Wealth Management Weekly Update May 31, 2013

Money6U.S. and World News

  • Markets in Japan have become extremely volatile with several wild trading sessions in the last few weeks. The result is a Nikkei Index level that was down 5.7% this week and is 11.8% lower than its high level achieved in the middle of last week. Causes that have been cited include fears about the end of the Fed’s QE program, a strengthening of the Yen and the market undergoing a correction after the enormous gains it’s had over the last six months.

 Markets

  • Stock markets fell this week, incurring all of the losses in the last 20 minutes of Friday’s session (last day of the month). The S&P 500 Index fell 1.1%, closing at 1,631. The Dow Jones Industrial Average was down 1.2% to close at 15,115. After this week’s dip, the S&P and the Dow are respectively up 14.3% and 15.4% year to date.
  • Treasury yields continued to drift higher again this week on speculation that the Federal Reserve will taper their asset purchases in coming months, as the 5 year and 10 year treasury finished the week at 1.03% and 2.14% respectively.
  • The spot price of WTI Crude Oil dropped this week, falling by 2.5%, closing at $91.72 per barrel. On the year, oil prices are down 2.1%.
  • The spot price of Gold was relatively unchanged for the week, closing at $1388.08/ounce. Gold remains down 17.3% for the year.

 Economic Data

  • Weekly Initial Jobless Claims rose this week as claims increased by 14,000 and came in higher than expected at 354,000 vs. consensus expectations of 340,000. The 4-week moving average of jobless claims moved up to 347,000.
  • Eurozone unemployment hit a new high this month as 19.4 million are without jobs and the unemployment rate moved up to 12.2% in April, up from 12.1% a month prior.
  • The Case-Shiller home price index rose by 1.1% in March which was better than expected, showing continuing improvement in the housing market. The index is now up 10.9% on a year over year basis, the strongest one year gain since April 2006.
    • Other data in housing shows that sales of residential properties in foreclosure dropped 22% year over year at the end of the 1st quarter. Foreclosure transactions accounted for 21% of all home sales, down from 25% a year earlier and a peak of 45% in the 1st quarter of 2009. However, there is still work to be done to work through these properties as these levels are still well above an average of 5% of sales in 2006.
  • Consumer sentiment continues to improve as the latest University of Michigan report came in higher than expected and at a post-crisis high. The Conference Board’s measure of consumer sentiment also came in better than anticipated at multi-year highs.

Fact of the Week

  • Back in 1950, there were 16 American workers for every 1 Social Security retiree receiving benefits. It is estimated that by 2035, there will be just 2 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 – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update May 24, 2013

bank_vault_safe200pxU.S. and World News

  • Fed watchers got plenty of information to digest this week as minutes from the latest policy meeting were released and Chairman Ben Bernanke gave testimony to Congress. The minutes showed that a number of members are prepared to slow down the Federal Reserve’s bond buying as early as June if economic conditions continue to improve. Meanwhile, Bernanke appeared to talk out of both sides of his mouth by first saying that premature tightening of policy posed a significant risk to the economic recovery but then later saying that the Fed could begin to dial down purchases at one of the next few meetings.
  • The latest Senior Loan Officer Opinion Survey cited increased competition among banks which has led to easing of lending standards on business loans over the last three months, as razor thin margins (due to historically low interest rates) have created a scramble for Commercial and Industrial business. The survey also showed that business loans extended rose 10% year over year to a total of $1.55 trillion.

 Markets

  • Stock markets drifted down a bit this week with the S&P 500 Index falling 1.1%, closing at 1,650. The Dow Jones Industrial Average also fell and was down 0.3% to close at 15,303. After this week’s dip, the S&P and the Dow are up 15.7% and 16.8% year to date respectively.
  • Treasury yields continued to drift higher again this week, as the 5 year and 10 year treasury finished the week at 0.89% and 2.01% respectively.
  • The spot price of WTI Crude Oil dropped this week, falling by 2.5%, closing at $93.89 per barrel. On the year, oil prices are up 0.2%.
  • The spot price of Gold recovered a bit this week after last week’s plunge, rising by 1.8% and closing at $1384.64/ounce. Even with the gains, gold is down 17.3% for the year.

 Economic Data

  • Weekly Initial Jobless Claims fell this week after last week’s unexpected spike. Claims fell by 23,000 and came in lower than expected at 340,000 vs. consensus expectations of 345,000. The 4-week moving average of jobless claims moved up to 340,000. The Labor Department noted that there was nothing unusual in the claims data but the state-level reports showed a large 15K spike in claims in California due to layoffs in the service industry.
  • Manufacturing activity is shrinking in China as its PMI fell into contraction territory for the first time in seven months. Slower domestic demand and a sequential slowdown in the second quarter is seen as putting China’s fragile growth recovery at risk.

Fact of the Week

  • Medicare enrollment is projected to rise from 52 million in 2013 to 66 million in 2021, an increase of 27% more people over the next eight years. Medicare expenditures over the same eight years are projected to rise from $598 billion in 2013 to $1 trillion in 2021, an increase of 67%, highlighting the rapidly rising cost of healthcare.

 Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@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 May 17, 2013

Capital HillU.S. and World News

  • Bloomberg News was hit with controversy as it emerged that the news agency was using data from the company’s licensed computer research terminals in order to generate or get leads for news stories. Reports came in that news reporters monitored the computer terminal activity of such key policy makers as Federal Reserve Chairman Ben Bernanke and former U.S. Treasury Secretary Timothy Geithner. The organization apologized for the unscrupulous practices and has vowed to discontinue them.
  • Fed officials appear to be becoming increasingly divided over the efficacy and appropriate duration of the Federal Reserve’s monthly asset purchases. Speeches this week by the heads of the Philadelphia, Dallas and Richmond Federal Reserve Banks all suggested that bond buying should be tapered immediately. Complicating matters is economic data which at times seems to convey conflicting messages about the health of the economic recovery.
  • Acting IRS Chief Steven Miller resigned Wednesday in the wake of the agency’s admission it unfairly screened and scrutinized Tea Party groups seeking tax exempt status dating back to 2010. President Obama called the practices inexcusable and that the IRS was the last place where he would tolerate that kind of behavior.

Markets

  • Stock markets extended their rallies with the S&P 500 Index gaining 1.8%, closing at 1,667. The Dow Jones Industrial Average also rose and was up 1.6% to close at 15,354. Adding this week’s gains, the S&P and the Dow are up 16.9% and 17.2% year to date respectively.
  • Treasury yields continued to drift higher again this week, as the 5 year and 10 year treasury finished the week at 0.83% and 1.95% respectively.
  • The spot price of WTI Crude Oil edged higher this week, rising by 0.1%, closing at $95.99 per barrel. On the year, oil prices are up 2.6%.
  • The spot price of Gold plunged by 6.1% this week, closing at $1357.79/ounce. Continuing its slide, gold is down 18.9% for the year. Indications of the Fed reducing its asset purchases and lower than expected consumer prices likely contributed to the large drop.

Economic Data

  • Weekly Initial Jobless Claims unexpectedly spiked this week after recent weeks had shown significant improvement in this leading economic indicator. Claims rose by 37,000 this week and came in higher than expected at 360,000 vs. consensus expectations of 330,000. The 4-week moving average of jobless claims moved up to 339,000. The Labor Department noted that there was nothing unusual in the claims data so this is being viewed as a somewhat troubling report if claims continue to rise.
  • Housing starts declined more than expected in April, falling by 16.5% vs. consensus expectations of a drop of 6.4%. Most of this drop came from the volatile multi-family category so this report isn’t quite as negative as the headline numbers indicate. Over the last 12 months, housing starts are up 13.1%, with single family housing starts up 20.8%.

Fact of the Week

  • The actual total cost of four years of college education (tuition, fees, room and board) at an average public in-state university 30 years ago was $10,945, or when adjusted for inflation $29,324 in today’s dollars. That same education currently costs an average of $69,291, thus the cost of obtaining a four year degree has increased 136% over that last 30 years after adjusting for inflation.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@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 May 3, 2013

Natural GasU.S. and World News

  • This week President Obama signaled his support for increasing the U.S.’s exports of natural gas, saying that the country will likely be a net seller of liquid natural gas by 2020. The Department of Energy is assessing applications for 20 projects to export gas to nations with which the U.S. doesn’t have a free trade agreement.
  • In an effort to end tax-free shopping on the internet, the Senate passed a bill that would empower states to impose sales taxes for purchases made online. The measure now goes on to the House, where anti-tax sentiment among many Republicans may make the bill more difficult to push through.

 

Markets

  • Stock markets extended their rallies with the S&P 500 Index gaining 1.2%, closing at 1,634. The Dow Jones Industrial Average also rose and was up 1.0% to close at 15,118. Adding this week’s gains, the S&P and the Dow are up 14.6% and 15.4% respectively year to date.
  • Treasury yields rose substantially again this week, as the 5 year and 10 year treasury finished the week at 0.82% and 1.89% respectively.
  • The spot price of WTI Crude Oil edged higher this week, rising by 0.4%, closing at $95.86 per barrel. On the year, oil prices are up 2.5%.
  • The spot price of Gold dropped by 1.6% this week, closing at $1446.87/ounce. Continuing its slide, gold is down 13.6% for the year.

 

Economic Data

  • Weekly Initial Jobless Claims continued their improvement and fell by 1,000 this week and came in lower than expected at 323,000 vs. consensus expectations of 335,000. This is the lowest level of claims since January 2008. The 4-week moving average of jobless claims moved down to 337,000. The Labor Department noted that there was nothing unusual in the claims data so this is being viewed as another very positive report.
  • While fears of widespread defaults in the municipal bond market have so far proven overblown, Moody’s rating agency says that a disturbing trend in the space seems to be developing. Although, only five defaults were recorded in 2012, that’s more than four times the average yearly rate from 1970 to 2007. Perhaps the most notable thing about last year’s defaults is that three of them were general government defaults as opposed to just defaults on bonds tied to specific projects.

Fact of the Week

  • A very popular investment theory is the strategy of “sell in May and go away.” Whatever the rationale behind it (whether its seasonal patterns of earnings or Fat Cat Wall Street traders spending the summer months at their vacation homes in The Hamptons), the data backs up this tactic. Since 1990, S&P 500 returns from the months November to April have beaten returns from the months May to October in 17 of 23 years. Collectively, the index in the six months ending April 30th is up 473% vs. a 37% gain for the six months ending October 31st.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@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

Old Second: A Commercial Lender in the Community for over 140 Years

Executive VP Donald Pilmer explains the unique position of a community bank with a personal touch, and the financial muscle to provide commercial and industrial lending for equipment, credit and the cash management expertise required in order to prosper. Even in tough times, Old Second has worked with the business community to meet their commercial banking needs. Businesses know Old Second Bank is there when it matters most.

Learn more…

Wealth Management Weekly Update May 3, 2013

Europe_Map

U.S. and World News

  • Italy’s new Prime Minister Enrico Letta was sworn in this week. The country struggled to install a government and teetered on the edge of political gridlock following inconclusive elections in February and five additional presidential votes earlier this month.
  • The Federal Reserve signaled flexibility in the amount of committee’s asset purchases by adding language indicating they are “prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.” Consensus belief is that the new language suggests that an increase in the size of monthly asset purchases may be in the cards.
  • As expected, the European Central Bank cut its benchmark rate by 25 basis points, as rising Eurozone unemployment and low inflation provided an impetus for further monetary easing. The President of the ECB, Mario Draghi, also suggested he was open to taking the deposit rate into negative territory.

 

Markets

  • Stock markets extended their rallies with the S&P 500 Index gaining 2.0%, closing at 1,614. The Dow Jones Industrial Average also rose and was up 1.8% to close at 14,974. Adding this week’s gains, the S&P and the Dow are up 13.2% and 14.3% respectively year to date.
  • Treasury yields spiked up on the positive employment report, as the 5 year and 10 year treasury finished the week at 0.73% and 1.74% respectively.
  • The spot price of WTI Crude Oil was up again this week, rising by 2.7%, closing at $95.49 per barrel. On the year, oil prices are up 2.1%.
  • The spot price of Gold rose by 0.5% this week, closing at $1470.02/ounce. Despite this week’s gains, gold is down 12.3% for the year.

 

Economic Data

  • Weekly Initial Jobless Claims fell by 15,000 this week and came in lower than expected at 324,000 vs. consensus expectations of 345,000. This is the lowest level of claims since January 2008. The 4-week moving average of jobless claims moved down to 342,500. The Labor Department noted that there was nothing unusual in the claims data so this is being viewed as a very positive report.
  • The Case-Shiller home price index rose by 1.24% for February, better than consensus expectations of 0.9%. The index is now up 9.3% on a year over year basis, which is the fastest growth since May 2006 (albeit from a much lower base).
  • The April employment report was broadly better than expected. Non-farm payrolls increased by a larger than expected 165,000 vs. consensus expectations of 140,000. The report also included large upward revisions for the previous two months.

o   The unemployment rate declined to 7.5% and for the first time in months, the decline in the unemployment rate wasn’t due to a drop in the labor participation rate, which was unchanged for the month.

Fact of the Week

  • Since 1950, the highest marginal tax bracket for individuals has ranged from a high of 92% in 1953 to a low of 28% in 1990. The highest individual tax bracket today is 39.6%.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@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