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

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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

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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

Wealth Management Weekly Update May 27, 2014

U.S. and World News

  • Ukrainians are due to vote in presidential and mayoral elections on Sunday, with billionaire “chocolate king” Petro Poroshenko well ahead in the presidential polls. This election will come after 13 Ukrainian soldiers were killed during a skirmish with pro-Russian separatists earlier this week. The pro-Russian rebels are attempting to make sure the elections don’t take place in regions where they have influence, while another major issue is whether Russia will accept the outcome of the election after previously saying they may not.
  • The military chief of Thailand, General Prayuth Chan-ocha, had imposed martial law in the country earlier this week before announcing on Thursday that the military has taken control of the country in a coup. Nightly curfews have been imposed and the country’s constitution has been suspended in the process. The Thai military claims the actions seek to restore order following six months of violent and sometimes deadly protests, which have brought the country’s economy to the brink of recession. It also comes amid a period of limbo for Thailand after a court dismissed Prime Minister Yingluck Shinawatra and nine other ministers earlier this month for abuse of power.
  • swiss_000002085816SmallVoters in Switzerland have overwhelmingly rejected a proposal to institute a minimum wage of 22 Swiss francs (~$25) an hour, which would have been the highest in the world. Over 76% of voters cast a No ballot. Swiss Economy Minister Johann Schneider-Ammann said, “Accepting the initiative would have led to job cuts in economically weak, rural areas.”

Markets

  • Markets rose across the board this week with the S&P 500 rising 1.25% to a new All-Time high of 1900.The Dow Jones was also up this week, rising by 0.76% and closing at 16,606. Year to date, the S&P is now up 3.67% and the Dow Jones is up 1.17%.
  • Treasury yields remained steady this week following a gradual decline in interest rates this year. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.53% and 2.54%, respectively.
  • The spot price of WTI Crude Oil rose in the days leading up to the holiday weekend, ending the week up 2.77%, closing at a 52-week high of $104.39 per barrel. Year to date, Oil prices have climbed 8.23%.
  • The spot price of Gold decreased minimally this week, closing at $1292.59 per ounce. Year to date, Gold prices are up 7.57%.

Economic Data

  • Initial jobless claims rose by 29,000 from last week, coming in at 326,000 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 323,000.
  • Existing home sales rose 1.3% in April which was lower than consensus estimates of  2.2%. Meanwhile, new home sales rose 6.4% in April vs. consensus estimates of a 10.7% gain. The rebound in housing following an extremely harsh winter hasn’t been as robust as expected.

Fact of the Week

  • According to data released by the IRS, federal employees owe a total of $3.3 billion in back taxes. While the delinquency rate of federal employees of 3.2% is expectedly lower than national average of 8.7%, there are 318,462 federal employees who owe back taxes, putting the average outstanding tax bill at $10,391. There is a wide dispersion of non-payment rates within the different divisions of the federal government. The highest rates of tax delinquencies are found in small agencies dealing with civil rights and the disabled such as The National Council on Disability (11.5% delinquent) and the Civil Rights Commission (9.5%). Employees of the House of Representatives (not necessarily Congressmen) have a delinquency rate of 4.9%, while the Senate is a bit better at 3.2%. The Treasury Department, of which the IRS is a part of, has the lowest non-payment rate of 1.2%, with active duty military personnel not far behind at #2 with a tax delinquency rate of 1.7%.

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 May 19, 2014

U.S. and World News

  • Pro-Moscow separatists have declared victory in a referendum on “self-rule” for the “People’s Republic of Donetsk” in eastern Ukraine, saying that 89% of voters have approved the measure. Russia said it “respects” the results of the ballot, which should be implemented “in a civilized manner.” However, the Ukraine government, the U.S. and the EU have condemned the ballot as illegal. The fear is that if Donetsk does try to implement the poll outcome, Ukraine will slide into civil war.
  • oil_000013481523_290Saudi Arabia could increase oil production if the tension between Russia and Ukraine causes market shortages, Saudi Oil Minister Ali al-Naimi said today. Absent of any crude shortages, al-Naimi doesn’t expect OPEC to increase its output cap of 30M barrels a day when it meets next month. He also described $100 a barrel as a fair price “for everybody – consumer, producer and oil companies.”
  • Narendra Modi’s opposition Bharatiya Janata Party looks to have won India’s biggest election victory in thirty years. At the time of writing, counting showed that the BJP and its allies were ahead in 336 out of 542 seats in the lower house of parliament, well above the 272 needed for a majority. India’s Sensex stock index was +0.9% – although down sharply from earlier highs – on the prospect of a stable government that’s perceived as business friendly and committed to economic reform.

Markets

  • The S&P 500 declined by 0.03% for the week, closing at 1,878.The Dow Jones also fell this week by 0.55% closing at 16,491. So far in 2014, the S&P is up 1.60% and the Dow Jones is down 0.51%.
  • Treasury yields declined this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.55% and 2.52%, respectively.
  • The spot price of WTI Crude Oil ended the week up 2.15%, closing at $102.14 per barrel.  Year to date, Oil prices have climbed 5.00%.
  • The spot price of Gold increased by 0.31% this week, closing at $1292.93 per ounce. Year to date, Gold prices are up 7.60%.

Economic Data

  • Jobless claims dropped to 297,000 (vs. consensus 320,000) from an upwardly-revised 321,000 in the prior week. The Labor Department cited no special factors in the data. The four-week moving average of initial claims edged down to 323,000.
  • Headline consumer prices rose 0.3% in April, in line with consensus expectations. Core consumer prices rose 0.24% on an unrounded basis (vs. consensus +0.1%), somewhat higher than our view. Over the past year, headline consumer prices rose 2.0% and core prices rose 1.8%, bringing inflation numbers closer to the Fed’s stated targets.

Fact of the Week

  • Bill Gates is ranked # 1 as the richest American today ($72 billion), but the 6 living heirs of Sam Walton (who died in 1992) are worth a combined $145 billion (source: Forbes).

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 May 12, 2014

U.S. and World News

  • ukraine_moscow_mapViolence continued to escalate in Ukraine this week as the country sent special forces to the port city of Odessa after pro-Russian separatists stormed a police station and freed 70 fellow activists. Then, pro-Russian militants killed four government servicemen and downed a military helicopter as Ukraine sought to regain ground lost in the Eastern part of the country. Meanwhile, Putin and other Russian leaders have called to postpone the May 25th elections in Ukraine, a move in an effort to further destabilize the country. Secretary of State John Kerry warned that the U.S. will impose further sanctions if “Russian elements” continue to sabotage the democratic process in Ukraine.

Markets

  • The S&P 500 fell slightly by 0.06% for the week, closing at 1,878.The Dow Jones rose to a new record high this week, climbing by 0.54% and closing at 16,583. So far in 2014, the S&P is up 2.35% and the Dow Jones is up 0.84%.
  • Treasury yields were largely flat this week, keeping this year’s unexpected drop in interest rates intact. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.64% and 2.63%, respectively.
  • The spot price of WTI Crude Oil ended the week up 1.04%, closing at $100.08 per barrel.  Year to date, Oil prices have climbed 2.88%.
  • The spot price of Gold fell by 0.84% this week, closing at $1,288.79 per ounce. Year to date, Gold prices are up 7.25%.

Economic Data

  • Initial jobless claims fell by 25,000 from last week, coming in at 319,000 vs. consensus estimates of 325,000. The Labor Department noted no special factors in the data like they had done the last few weeks during the Easter and spring break seasons. The four week moving average for claims moved up for the third consecutive week, up to 325,000, after seeing several weeks of decline.
  • 1st quarter earnings reports are nearly all in with 91% of the S&P 500 having reported. Overall, corporate profits weren’t as bad as many analysts had feared given the harsh weather to start the year. 69% of companies beat bottom line earnings expectations while 53% were able to beat top line sales expectations. Utilities faired the best in the first quarter, aided by increased demand due to the colder than normal winter. Consumer staples stocks featured the worst reports with 52% of the sector exceeding earnings expectations and only 39% having better than expected revenue.

Fact of the Week

  • In a recent study conducted by Mark Rank of Washington University and Thomas Hirschl of Cornell, 44 years of personal income data for individuals from ages 25 to 60 (prime working years) were analyzed to see what levels of affluence Americans may experience during their lives. Surprisingly, it turns out that 12% of the U.S. population will find themselves in the infamous “1%” of income distribution for at least one year. Additionally, 39% of Americans will spend at least a year in the top 5% of income distribution, 56% will be in the top 10% at some point and a whopping 73% of the population will have at least one year in the top 20% of the country’s income distribution. The findings cast serious doubt on the notion of a static 1% and 99% class structure that is often portrayed in the U.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 CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update May 5, 2014

U.S. and World News

  • iStock_000024203309Small_350President Obama has announced new targeted sanctions against Russia that will impact more wealthy individuals and companies in the country. The G7 (the G8 excluding Russia) deemed that Russia hasn’t met its pledge to de-escalate the conflict with Ukraine. The sanctions won’t target broad sections of Russia’s economy as many European nations fear the consequences for their own economies due to energy dependence on Russia.
  • The April Federal Reserve meeting didn’t provide any major surprises as the Committee continued to taper their asset purchases by another $10 billion, bringing monthly purchases down to $45 billion per month. If Janet Yellen and the Fed continue to reduce asset purchases at this rate, they will wind down the Quantitative Easing program in October. Most of the language in the Committee’s statement was the same but they did note that “economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions.”

Markets

  • The S&P 500 rose slightly by 0.95% for the week, closing at 1,881.The Dow Jones followed suit by climbing 0.93%, closing at 16,512. So far in 2014, the S&P is up 1.77% and the Dow Jones is down 0.38%.
  • Treasury yields fell again this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.67% and 2.59%, respectively.
  • The spot price of WTI Crude Oil ended the week down 0.77%, closing at $99.83 per barrel.  Year to date, Oil prices have climbed 1.59%.
  • The spot price of Gold fell by 0.33% this week, closing at $1,298.93 per ounce. Year to date, Gold prices are up 8.10%.

Economic Data

  • Nonfarm payrolls gained 288,000 jobs surpassing estimates of 218,000 jobs gained. The unemployment rate dipped to 6.3% from 6.6%. The unemployment rate is at the lowest level since September 2008.
  • Initial jobless claims rose by 15,000 from last week, coming in at 344,000 vs. consensus estimates of 320,000. The Labor Department noted that seasonal adjustment presents difficulties during the Easter holiday and spring break from schools. The four week moving average for claims moved up for the second consecutive week to 320,000 after seeing several weeks of decline.
  • The Case-Shiller home price index rose a solid 0.8% in February, in line with consensus expectations. Over the past year, the national index has risen 12.9%, although prices have varied widely in different geographic areas.
  • The preliminary 1st quarter GDP reports showed growth of only 0.1% vs. consensus expectations of 1.2%. This was the slowest growth rate since the 4th quarter of 2012. Adverse weather is primarily being blamed for the weak number and despite the disappointing headline number, there are some positive signs in this report that suggest a solid bounce in GDP growth could be coming in the 2nd quarter.

Fact of the Week

  • Households in the U.S. are split 68%/32% between homeowners and renters. Of those homeowners, 32% of them own their home outright (no mortgage). Therefore, 22% of all U.S. households are homeowners with no debt (32% of 68%).

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