Wealth Management Economic Update March 2, 2015

U.S. and World News

  • Greece submitted its list of economic reform plans to the Eurozone finance ministers just before Monday’s deadline. While the list was approved, clearing the path for a four month extension to Greece’s bailout funding, the finance ministers warned that the reforms must be expanded in detail before new bailout funding would be released.
  • Following months of negotiations, West Coast ports have been reopened and are working at full speed after a new five year labor contract agreement was reached. Port officials estimate that it will take at least three months to clear the backlog of containers that have been piling up during the labor stoppage. The strike has disrupted shipments for companies across the country as merchandise has been sitting idle in stacked containers, waiting to be unloaded.
  • world_internet_000003759439_320The FCC has approved net neutrality restrictions on the internet, reclassifying broadband services under the Telecommunications Act. The vote for the measure was 3 to 2 and went down party lines with the Democrats carrying the vote. The new rules will prevent internet service providers from prioritizing the speeds of service they provide to customers and charging higher rates for ‘fast lanes’ of the internet. FCC Chairman Tom Wheeler said the action was an “irrefutable reflection of the principle that no one, whether government or corporate, should control free and open access to the internet.”

Markets

  • Equity markets were mostly flat this week. The S&P 500 lost 0.24%, closing at 2,104, while the Dow Jones gained 0.02% and closed at 18,033. Year to date, the S&P and Dow Jones are up 2.57% and 2.22%.
  • Yields in the Treasury markets moved down this week. The 10 year Treasury bond now yields 2.00% and the 5 year Treasury bond yields 1.50%.
  • The spot price of WTI Crude Oil fell this week, losing 3.05% and closing at $49.26 per barrel. In 2015, WTI Oil prices have fallen 9.21%.
  • The spot price of Gold rose by 0.92% this week and closed at $1,213.00 per ounce. Year to date, gold prices are up 2.41%.

Economic Data

  • Initial jobless claims jumped up from last week, coming in at 313,000 vs. consensus estimates of 290,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 294,500.
  • The Case-Shiller home price index rose 0.9% in December vs. consensus estimates of a 0.6% increase. Appreciation was seen across all 20 of the cities monitored in this index. Over the past year, home prices have risen 4.5% as measured by the index.
  • The headline Consumer Price Index (measure of inflation) fell 0.7% in January, pushed lower by an 18.7% drop in gasoline prices. Core CPI, which does not include food or energy, rose 0.2%, better than the expected 0.1%. Despite this better core CPI number for January, the one year rate of change stands at a subdued 1.6%.

Fact of the Week

  • On July 15, 2014, Federal Reserve Chair Janet Yellen stated in her scheduled testimony to Congress that, “Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched…” This sort of sector specific commentary from a Fed Chair was highly unusual and questioned at the time. Her call on social media stocks was good, as since then, those stocks have returned -1.11% (as measured by the Global X Social Media ETF, SOCL) compared to the S&P 500 return of 7.9% during that time. However, her biotech call doesn’t look so good as those stocks have gained 52.3% (as measured by the SPDR Biotech ETF, XBI) in that time. Yellen was back in front of Congress again this week but didn’t provide any asset class valuation calls this time around.

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 February 24, 2015

U.S. and World News

  • After a full week of contentious negotiations, a tentative agreement has been reached between Greece and Eurozone finance ministers, which would provide for a four month extension of Greece’s bailout program. This would allow Greece to access €10 billion of funding the country desperately needs. New Greek Prime Minister Alex Tsipras had been seeking a six month extension and a roll back of the austerity measures the original bailout had been contingent upon, instead winding up with only four months and no change to austerity. Greece must provide an action plan on Monday outlining steps they will be taking to improve its fiscal situation in order for the deal to be complete.  Additionally, Greece will be subject to reviews by the IMF and the ECB to ensure they are following the terms of the agreement, conditions which the country had been fighting against. Temporarily preventing Greece from exiting the Eurozone, this ‘kick the can down the road’ agreement will likely lead to the situation being revisited in four months.
  • russia_000057310942LargeThe U.S. has accused Russia of violating the ceasefire in Ukraine. This is amid reports that Ukrainian troops are pulling out of the key railroad hub town of Debaltseve after separatist forces fought their way into the key railway junction on Tuesday. Vice President Joe Biden strongly condemned the violence and warned the “costs to Russia will rise if it continues to violate the Minsk agreements.”
  • Minutes from the January Fed meeting showed the committee to be a bit more dovish than consensus believed. There was no clear indication that most participants thought that ‘patience’ should be removed from the upcoming Fed statement as it pertains to when an initial rate hike will come. Many still believe the Fed is on track for a June or September initial hiking of the Fed Funds rate, as long as employment and inflation data continue to improve.

Markets

  • Equity markets continued to rise this week following the four month Greek extension as both the S&P 500 and Dow Jones closed the week at new All-Time Highs. The S&P 500 gained 0.67%, closing at 2,110, while the Dow Jones gained 0.69% and closed at 18,140. Year to date, the S&P and Dow Jones are up 2.80% and 2.17%.
  • Yields in the Treasury markets continued to creep upwards this week. The 10 year Treasury bond now yields 2.12% and the 5 year Treasury bond yields 1.60%.
  • The spot price of WTI Crude Oil fell this week, losing 4.62% and closing at $50.34 per barrel. In 2015, WTI Oil prices have fallen 5.50%.
  • The spot price of Gold fell by 2.23% this week and closed at $1,229.66 per ounce. Year to date, gold prices are up 1.51%.

Economic Data

  • Initial jobless claims decreased from last week, coming in at 283,000 vs. consensus estimates of 290,000. The Labor Department noted that some states had to have their claims estimated due to severe weather. The four week moving average for claims now stands at 283,250.

Fact of the Week

  • Since the beginning of 1986 through close today, the Dow Jones Industrial Average has risen from 1,547 to 18,140, a price increase of 1,072%. Breaking down when these gains occurred results in a pretty interesting finding. The combined gains on the index on Mondays, Tuesdays and Wednesdays comes to 988.46%, while the combined gain of Thursdays and Fridays is just 8.95%. The Dow has been doing its work early in the week and been taking four day weekends for 30 years. (Source: Eddy Elfenbein, Crossing Wall Street)

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 February 16, 2015

U.S. and World News

  • After unsuccessful meetings this week in Brussels, Belgium, European finance ministers put off decisions on Greece’s bailout terms until they reconvene next week. Greece is trying to negotiate a €10 billion bridge loan to keep the country solvent as it works with its creditors. Greek officials are promising they will make every effort to reach an agreement on conditions for a new support program although new Greek Prime Minister Alexis Tsipras continues to vow to roll back austerity measures in the country, jeopardizing its ability to renegotiate.
  • A ceasefire between Russia and Ukraine has been reached and will begin on February 15th. This was the result of a 17 hour meeting between leaders of Russia, Ukraine, France and Germany. The new deal revives a failed September agreement and includes commitments from each side to pull back heavy weapons. Should this agreement fail, many Western nations are considering increased sanctions against Russia.
  • Sweden has joined the fray when it comes to central bank easing as its Riksbank cut its repo rate into negative territory, down to -0.1%. Riksbank also announced a 10 billion kronor ($1.2 billion) quantitative easing program in which the bank will purchase Swedish government bonds.

Markets

  • Equity markets continued to rally this week, with the S&P 500 gaining 2.09% and closing at a new All-Time High of 2,097. Likewise, the Dow Jones gained 1.26% and closed at 18,019. Year to date, the S&P and Dow Jones are up 2.11% and 1.47%.
  • Yields in the Treasury markets continued to creep upwards this week. The 10 year Treasury bond now yields 2.04% and the 5 year Treasury bond yields 1.53%.
  • The spot price of WTI Crude Oil continued to rise from very low levels, gaining 1.64% and closing at $52.54 per barrel. In 2015, WTI Oil prices have fallen 2.16%.
  • The spot price of Gold fell by 0.35% this week and closed at $1,229.66 per ounce. Year to date, gold prices are up 3.82%.

Economic Data

  • Initial jobless claims increased from last week, coming in at 304,000 vs. consensus estimates of 287,000. The Labor Department noted that some states had to have their claims estimated due to severe weather. The four week moving average for claims now stands at 289,750.
  • Headline retail sales declined 0.8% in January, more than the 0.4% decline that was expected. The drop was largely due to a 9.3% drop in gasoline station sales due to lower prices. This indicates that consumers are not yet spending the savings they’ve been enjoying at the gas pump, but this is not terribly surprising as oil price declines have historically affected the economy with a lag.

Fact of the Week

  • According to the Treasury Department, the average interest rate paid by the US government on the country’s interest-bearing debt has fallen by more than half over the last 8 years, dropping from 5.03% at the end of 2006 to 2.37% at the end of 2014.

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 February 11, 2015

U.S. and World News

  • The second full week of the Syriza Party’s power in Greece was another tumultuous one that first started with Germany ruling out any debt write downs for Greece and an ECB policymaker threatening to cut off funding to Greek banks if Athens doesn’t agree to renew its bailout package. Fears were calmed a bit when Greece proposed ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus and targeting wealthy tax-evaders. However, later in the week the ECB put more pressure on Greece by revoking a waiver that allowed banks to use Greek government debt as collateral for loans. All of this is to say, stay tuned to the Greek situation.
  • australia_000047410124_300The Reserve Bank of Australia has joined the easing party, becoming the latest global central bank to cut interest rates in response to slowing inflation and concerns about economic growth. The RBA’s cut was its first change since August 2014 and lowered its benchmark rate by 0.25% to a new low of 2.25%

Markets

  • Equity markets rallied this week, with the S&P 500 gaining 3.09% and closing at 2,055. Likewise, the Dow Jones gained 3.86% and closed at 17,824. Year to date, the S&P and Dow Jones are virtually unchanged.
  • Yields in the Treasury markets spiked up this week, especially after a solid employment report seemed supportive of a Fed rate hike during the summer. The 10 year Treasury bond now yields 1.97% and the 5 year Treasury bond yields 1.49%.
  • The spot price of WTI Crude Oil continued to bounce from very low levels, rising 8.37% and closing at $52.28 per barrel. In 2015, WTI Oil prices have fallen 2.64%.
  • The spot price of Gold fell by 3.88% this week and closed at $1,234.04 per ounce. Year to date, gold prices are up 4.19%.

Economic Data

  • Initial jobless claims increased a bit from last week but remained quite low, coming in at 278,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 292,750.
  • The January nonfarm payroll employment report showed a gain of 257,000 jobs vs. expectations of 228,000. Job gains for November and December were revised up by a combined 147,000, bringing the three month average gain to 336,000 jobs.
    • The headline unemployment rate ticked up from 5.6% to 5.7%. However, the labor force participation rate increased 0.2% to 62.9% which is what pushed the unemployment rate up.
    • Another positive sign was average hourly earnings rising 0.5% vs. expectations of 0.3%. The 1 year growth in average hourly earnings now stands at 2.2%.

Fact of the Week

  • According to World Bank, if the state of California were a country, its $2.2 trillion economy would rank as the 8th largest in the world, ahead of Russia, Italy, India, Canada, Australia and Spain.

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 February 2, 2015

U.S. and World News

  • The left-wing, anti-austerity Syriza party won the general election in Greece on Sunday, raising concerns over the country’s future status as member of the European Union. Party leader Alexis Tsipras has already moved to form a coalition that will work to reverse years of austerity measures imposed by the Troika. The Syriza government also came out against increasing sanctions on Russia for escalating violence in Ukraine. This could be very problematic for EU foreign policy, as further sanctions must be unanimously voted upon by all EU nations.
  • Just about a week after President Obama floated the idea of ending the tax advantage of 529 College Savings plans, the administration has decided to scrap the proposal. Amid outrage from a broad range of Americans, Obama has decided that the plan is a “distraction” and will seek to raise revenue in other ways.
  • ruble_320Ratings agency Standard and Poor’s downgraded Russia’s credit rating to junk, due to weak economic growth prospects, low oil prices and sanctions from the West. The move sent the Russian currency, the ruble, plunging to new lows.

Markets

  • Equity markets tumbled this week with the S&P 500 falling 2.75% and closing at 1,995. Likewise, the Dow Jones lost 2.87% and closed at 17,165. Year to date, the S&P and Dow Jones are down 3.00% and 3.58% respectively.
  • Yields in the Treasury markets remained at very low levels this week. The 10 year Treasury bond now yields 1.65% and the 5 year Treasury bond yields 1.17%.
  • The spot price of WTI Crude Oil reversed course after a sharp bounce on Friday, rising 4.89% and closing at $47.82 per barrel. In 2015, WTI Oil prices have fallen 10.95%.
  • The spot price of Gold fell by 0.79% this week and closed at $1,283.92 per ounce. Year to date, gold prices are up 8.41%.

Economic Data

  • Initial jobless claims declined sharply from last week, coming in at 265,000 vs. consensus estimates of 300,000. This was a new low mark for the recovery. While the Labor Department noted no special factors affecting the report, the holiday shortened week (MLK Day) may have skewed the data. The four week moving average for claims now stands at 298,500.
  • The Case-Shiller home price index rose 0.7% in November vs. expectations of 0.6%. This represents the strongest monthly gain since March. Over the last 12 months, home prices as measured by the index have risen 4.3%.
  • The first estimate of GDP showed 2.6% growth vs. expectations of 3%. Growth was aided by a strong 4.3% increase in consumer spending but was suppressed by increasing import activity. Full year 2014 GDP growth now stands at 2.5%, which is a solid gain especially given the -2.1% number posted in the 1st quarter of 2014.

Fact of the Week

  • Apple reported earnings this week, showing that the company has $178 billion in cash reserves on its balance sheet. The size of this cash component alone would rank it 5th in size in the entire S&P 500. This amount of cash would be enough to give each American $556 or purchase every pro sports franchise in the NFL, MLB, NBA and NHL.

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 January 26, 2015

U.S. and World News

  • President Obama delivered his State of the Union address this week, declaring that the economy has recovered under his leadership and discussed several measures that he would like to see enacted during his final two years in office. Among them, he called on Congress to impose new taxes on high-income earners and new fees on large financial institutions. Obama also reiterated his plan to offer free community college that would be funded by the federal and state government, but is seemingly seeking to discourage individuals from saving for their child’s college by eliminating the tax advantages of Section 529 and Coverdell Education Savings Accounts. Many of the issues he raised have little to no chance of passing in the Republican controlled House and Senate.
  • European Central Bank President Mario Draghi announced this week that the central bank plans to expand its purchase of European government bonds to €60 billion per month until at least September 2016. While additional quantitative easing was expected, the size of the program was larger than consensus expectations. The goal of the plan is to reverse deflationary pressures that are weighing on the Eurozone as many of the country’s economies have stagnated recently.
  • oil-rig_000003751456_250King Abdullah, 91, of Saudi Arabia died this week, calling into question the future of the Saudi’s strategy for crude oil production. Historically, the country has been the oil market’s swing producer, altering production volumes based on demand in order to keep prices stable, but this has not been the case during the current plunge in oil prices. Abdullah’s half-brother, Crown Prince Salman has been declared King and a key indicator of the future Saudi oil policy will be whether Salman retains oil minister Ali Al-Naimi, who has driven the decision making since 1995.

Markets

  • Equity markets ended positively this week following the ECB’s announcement of an increased quantitative easing program. The S&P 500 rose 1.62% and closed at 2,052. Likewise, the Dow Jones gained 0.95% and closed at 17,673. Year to date, the S&P and Dow Jones are down 0.26% and 0.73% respectively.
  • Yields in the Treasury markets remained at very low levels this week. The 10 year Treasury bond now yields 1.79% and the 5 year Treasury bond yields 1.31%.
  • The spot price of WTI Crude Oil plunged again this week, falling 7.63% and closing at $45.32 per barrel. In 2015, WTI Oil prices have fallen 15.49%.  According to AAA, the national average gas price is now $2.04/gallon as compared to $3.29 a year ago.
  • The spot price of Gold rose by 1.09% this week and closed at $1,294.39 per ounce. Year to date, gold prices are up 9.29%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 307,000 vs. consensus estimates of 300,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 306,500.
  • Housing starts rose 4.4% in December against expectations of 1.2%. Rising 7.2% in the month, the increase was primarily from the single-family home category which is a more positive signal.
  • China reported that its economy grew by 7.4% in 2014, its slowest pace since 1990 when growth was only 3.8% as a result of international sanctions following the Tiananmen Square massacre. The slowing growth pace has prompted speculation that the People’s Bank of China may undergo additional support measures.

Fact of the Week

  • The economy of the United States is estimated to be $17.5 trillion, representing 23% of the $77.6 trillion global economy. The 19 countries that make up the Eurozone and use the common currency collectively have an economy of $13.2 trillion, or 17% of the global 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 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 January 20, 2015

U.S. and World News

  • Switzerland_swiss_250The Swiss National Bank shocked markets this week when it unexpectedly scrapped the cap that it had placed on its currency, the Swiss Franc, relative to the price of the Euro (€). The move is an attempt to fight recession and deflation threats in Switzerland that has resulted from overall economic weakness in Europe. The cost of defending that cap had become extraordinarily high, and with speculation that the European Central Bank could be announcing a large Quantitative Easing program, costs would continue to go up as the Euro would surely continue depreciating. After the announcement, the Swiss Franc nearly immediately appreciated by almost 30% against the Euro and 15% against the US Dollar.
  • India’s central bank also surprised the market with an unexpected cut in interest rates in an effort to improve growth in the country. Central bank Governor Raghuram Rajan lowered the repurchase rate in India to 7.75% from 8%, the first rate reduction in two years, as lower food and energy prices have eased inflationary fears.
  • As of Friday, Americans will be able to visit Cuba without obtaining a license from the Treasury Department. Many US airlines announced plans to seek regular service to and from Cuba. The issue of the 54 year old trade embargo with Cuba remains, as this can only be lifted by Congress and prohibits American companies from doing business in the country.

Markets

  • Equity markets ended with another volatile week. The S&P fell 1.24% and closed at 2,019. Likewise, the Dow Jones trickled down 1.27% and closed at 17,512. Year to date, the S&P and Dow Jones are down 1.92% and 1.75% respectively.
  • Yields in the Treasury markets continued their downward trend. The 10 year Treasury bond now yields 1.84% and the 5 year Treasury bond yields 1.30%.
  • The spot price of WTI Crude Oil rose slightly by 0.23% and closed at $48.47 per barrel. Year to date, the spot price of WTI Crude Oil is down 9.01%.
  • The spot price of Gold rose by 4.68% this week and closed at $1,280.45 per ounce.

Economic Data

  • Initial jobless claims rose from last week, coming in at 316,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 298,000, an increase of 7,000.
  • Headline retail sales fell 0.9% in December vs. expectations of -0.1%. Expectedly, gasoline station sales were a drag on retail sales, falling 6.5% in the month.
  • The headline Consumer Price Index declined 0.4% in December, which was in line with consensus. Much of the decline was due to a 4.7% fall in energy prices. Core CPI which excludes food and energy was unchanged in December. Over the past year, both headline and core prices have been very subdued, rising only 0.8% and 1.6% respectively.

Fact of the Week

  • In March 2009, the Congressional Budget Office projected that the taxpayer cost of the August 2008 TARP bailout would be $356 billion. However, a report by the Treasury Department in December 2014 showed an overall $15 billion profit from the TARP program.

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 January 13, 2015

U.S. and World News

  • Minutes from the December Federal Reserve meeting were consistent Janet Yellen’s comments press conference following the meeting. There was not much clarity given to the future path of monetary policy. However, there were a number of participants who saw a risk that inflation will persistently undershoot the Fed’s 2% target, calling into question when the central bank will begin to hike short term interest rates.
  • Starting in 2017, Illinois businesses with 25 or more employees that do not offer any type of retirement savings plan must automatically enroll it’s employees in the state’s Secure Choice Savings Program, which will allow them to invest in an IRA. The measure comes as a result of a law signed by outgoing governor Pat Quinn. The program is similar to one that President Obama has endorsed on the federal level, which promotes retirement savings for workers who may otherwise not have the access or knowledge to save in tax-advantaged retirement accounts. Workers will be allowed to opt out after initial enrollment if they choose not to participate. Those who don’t opt out will have a default of a 3% payroll deduction used to fund the account and have a limited amount of investment options to choose from.
  • iStock_000018702425XLarge320President Obama unveiled a proposal this week that would make community college free for the first two years for eligible students. Federal funding would cover 75% of the cost, while participating states would contribute the rest. Obama projects that 9 million students will participate in the program and save an estimated $3,800 a year on tuition. Explaining the proposal, the President said, “We have to make sure that everybody has the opportunity to constantly train themselves for better jobs, better wages and better benefits.”

Markets

  • Equity markets earnestly kicked off 2015 with a very volatile week which saw five straight triple digit moves in the Dow Jones Industrial Average. By the end of the week, the S&P had fallen 0.61% and closed at 2,045. Likewise, the Dow Jones moved down 0.49% and closed at 17,737.
  • Yields in the Treasury markets moved considerably lower this week. The 10 year Treasury bond now yields 1.96% and the 5 year Treasury bond yields 1.43%.
  • The spot price of WTI Crude Oil plunged again this week, falling 8.43% and closing at $48.25 per barrel. According to AAA, the national average gas price is now $2.17/gallon as compared to $3.31 a year ago.
  • The spot price of Gold rose by 2.86% this week and closed at $1,222.44 per ounce.

Economic Data

  • Initial jobless claims fell from last week, coming in at 294,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report, although the holiday season is traditionally more volatile. The four week moving average for claims now stands at 290,500.
  • The monthly non-farms payroll report showed 252,000 jobs added in December, beating estimates of 240,000. This was the 11th consecutive month of job gains above 200,000 which is the longest such stretch since 1994.
    • The headline unemployment rate fell 0.2% to 5.6%. This was aided by a corresponding 0.2% drop in the labor force participation rate to 62.7%, lowest since 1977.
    • Average hourly earnings disappointed to the downside, declining by 0.2% in December vs. expectations of a 0.2% gain. In 2014, average earnings rose only 1.7% vs. consensus projections of 2.2%.

Fact of the Week

  • An individual who waits until age 70 to collect Social Security benefits will receive 76% more per month than if they had started taking benefits at age 62.

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 January 5, 2015

U.S. and World News

  • greek320Greek politicians failed to elect a president in a key vote this week, leading to a snap election that will take place next month. There are fears in some corners of the market that the left-wing Syriza party could come into power and jeopardize the bailout that Greece received from the European Central Bank in exchange for austerity measures. This scenario would also increase the odds of Greece exiting the European Union because the nation cannot or will not undertake the imposed austerity measures.
  • Prime Minister Shinzo announced this week a new ¥3.5 trillion ($29 billion) stimulus package, aimed at boosting the country’s lagging economy that has contracted in each of the last two quarters. Abe also announced a cut to the corporate tax rate, lowering the effective rate 2.5% to 32.1%, evidence that Abe plans to make good on his pledge to lower the rate to below 30% in the coming years.
  • Lithuania has become the 19th member of the Eurozone and will be adopting the shared currency the euro (€). Lithuania is following the path of other former Soviet satellite states such as Latvia, Estonia and Slovakia, in joining the European Union.

Markets

  • Equity markets wrapped up 2014, posting solid double digit gains. In 2014, the S&P 500 returned 13.68%, while the Dow Jones Industrial Average returned 10.04%. On the week, the S&P fell 1.43% and closed at 2,058. Likewise, the Dow Jones moved down 1.22% and closed at 17,833.
  • Yields in the Treasury markets moved lower this week. The 10 year Treasury bond now yields 2.12% and the 5 year Treasury bond yields 1.61%. These benchmark yields stood at 3.00% and 1.71%, respectively at the beginning of 2014, which contradicted the majority of forecasts which called for higher interest rates in 2014.
  • The spot price of WTI Crude Oil fell again this week, reaching a new 52 week low. Prices fell 3.91%, closing at $52.59 per barrel. During 2014, Oil prices fell 41.59%. According to AAA, the national average gas price is $2.23/gallon as compared to $3.33 at the beginning of 2014.
  • The spot price of Gold dipped by 0.58% this week and closed at $1,189.05 per ounce. In 2014, Gold prices were down 1.44%.

Economic Data

  • Initial jobless claims rose from last week, coming in at 298,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report, although the holiday season is traditionally more volatile. The four week moving average for claims now stands at 290,750.
  • The Case-Shiller home price index rose 0.8% in October, beating estimates of 0.4%. This was the strongest monthly gain since March. Over the last year, home prices have risen 4.5% based on this measure.

Fact of the Week

  • The share of wages that Social Security replaced for the typical worker who retires at age 65 was 48% in 1980, 37% in 2000 and is projected to drop to 34% by 2020.

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 December 29, 2014

U.S. and World News

Shinzo Abe


   Shinzō Abe*

  • Shinzō Abe was re-elected prime minister by Japan’s parliament, following his victory at the polls earlier this month. Abe faces many challenges in trying to reignite an economy that has contracted for two straight quarters. There are talks that a new round of stimulus is being prepared by Abe’s cabinet and is expected to include monetary easing and structural reforms.
  • China has stepped in to offer assistance to Russia in trying to support the Russian ruble. The currency has been weakening significantly as a result of the economic sanctions placed on Russia by the West, as well as the recent plunge in oil prices. The support from China will allow Russia to conserve its already depleted foreign exchange reserves as it defends its currency.

Markets

  • Equity markets rose during the holiday shortened week to close at All-Time Highs.  The S&P gained 0.86% and closed at 2,089. Likewise, the Dow Jones moved up 1.40% and closed at 18,054. Year to date, the S&P is up 15.22% and the Dow Jones is up 11.38%
  • Yields in the Treasury markets moved higher this week. The 10 year Treasury bond now yields 2.25% and the 5 year Treasury bond yields 1.76%.
  • The spot price of WTI Crude Oil fell again this week, reaching a new 52 week low. Prices fell 3.17%, closing at $54.73 per barrel. Year to date, Oil prices are down 40.00%.
  • The spot price of Gold went unchanged this week and closed at $1,196.00 per ounce. Year to date, Gold prices are down 0.47%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 280,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report, although the holiday season is traditionally more volatile. The four week moving average for claims now stands at 290,000.
  • The core PCE index, which the Federal Reserve uses as its preferred measure of inflation, was unchanged in November. This makes the rate over the past year equal to 1.41%, still well below the Fed’s 2% inflation target.

Fact of the Week

  • According to the Society of Actuaries, in the year 2000 the average 65 year old American male had a life expectancy of 19.6 years and the average 65 year old American female had one of 21.4 years. Today, the average 65 year old male has a life expectancy of 21.6 years and the average 65 year old female has a life expectancy of 23.8 years. These are increases of 2.0 and 2.4 years and life expectancy is projected to increase even further in the future with technology and health care advances.

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

*Portrait of Shinzō Abe, Prime Minister of Japan. Source: Obtained from Wikimedia Commons. Date: July 14, 2014. Author: Chuck Hagel. Image used in accord with Creative Commons Legal Code Attribution 2.0 (https://creativecommons.org/licenses/by/2.0/legalcode). (See, http://commons.wikimedia.org/wiki/File:Shinzō_Abe_April_2014.jpg).