israel, worked to contain unrest. But tension there boiled over Thursday after 16 Palestinians were killed in Gaza in the shelling of a United Nations-run shelter where hundreds had taken refuge from Israeli shelling.
*Source: Dow Jones & Company

Markets

  • Markets rose this week despite the geopolitical turmoil and a sharply negative Thursday trading session. The S&P 500 was flat and closed at 1,978. The Dow Jones dipped slightly (0.8%) closing at 19,961. Year to date, the S&P is up 7.0% and the Dow is up 2.3%.
  • Interest rates remained steady this week, with the 5 year and 10 year U.S. Treasury Notes are yielding 1.67% and 2.46%, respectively.
  • The spot price of WTI Crude Oil rose by .03% this week, closing at $101.99 per barrel. Year to date, Oil prices have risen 7.72%.
  • The spot price of Gold dropped .25% this week, closing at $1,307.55 per ounce. Year to date, Gold prices are up 8.8%.

Economic Data

  • The Consumer Price Index Ex-food and energy was reported to +1.9% above year ago levels and in line with the expected +2.0%.
  • Existing home sales was for the month of June were reported to be 5.04 million units ahead of the expected 4.99 units.
  • Initial jobless claims created excitement by being reported 18,000 below expectations.
  • On July 30, 2014, the Federal Reserve Open Market Committee is expected to release the Federal Funds Rate; with no change being anticipated.

Fact of the Week

  • … is out of the office.
  • Happy Summer

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 July 21, 2014

U.S. and World News

  • jet_plane_350pxMalaysian Airlines flight MH 17 appears to have been shot down by surface to air missiles over the battle-torn east Ukraine region of Donetsk. U.S. intelligence is pointing to pro-Russian separatists in Ukraine as the group behind the attack. There were 298 passengers and crew members on the aircraft, all of which were killed. President Obama called the event an “outrage of unspeakable proportions” and has again warned Vladimir Putin of increased sanctions if Russia does not change its stance of backing the Ukrainian rebels. Putin for his part placed the blame on the Ukrainian government, claiming that the tragedy would not have happened had Ukraine not resumed a military campaign against the pro-Russian separatists in the country.
  •  Israeli soldiers and tanks have entered Gaza after cease-fire efforts collapsed and 10 days of bombardments from the air failed to stop the rocket attacks by Hamas from the Gaza Strip. Israeli Prime Minister Benjamin Netanyahu says the campaign is aimed at “destroying the terror tunnels dug from the Gaza Strip into Israeli territory.” Israel had previously been reluctant to launch a ground assault for fear of endangering its own soldiers and drawing international condemnation over mounting Palestinian civilian deaths. The offensive follows an Egyptian effort earlier this week to halt hostilities in which Israel agreed to the terms, but Hamas refused, demanding that Israel and Egypt first give guarantees to ease the blockade on Gaza.
  •  The Obama administration is calling for new legislation that will limit the benefits of U.S. companies which reincorporate overseas in order to take advantage of the lower corporate tax rates of other countries. In the last decade, 50 U.S. firms have relocated for these tax inversions, with many of them being announced this year. Treasury Secretary Jacob Lew has written to congressional tax-writing committees stating that lawmakers “should enact legislation immediately to shut down this abuse of our tax system,” adding that any legislation should be retroactive to May to prevent a rush to do deals before it is potentially enacted.
  • The long awaited New Development Bank has been launched after the BRICS (Brazil, Russia, India, China and South Africa) leaders put their finishing touches on the $100 billion bank and currency reserve pool aimed at reshaping the Western-dominated international financial system centered on the International Monetary Fund and the World Bank. The bank is scheduled to start lending in 2016 and is a major accomplishment by the BRICS countries which account for almost half of the world’s population.

Markets

  • Markets rose this week despite the geopolitical turmoil and a sharply negative Thursday trading session. The S&P 500 gained 0.56% and closed at 1,978. The Dow Jones followed suit by rising 0.97% and closing at 17,100. Year to date, the S&P is up 8.21% and the Dow is up 4.46%.
  • Interest rates fell a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.67% and 2.49%, respectively.
  • The spot price of WTI Crude Oil rose by 2.13% this week, closing at $102.98 per barrel. Year to date, Oil prices have risen 7.72%.
  • The spot price of Gold decreased by 2.08% this week, closing at $1,310.88 per ounce. Year to date, Gold prices are up 9.09%.

Economic Data

  • Initial jobless claims fell 2,000 from last week, coming in at 302,000 vs. consensus estimates of 310,000. The level of claims is approaching the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 309,000, the lowest it’s been since June 2007.
  • Housing starts unexpectedly fell 9.3% in June vs. expectations of a rise of 1.9%. Both single family and multifamily starts fell much more than expected. The report contrasts with more positive recent news on home sales and the National Association of Home Builders index so it may have been an anomaly this month.

Fact of the Week

  • On June 12th, the Supreme Court ruled 9-0 that funds received via an inherited IRA from a non-spouse are not protected in bankruptcy. The case revolved around Heidi Clark who inherited $450,000 in an IRA from her deceased mother in 2001. She then went on to file bankruptcy along with her husband in 2010. The court ruled that the inherited IRA could be taken by creditors to cover the Clark’s debts.

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 July 14, 2014

U.S. and World News

  • money_printing_000013471715Minutes from the latest Federal Reserve meeting were released this week and were generally in line with expectations. The tone was slightly on the more dovish side but also confirmed the Fed’s plan to continue to decrease bond purchases (quantitative easing) at the next three meetings, completely stopping purchases in October.
  • The results of Indonesia’s presidential election will remain uncertain until next week, as 130 million votes need to be hand-counted. The latest polls show a narrow margin between candidates Joko Widodo and ex-general Prabowo Subianto. Subianto faces a U.S. visa ban for allegations of past human rights violations. The new president will come into office facing several issues including foreign investment, a crumbling currency and a need to cut fuel subsidies.
  • Tensions are mounting in the Middle East, after Gaza militants fired new M-302 rockets deep into Israel. Israel has ramped up its air strike campaign as a result, targeting militant positions including rocket launching sites and smuggling tunnels. The newly acquired rockets put about 2/3 of Israel’s 8 million people into Gaza’s range of fire, increasing pressure to neutralize any threats.
  • The Ukrainian army is preparing its invasion of Donetsk, the pro-Russian separatist stronghold and city of nearly 1 million. Rebel leaders are urging residents to evacuate the city and have vowed to never surrender. Separatists have continued to call on Russia for aid, although the country has not yet offered any direct military assistance. While Russia openly condemns Ukraine’s military crackdown, Russia faces heavy economic sanctions should it intervene.

Markets

  • Markets fell this week after making new highs the week prior. The S&P 500 shed 0.86% and closed at 1,968. The Dow Jones followed suit by dropping 0.68% and closing at 16,944. Year to date, the S&P is up 7.60% and the Dow is up 3.46%.
  • Interest rates fell this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.64% and 2.52%, respectively.
  • The spot price of WTI Crude Oil continued to fall this week due to waning concerns about Iraqi oil supplies in the near term. Prices fell 3.26%, closing at $100.67 per barrel. Year to date, Oil prices have risen 5.30%.
  • The spot price of Gold increased by 1.34% this week, closing at $1,338.20 per ounce. Year to date, Gold prices are up 11.36%. 

Economic Data

  • Initial jobless claims dropped 11,000 from last week, coming in at 304,000 vs. consensus estimates of 315,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 311,500.

Fact of the Week

  • According to the Federal Reserve, outstanding student loans total $1.11 trillion while outstanding credit card debt stands at $857 billion. In the last 12 months, student debt has increased $124 billion while credit card debt has increased just $7 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 – (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 – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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

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

Wealth Management Weekly Update June 9, 2014

U.S. and World News

  • power_000030464078SmallThe Environmental Protection Agency has proposed legislation mandating U.S. power plants to cut greenhouse gas emissions by an average of 30% by 2030. The law would affect hundreds of fossil fuel power plants and would strike the nation’s 600 coal fired plants hardest.
  • The European Central Bank announced a series of dramatic policy actions this week in an attempt to stimulate the Eurozone’s economy that faces low growth and threats of deflation. The ECB announced that it would be lowering all three of its key interest rates, bringing the refinancing rate to 0.15%, marginal lending facility to 0.4% and the deposit rate was lowered to -0.1% (banks are charged for holding excess reserves with the central bank, incentivizing them to lend). Liquidity was also injected into the system in the form of €400 billion of Targeted Long-Term Refinancing Operations (TLTRO) wherein the ECB would buy up asset-backed securities from its banks to improve their balance sheets and again incentivize them to lend more.

Markets

  • Markets continued to rise this week, setting new All-Time Highs. The S&P 500 climbed 1.38% and closing at 1,949. The Dow Jones followed suit by increasing 1.26% and closing at 16,924. Year to date, the S&P is up 6.42% and the Dow Jones is up 3.19%.
  • Treasury yields rose this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.65% and 2.60%, respectively.
  • The spot price of WTI Crude Oil was relatively unchanged this week, closing at $102.75 per barrel. Year to date, Oil prices have climbed 6.53%.
  • The spot price of Gold increased by 0.30% this week, closing at $1,253.41 per ounce. Year to date, Gold prices are up 4.31%.

Economic Data

  • Initial jobless claims rose by 12,000 from last week, coming in at 312,000 vs. consensus estimates of 310,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 310,000, the lowest since June 2007.
  • Monthly nonfarm payroll jobs came in slightly better than expected, showing an increase of 217,000 jobs vs. consensus estimates of 215,000. With this gain, the level of nonfarm payroll employment now exceeds its 2008 peak, although the working-age population has grown significantly in that time.
    • The unemployment rate held steady at 6.3%, as did the labor force participation rate which remained at a very low 62.8%.
    • Also of note were wages growing by 0.2% in the month and now are up 2.1% over the last year. It now appears that wage growth is in an uptrend, as would be expected in the second half of a business cycle.

Fact of the Week

  • According to the Department of Commerce, the personal savings rate (after-tax income minus spending divided by after-tax income) in the U.S. was 13.1% in 1973. As of 3/31/2014, the personal savings rate has dropped to a meager 3.8%.

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

Wealth Management Weekly Update June 2, 2014

U.S. and World News

  • The ‘Chocolate King’ Petro Poroshenko has been elected as the new Ukrainian President and has said he is prepared to talk to Moscow and Russia has indicated their willingness to speak to Poroshenko as well. Poroshenko comes into office facing a number of challenges including boosting Ukraine’s lagging economy, preventing civil war and dealing with Russian attempts to destabilize the region.
  • Thailand’s new military rulers are in the process are restoring central parts of their economy after receiving royal endorsement to rule earlier this week. General Prayuth Chan-Ochoa claims the army had to restore order after nearly seven months of rioting. This weekend the U.S. cancelled military exercises in Thailand and threatened to cut military assistance. The question remains whether the U.S. will start to cut economic ties as well.

Markets

  • Markets continued to rise this week with the S&P 500 climbing 1.64% and closing at 1924.The Dow Jones followed suit by increasing 1.05% and closing at 16,717. Year to date, the S&P is up 4.07% and the Dow Jones is up 0.85%.
  • Treasury yields had little fluctuation this week with the exception of the 10 year yield which continued to decline. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.54% and 2.48%, respectively.
  • oil_barrel_000036578632SmallThe spot price of WTI Crude Oil fell after the holiday weekend, ending the week down 1.42%, closing at $102.87 per barrel. Year to date, Oil prices have climbed 6.66%.
  • The spot price of Gold dropped 3.32% this week closing at $1249.68 per ounce. Year to date, Gold prices are up 4.00%.

Economic Data

  • Initial jobless claims fell by 26,000 from last week, coming in at 300,000 vs. consensus estimates of 318,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 312,000.
  • Gross Domestic Product (GDP) growth in the 1st quarter was revised down from a +0.1% initial reading to a -1.0% contraction in economic growth. This was the first negative growth quarter since the 1st quarter of 2011. Many economists continue to believe the negative print was largely due to especially harsh weather during the quarter and doesn’t represent a trend of a shrinking U.S. economy.
  • The Case-Shiller home price index rose a solid 1.2% in March vs. consensus estimates of 0.7%. Nearly all cities measured showed price increases. The national index is now up 12.4% in the past 12 months.

Fact of the Week

  • In 1950 there were 16 American workers for every 1 Social Security retiree receiving benefits. It is estimated that by the year 2035, there will be just 2.1 American workers for every 1 Social Security retiree receiving benefits.

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