Wealth Management Weekly Update April 14, 2014

U.S. and World News

  • The Senate has passed a bill that would extend unemployment benefits for 2.8 million people who have been out of work for at least six months. The legislation would restore the payout for five months retroactive to December, when the payouts expired. The bill will now be reviewed by the House, where approval is expected to be harder to come by due to concerns about costs of the extension.
  • The world’s largest election began this week in India with an electorate of 815 millionindia_taj_mahal_350 people. The ballot comprises of nine rounds and will take five weeks with results due on May 16th. The favorite to win is the Bharatiya Janata Party led by Narendra Modi, who has the support of businesses in the country. There are hopes that, if elected, he could form a stable coalition and revive India’s lackluster economy.
  • Ukraine’s security forces have been attempting to clear Kharkiv, the country’s second largest city, of separatists as the government tries to counteract what it sees as Russian schemes to engineer further annexations. Violence has flared up recently amid pro-Russian demonstrations in Ukraine.
  • The Illinois House and Senate approved a bill that would increase employee contributions to two Chicago city pension systems and will cut future cost of living increases for retirees. The bill is the start of an attempt to deal with a pension system that has a shortfall of around $20 billion, with some funds on track to completely run out of money within a decade.

Markets

  • Stock markets continued their slide this week that began last Friday. The S&P 500 was down 2.61% for the week, closing at 1,816.The Dow Jones fell 2.31%, closing at 16,026. So far in 2014, the S&P is down 1.20% and the Dow Jones is down 2.69%.
  • Treasury yields fell this week in conjunction with falling stock prices as the growth prospects of the U.S. economy have been called into question. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.58% and 2.63%, respectively.
  • The spot price of WTI Crude Oil ended the week up 2.28%, closing at $103.40 per barrel.  Year to date, Oil prices have risen 5.52%.
  • The spot price of Gold rose by 1.14% this week, closing at $1,318.34 per ounce. Year to date, Gold prices are up 9.71%.

Economic Data

  • Initial jobless claims dropped by 32,000 from last week, coming in at 300,000 vs. consensus estimates of 320,000. The level of claims was a post-recession low and was the best reading since May 2007. The four week moving average for claims fell to 316,000, continuing the improvement in this timely measure of employment.

Fact of the Week

  • According to the IRS, eliminating the deduction for home mortgage interest expense would increase annual tax revenues to the U.S. government by $175 billion, a boost of 6.3%.

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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update April 8, 2014

cuffsU.S. and World News

  • The FBI, Justice Department and the SEC all announced this week that they are investigating whether high-frequency trading companies break insider trading laws by abusing the fast moving information that they are able to receive microseconds before investors. The traders in question are able to use this informational advantage to front run investor orders, generating riskless profit on their end. The announcements come of the heels of a media tour by author Michael Lewis, whose new book, ‘Flash Boys’, accuses the high-frequency traders of rigging the stock markets.
  • The government has met its goal of signing up 7 million people for Obamacare by the end of March. Over 7.1 million Americans enrolled despite significant technical issues in the final days before this enrollment deadline. The administration failed to disclose the detail behind those who have signed up, including the most important metric for the success of the program: how many young people enrolled.
  • China has unveiled another stimulus package as part of the country’s attempt to stabilize slowing growth and maintain confidence. The announcement comes even as the government looks to reform the economy so that it relies less on the state sector. The stimulus includes selling 150 billion Yuan ($25 billion) in bonds for railway construction, improved low income housing and tax relief for struggling small businesses.

Markets

  • Stock markets made new all-time highs in the middle of the week before experiencing a sharp sell-off on Friday following the monthly jobs report. The S&P 500 was up 0.43% for the week, closing at 1,865.The Dow Jones rose 0.58%, closing at 16,412. So far in 2014, the S&P is up 1.45% and the Dow Jones is now down 0.39%.
  • Treasury yields did not fluctuate much from last week despite seeing some moderate  mid-week swings. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.71% and 2.73%, respectively.
  • The spot price of WTI Crude Oil ended the week down 0.57%, closing at $101.09 per barrel.  Year to date, Oil prices have risen 3.16%.
  • The spot price of Gold rose by 0.70% this week, closing at $1,304.25 per ounce. Year to date, Gold prices are up 8.54%.

Economic Data

  • Initial jobless claims rose by 16,000 from last week, coming in at 326,000 vs. consensus estimates of 319,000. The four week moving average for claims ticked up to 320,000.
  • Monthly nonfarm payroll employment increased by 192,000 vs. expectations of 200,000 jobs gained. Revisions to the January and February reports added another 37,000 jobs. The unemployment rate held steady at 6.7% and the labor force participation rate rose by 0.2% in the month. Overall, the report was good but not great and employment numbers may have seen an artificial boost from the expiration of emergency unemployment benefits.

Fact of the Week

  • According to the IRS, the total number of pages in the Federal Tax Rules has increased by 34,108 pages since 1995. Now standing at a total of 74,608 pages, the U.S. tax code has expanded by 5 new pages per day every day in the last 19 years.

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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update March 31, 2014

ukraine_moscow_mapU.S. and World News

  • World leaders met in the Netherlands this week to discuss a wide range of issues, but probably most notably the situation with Russia and Ukraine. The leaders barred Russia’s participation from the scheduled G-8 meeting, making it instead a G-7 conference with the United States, Britain, France, Germany, Italy, Canada and Japan participating. The group reaffirmed that Russia’s actions will have significant consequences, declaring Russia’s annexation of Crimea as a clear violation of international law.
  • The International Monetary Fund (IMF) has agreed to provide Ukraine with $14-18 billion as part of an economic reform program that will enable the country to tap into a total of $27 billion of international support over the next two years. In the U.S., Congress has overwhelmingly approved an aid package for Ukraine that includes $1 billion in loan guarantees and $150 million in direct assistance.

Markets

  • Stock markets were mixed this week. The S&P 500 was down 0.45% for the week, closing at 1,858.The Dow Jones edged up 0.12%, closing at 16,323. So far in 2014, the S&P is up 1.00% and the Dow Jones is now down 0.97%.
  • Short maturity issues saw their yields rise again this week, continuing last week’s trend following Janet Yellen’s hints that rate hikes may be coming sooner that expected. The     5 year and 10 year U.S. Treasury Notes are now yielding 1.75% and 2.72%, respectively.
  • The spot price of WTI Crude Oil ended the week up 2.06%, closing at $101.53 per barrel.  Year to date, Oil prices have risen 3.61%.
  • The spot price of Gold fell by 3.03% this week, closing at $1,293.85 per ounce. Year to date, Gold prices are up 7.67%.

Economic Data

  • Initial jobless claims dropped by 10,000 from last week, coming in at 311,000 vs. consensus estimates of 323,000. The four week moving average for claims fell to 318,000 continuing the positive trend in this timely employment indicator.
  • The Case-Schiller home price index rose a solid 0.8% in January vs. expectations of 0.6%. All 20 cities in the index saw price increases and prices nationally have risen 13.2% over the past year.
  • Chinese factory activity has shrunk for the fifth straight month with manufacturing PMI slipping to a reading of 48.1 (a reading of 50 is breakeven). Analysts see weakness in the country being broadly based and expect the Chinese government to launch a series of policy measures in an effort to stabilize growth.

Fact of the Week

  •        According to Bloomberg, American corporations hold an estimated total of $1.95 trillion in foreign earnings that have not been brought back into the United States in order to avoid the taxation of repatriating these funds. This foreign cash is equal to 12% of the size of the U.S. economy.

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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update March 17, 2014

U.S. and World News

  • Quickly condemned as an illegal referendum by the U.S., the overwhelming majority of Crimeans voted to secede from Ukraine and join Russia last Sunday. Russian President Vladimir Putin authorized the annexation despite warnings of economic sanctions from President Obama and European Union nations. Obama has since responded by imposing asset freezes and visa bans on some senior Russian officials and businessmen closely associated with Putin. Meanwhile, Ukraine plans to pull its troops out of Crimea, effectively accepting Russia’s annexation of the province and will now fortify its eastern border with Russia.
  • fed_000011172845SmallThe Federal Reserve board met this week and decided to continue on with the tapering of asset purchases, lowering monthly treasury purchases by another $10 billion to $55 billion per month. The Committee also provided an update to their forward guidance regarding raising short term interest rates from their near zero level. First, they have abandoned the use of a 6.5% unemployment rate threshold as a timing mechanism for raising rates. The unemployment rate has continued to fall, aided by a declining labor force, and was no longer useful to the policy makers as a true measure of labor market strength. Secondly, the Committee confirmed their use of a 2% inflation target when deciding on policy. Chairwoman Janet Yellen also made headlines when she estimated that rate hikes could come “around six months” after the Fed fully winds down its Quantitative Easing program. With the pace of tapering setting the course for an October end of asset purchases, higher rates could come in April of 2015, earlier than many expectations of late 2015/early 2016.

Markets

  • Despite the results of the Crimean annexation vote and an increase of international political tensions, stock markets rose this week. The S&P 500 was up 1.38% for the week, closing at 1,867. The Dow Jones climbed 1.48%, closing at 16,302. So far in 2014, the S&P is up 1.45% and the Dow Jones is now down 1.09%.
  • Treasury yields jumped higher this week, especially shorter maturity issues, after Janet Yellen’s hints that rate hikes may be coming sooner that expected. The 5 year and 10 year U.S. Treasury Notes yielding 1.71% and 2.75%, respectively.
  • The spot price of WTI Crude Oil ended the week up 1.04%, closing at $99.58 per barrel.  Year to date, Oil prices have risen 1.62%.
  • The spot price of Gold fell by 3.51% this week, closing at $1,334.32 per ounce. Year to date, Gold prices are up 11.04%.

Economic Data

  • Initial jobless claims edged up by 5,000 from last week, coming in at 320,000 vs. consensus estimates of 322,000. The four week moving average for claims fell to 327,000 continuing the positive trend in this timely employment indicator.
  • The Headline Consumer Price Index rose 0.1% in February, in line with expectations. Energy prices declined 0.5%, as a 3.6% increase in natural gas prices was offset by a 1.7% decline in motor fuel prices. Over the past year, headline CPI has increased 1.1%, consistent with a subdued inflationary environment.

Fact of the Week

  • According to a study by the National Institute on Retirement Security, 38 million of the 84 million American households (45%) that are headed by working-age people (ie. not retired) do not own any tax-advantaged retirement accounts like an IRA or 401(k).

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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update March 17, 2014

iStock_000024203309Small_350U.S. and World News

  • Tensions continue to mount overseas as rhetoric and vague threats of economic sanctions from President Obama and John Kerry against Russian action in Ukraine have fallen on deaf ears. The citizens of the Ukrainian province Crimea are scheduled to hold a referendum vote on Sunday in regards to joining the Russian Federation. Russia has stated that they will honor the results of the vote by the Crimean people, while John Kerry has stated that an annexation of Crimea by Russia will not be recognized by the United States and would bring with it strong consequences.
  • A bipartisan group of senators has agreed on a proposal to renew long-term jobless benefits for five months. The payments would be made retroactively from December, when the previous extension expired. The measure, which would cost $10 billion, is expected to pass through the Senate, but is expected to meet significant opposition in the House, making ultimate passage a toss-up.

Markets

  • Stock markets fell this week amid disappointing economic data from China and intensified rhetoric leading up to the Crimean referendum vote. The S&P 500 fell 1.92% for the week, closing at 1,841. The Dow Jones dropped by 2.29%, closing at 16,066. So far in 2014, the S&P is up 0.07% and the Dow Jones is now down 2.53%.
  • Treasury yields came back down this week following the increasing of tensions overseas with the 5 year and 10 year U.S. Treasury Notes yielding 1.54% and 2.66%, respectively.
  • The spot price of WTI Crude Oil ended the week down 3.54%, closing at $98.95 per barrel.  Year to date, Oil prices have risen 0.52%.
  • The spot price of Gold increased this week, gaining 3.19% and closing at $1,382.72 per ounce. Year to date, Gold prices are up 15.07%.

Economic Data

  • Initial jobless claims dropped by 8,000 from last week, coming in at 315,000 vs. consensus estimates of 330,000. The four week moving average for claims fell to 330,500. The Labor Department noted that there were no special factors affecting last week’s claims.
  • Consumer inflation in India fell for the third consecutive month in February, dropping to 8.1% from 8.8% in January. The decline comes as the Reserve Bank of India considers setting an inflation target after having raised interest rates three times since September.

Fact of the Week

  • According to the National Institute on Retirement Security, in 1975 85% of American workers in the private sector (non-government jobs) were covered by a defined benefit pension plan. This compares to just 16% of private sector workers being covered by pensions today, highlighting the dramatic shift from defined benefit pensions toward defined contribution plans such as 401(k)’s.

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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update March 10, 2014

U.S. and World Newsukraine_map

  • Russian forces took control of Crimea and threatened a full-scale invasion of Ukraine early this week, causing markets to fall drastically on Monday. Russian President Vladimir Putin then calmed markets by ordering some military units back to their bases and claiming that the country has no intention of using military force in the Ukraine. However, in a bit of a surprising twist, the Crimean parliament has voted unanimously for the province to become a part of Russia. The parliament’s vote is not binding in any way but this action will now go to a referendum vote by the citizens of Crimea that is scheduled for March 16th, where a “Yes” vote to join Russia could put the U.S. and the European Union in a bit of a democratic bind.
  • The crisis in Ukraine has renewed calls among Republicans and energy state Democrats for an easing of restrictions on foreign sales of natural gas. With Russia supplying Europe with 30% of its natural gas, there are many nations who are wary of imposing major sanctions on the country. By increasing U.S. gas exports, that sort of reliance on Russia could be reduced and give the U.S. and E.U. a freer hand when dealing with Russia, particularly in the long term.
  • President Obama unveiled his $3.9 trillion budget for fiscal year 2015 this week. His budget includes tax hikes for the wealthy and energy companies, as well as increased spending on infrastructure and education. Many of the proposals included in his budget stand little chance of passing but will provide fodder for the upcoming mid-term elections.

Markets

  • Stock markets shrugged off losses on Monday due to the tensions in Ukraine and rallied to end the week. The S&P 500 again closed at an all-time high, ending up 1.04% for the week, closing at 1,878. The Dow Jones rose by 0.82%, closing at 16,453. So far in 2014, the S&P is up 2.01% and the Dow Jones is now down 0.26%.
  • Treasury yields rose this week following an easing of tensions overseas with the 5 year and 10 year U. S. Treasury Notes yielding 1.64% and 2.79%, respectively.
  • The spot price of WTI Crude Oil ended the week flat, closing at $102.55 per barrel.  Year to date, Oil prices have risen 4.16%.
  • The spot price of Gold increased this week, gaining 1.05% and closing at $1,340.32 per ounce. Year to date, Gold prices are up 11.54%.

Economic Data

  • Initial jobless claims dropped by 26,000 from last week, coming in at 323,000 vs. consensus estimates of 335,000. The four week moving average for claims fell to 336,500. The Labor Department noted that there were no special factors affecting last week’s claims.
  • The monthly non-farms payroll employment figure came in higher than expected, showing a gain of 175k jobs vs. estimates of 149k. The negative impact from weather ended up being smaller than anticipated. The previous two months numbers were revised up by 25k, bringing the three month average gain to 129k.
    • The unemployment rate ticked up to 6.7% from 6.6%, while the labor force participation rate held steady at a very low 63.0%.
    • Also in the report, average hourly earnings unexpectedly rose 0.4% for the month, the strongest gain in eight months and have risen 2.2% over the last 12 months. This could perhaps be the early signs of a more normal inflationary environment.

Fact of the Week

  • Sunday marks the 5 year anniversary of the stock market recession low (3/9/2009), which was famously called by late CNBC anchor Mark Haines when he proclaimed, “I’m going to go out on a limb here…I think we are at a bottom. I really do.” On that date, the     S&P 500 traded at 676 and has since gained 208.75% total return (including dividends) to close today at an all-time high of 1,878. In that same time frame, the Dow Jones has risen from 6,547 to 16,453, a total return of 187.55%.

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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update March 3, 2014

ukraine_moscow_mapU.S. and World News

  • Violent protests in Ukraine have escalated and the parliament has ousted President Viktor Yanukovych and put a warrant out for his arrest. Acting President Oleksandr Turchynov says that the country is close to default and is requesting $35 billion in foreign aid from the European Union, the United States and the International Monetary Fund over the next two years to say afloat. While they await response from these entities, Russian gunmen have reportedly seized government buildings in the Crimea region, including the two main airports, according to Ukraine officials. Russia is denying these reports.
  • Despite some opposition, the Japanese government disclosed in a draft regarding its long-term energy strategy that they intend to revive nuclear energy as a major source of electricity. Japan’s nuclear plants were idled following the Fukushima disaster that was caused by a tsunami almost three years ago. This has caused the country to significantly increase its energy imports and as a result, has been a drag on the country’s GDP.
  • Major bitcoin exchange Mt. Gox has gone offline and is filing for bankruptcy protection after the exchange said it may have lost 850,000 bitcoins due to hacking. The crypto-currency currently trades at around $575 per bitcoin, bringing the losses due to the bankruptcy and hacking to over $475 million.
  • David Camp, the Republican Chairman of the House Ways and Means Committee has introduced a proposal to overhaul and simplify the tax code. His plan reduces the seven individual tax brackets to two, a 10% and 25% bracket. The proposal also includes cutting the top corporate tax rate from 35% to 25%. Finally, the largest banks and insurers would have to pay a quarterly 0.035% tax on assets over $500 billion. The proposal faces many challenges before becoming a law.

Markets

  • Stock markets rose this week as the S&P 500 closed at an all-time high, ending up 1.30% for the week, closing at 1,859. The Dow Jones rose by 1.42%, closing at 16,322. So far in 2014, the S&P is now up 0.96% and the Dow Jones is now down 1.07%.
  • Treasury yields came down this week with the 5 year and 10 year U. S. Treasury Notes yielding 1.51% and 2.65%, respectively.
  • The spot price of WTI Crude Oil increased this week by 0.32%, closing at $102.53 per barrel.  Year to date, Oil prices rose 4.16%.
  • The spot price of Gold increased moderately this week, gaining 0.17% and closing at $1,326.26 per ounce. Year to date, Gold prices are up 10.37%.

Economic Data

  • Initial jobless claims rose by 12,000 from last week, coming in at 348,000 vs. consensus estimates of 335,000. The four week moving average for claims fell to 338,250. The Labor Department noted that there were no special factors affecting last week’s claims.
  • 4th quarter GDP growth was revised down to 2.4% from an initial estimate of 3.2%. Weather effects most likely had to do with the large negative revision. This revision brings total 2013 GDP growth down by 0.2% to 2.5%.
  • The Case-Shiller home price index rose 0.8% in December vs. consensus expectations of 0.6%. 19 out of the 20 cities part of the index saw price increases. In 2013, the index rose a strong 13.4%.
  • New home sales rose 9.6% in January vs. consensus estimates of them actually falling by 3.4%. This brings the level of new home sales up to a new post-recession high and is a positive surprise in light of recent downbeat data.

Fact of the Week

  • The average interest rate paid by the US government on the country’s interest-bearing debt has been more than cut in half over the last seven years. Benefitting from aggressive interest rate lowering policies by the Federal Reserve, the US government now pays an average of 2.406% on its debts, compared to 5.034% at the beginning of 2007.

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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update February 24, 2014

U.S. and World News

    • The Congressional Budget Office released the findings of a study on President Obama’s proposal to raise the minimum wage to $10.10/hour by 2016 from a current level of $7.25/hour. The study found that the proposal could lead to the loss of about 500,000 jobs as some businesses would likely need to cut staff. However, the study also said that the plan would increase the pay of 16.5 million people and potentially lift 900,000 people out of poverty. A total of 45 million people are projected to be categorized as poor in 2016.

yen_safe_000015999222_250

  • The Bank of Japan surprised markets by expanding lending facilities that are designed to spur corporate investment by offering low interest loans to commercial banks in the hope that they will lend the money to businesses. The Japanese central bank also decided to maintain its asset purchasing program of ¥60-70 trillion per year. The decisions come after 4th quarter GDP data show growth of 0.3% which was much less than expected.
  • Progress toward approval of the Keystone XL pipeline hit a snag this week after a Nebraska judge overruled a law that had allowed the state’s Governor Dave Heineman to approve the building of the pipeline through the state. As a result of the ruling, the decision now rests with the Public Service Commission.

Markets

  • Stock markets rose slightly this week as the S&P 500 ended up 0.35%, closing at 1,836 and the Dow Jones rose by 0.47%, closing at 16,103. So far in 2014, the S&P and Dow have declined 0.66% and 2.86%, respectively.
  • Treasury yields rose slightly in the week with the 5 year and 10 year U. S. Treasury Notes yielding 1.53% and 2.73%, respectively.
  • The spot price of WTI Crude Oil increased this week by 2.1%, closing at $102.23 per barrel.  Year to date, Oil prices rose 3.85%.
  • The spot price of Gold increased moderately this week, gaining 0.42% and closing at $1,323.97 per ounce. Year to date, Gold prices are up 10.18%.

Economic Data

  • Initial jobless claims fell by 3,000 from last week, coming in at 336,000 vs. consensus estimates of 335,000. The four week moving average for claims rose to 338,500. The Labor Department noted that there were no special factors affecting last week’s claims.
  • Housing starts declined 16.0% in January vs. consensus estimates of a decline of 4.9%. Adverse weather conditions played a significant role in the drop off, as the Midwest region saw housing starts fall to their lowest level in the 55 year history of the economic series.

Fact of the Week

  • The proportion of workers who voluntarily left their jobs, known as the “quit rate”, rose to a post-recession high of 1.8% in November. That compares with a low of 1.2% in September 2009, but is still well under the average of 2.1% seen from 2000-2006. Many economists, including new Fed Chief Janet Yellen, view the quit rate rising as a positive indicator of the state of the labor market as they believe that people resign from their jobs either because they have a new one or are confident of finding another position.

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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update February 17, 2014

U.S. and World News

  • Both the House and Senate passed through a one year extension of the U.S. debt ceiling that will extend the government’s borrowing authority until March 16, 2015. The measure was passed without any additional conditions, although there had been plans by the Republicans to link a debt ceiling extension to restoring cuts to military pensions. The legislation is now due to be sent to President Obama for his approval.
  • The government has announced yet another delay to an important part of Obamacare, saying that businesses with between 50 to 99 full-time workers won’t be mandated to provide health insurance to their workers until 2016. Larger companies will have to cover at least 70% of employees by 2015 and 95% by 2016. The original plan was for companies to offer coverage this year, but in July, that was delayed until 2015.
  • According to a Wall Street Journal study, there are around 4.8 million people aged 18-64 that get no government help to buy medical insurance because they earn too little to qualify for federal subsidies. However, they earn too much to receive benefits under state programs. The gap is the result of 24 states (Illinois is not one of them) deciding not to expand Medicaid coverage under the Affordable Care Act. Some states are revisiting their policies in order to cover the gap.
  • New Fed Chair Janet Yellen, had her first congressional testimony in her new position this week and reiterated the Central Bank’s pledge to retain super easy monetary policies and reiterated that any action the Fed will take is data dependent. The Fed will have their next policy meeting in March, so there will be plenty of economic data, including another jobs report, which will be released before a decision needs to be made on continuing the path of tapering asset purchases.

Marketsfinance_chart_250px

  • Stock markets climbed higher this week as the S&P 500 ended up 2.38%, closing at 1,839 and the Dow Jones rose by 2.45%, closing at 16,154. So far in 2014, the S&P and Dow are down 0.53% and 2.55% respectively.
  • Treasury yields started to rise again this week with the 5 year and 10 year treasury now yielding 1.53% and 2.75% respectively.
  • The spot price of WTI Crude Oil increased this week by 0.45%, closing at $100.33 per barrel. Oil prices are now up 1.81% in 2014.
  • The spot price of Gold rallied again this week, gaining 4.06% and closing at $1,318.69 per ounce. Year to date, Gold prices are up 9.74%.

Economic Data

  • Initial jobless claims rose by 8,000 from last week, coming in at 339,000 vs. consensus estimates of 330,000. The four week moving average for claims rose to 336,750. The Labor Department noted that there were no special factors affecting last week’s claims.
  • January retail sales were a significant disappointment, declining by 0.4% vs. expectations that they would be flat for the month. Adverse weather conditions certainly played a role, with weakness seen at department stores as well as restaurants and bars. However, non-weather sensitive categories, such as online sales, also showed weakness and declined 0.6% for the month.

Fact of the Week

  • The total number of listed stocks on public exchanges reached an all-time high of 8,823 in 1997. At the end of 2013, this number had fallen to a mere 5,008 companies, a 43% decline in the number of listings. The bursting of the Tech Bubble from 2000-2002, increased costs associated with being a public company after the Sarbanes-Oxley Act was passed and the rapid rise of the private equity industry are likely some factors reducing the number of listings. This phenomenon, combined with the decline in shares outstanding of companies that have remained public (through share buybacks), have contributed to reduce the total investment options available in the market and may be a significant factor in the rapid rise in stock prices since 2009.

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 – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update February 10, 2014

U.S. and World News

    • The suspension of the U.S. debt limit ended this week, leaving the Treasury a couple week window in which they can take measures to avoid a default. In the past, the debate over the debt ceiling has been extremely contentious, but at this time there seems to be little stomach for a new fight, so it is expected that Congress will increase the cap without too much theatrics.

Architecture in San Juan Old City

  • Rating agency S&P has cut Puerto Rico’s credit rating to BB+, or junk status, and maintained a negative outlook for the debt-laden commonwealth. They cited a reduced capacity to access to capital to fund its operating deficit as a reason for the negative outlook. Moody’s and Fitch, other rating agencies, are also contemplating dropping Puerto Rico to junk status as well.
  • A bipartisan group of Senate and House members has stepped up pressure on the White House to approve the controversial Keystone XL oil pipeline that would extend from Canada to the Gulf Coast. This follows an extensive State Department report filed last week that found that the proposed pipeline would have little to no negative environmental impact, which has been one of the primary concerns holding up approval.

Markets

  • Stock markets climbed higher this week as the S&P 500 ended up 0.90%, closing at 1,797 and the Dow Jones rose by 0.69%, closing at 15,794. So far in 2014, the S&P and Dow are down 2.78% and 4.72% respectively.
  • Treasury yields were largely flat this week with the 5 year and 10 year treasury now yielding 1.47% and 2.68% respectively.
  • The spot price of WTI Crude Oil increased this week by 2.64%, closing at $100.06 per barrel. Oil prices are now up 1.53% in 2014.
  • The spot price of Gold rose again this week, gaining 1.82% and closing at $1,267.17 per ounce. Year to date, Gold prices are up 5.45%.

Economic Data

  • Initial jobless claims fell 17,000 from last week, coming in at 331,000 vs. consensus estimates of 335,000. The four week moving average for claims rose to 334,000. The Labor Department noted that there were no special factors affecting last week’s claims.
  • The January employment report contained a confusing set of data, as payroll job growth significantly disappointed, but the unemployment rate fell by one tenth. Nonfarm payrolls rose by 113,000 vs. expectations of 180,000. Weather surprisingly didn’t appear to play too much of a role in this month’s numbers. The unemployment rate fell 0.1% to 6.6%. Labor force participation rate actually rose by 0.2% to 63.0% despite the expiration of Emergency Unemployment Compensation benefits which many believed would lead some unemployed workers to stop reporting that they were actively seeking employment.
  • The ISM manufacturing index was much weaker than expected in January with a reading of 51.3 vs. expectations of 56.0 and was a fall from 56.5 in December. Comments from several of the survey respondents pointed to poor weather as a reason for the weakness in January.

Fact of the Week

  • According to a Wall Street Journal report, 1 in 6 men in their prime working years of 25-54 don’t have jobs. The proportion is around 17%, or 10 million people, which compares with 6% in the early 70’s and 13% in 2007. Reasons cited by economists include the slow recovery from the recession and that many people are unable to keep up with the way that technology and globalization are changing the labor market.

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 – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management