Wealth Management Weekly Update September 30, 2013

CongressU.S. and World News

  • The U.S. government is heading for a shutdown if a budget agreement can’t be reached by October 1st. On Friday, the Senate passed a continuing resolution to keep the government running past the Monday night deadline. However, it included funding measures for Obamacare which is a major point of contention in the Republican-majority House where this resolution is expected to be voted down. Negotiations will take place over the weekend and any potential deal is likely to come right down to the deadline.
  • Meanwhile, Treasury Secretary Jacob Lew believes that investor confidence that Washington will agree to a deal to increase or extend the debt ceiling is probably greater than it should be. Republicans and Democrats have until the middle of October to come up with something on that front after an agreement is reached on a funding bill.
  • Angela Merkel and her Christian Democratic Union (CDU) achieved victory in last weekend’s German elections. Merkel maintains her role as the Chancellor of Germany, a post she has held since 2005 and will continue her efforts to strengthen Germany and the European Union.

 

Markets

  • Stock markets fell this week, possibly due to the uncertainty in Washington D.C. as the S&P 500 Index dropped by 1.06%, closing at 1,692. The Dow Jones Industrial Average was down 1.25% to close at 15,258. The S&P and the Dow respectively are up 18.62% and 16.44% year to date.
  • Treasury yields continued to drop this week on the back of the Fed’s decision to delay tapering of asset purchases with the 5 year and 10 year treasury yielding 1.41% and 2.63% respectively.
  • The spot price of WTI Crude Oil continued its decline this week as rhetoric out of Iran regarding a supply interruption has died down. Spot prices fell by 1.84%, closing at $102.82 per barrel. Year to date, oil is up 10.00%.
  • The spot price of Gold was up this week, rising by 0.81% and closing at $1,336.64/ounce. Gold is now down 20.22% this year.

 

Economic Data

  • Weekly Initial Jobless Claims came in artificially low again this week, falling by 4,000 and coming in at 305,000 vs. expectations of 325,000. Again, this data cannot be relied upon as an indication of labor market strength as the Labor Department noted that the claims numbers are still being affected by processing issues.
  • Pending home sales declined a bit more than expected in August, falling by 1.6% vs. expectations of -1.0%. The moderate decline in pending home sales (based on contract signings) over the past several months is an unfavorable indicator for future existing home sales reports (based on closings).

 

Fact of the Week

  • Using the Consumer Price Index as the gauge of inflation, an individual living on a fixed income (same year to year) for the last 20 years would have suffered a 38% loss of purchasing power over those two decades.

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 September 23, 2013

finance_chart_250pxU.S. and World News

  • Fed Chairman Ben Bernanke surprised markets this week when he announced that the Federal Reserve would not be tapering their $85 billion per month in asset purchases. Bernanke stated that they are waiting for more evidence that economic progress will be sustained as the economy is still well away from their stated goals of 6.5% unemployment and 2.0% inflation expectations. The announcement sent stock markets higher and interest rates lower. The focus now shifts to the likely final meetings of Bernanke’s term and if the process of tapering will occur under his watch or his eventual successor remains to be seen.
  • Larry Summers has withdrawn his name for consideration to become the next Chairman of the Federal Reserve, saying that the confirmation process would be ugly and would not serve the interests of the Fed or the economy. The remaining top contenders are Janet Yellen and Don Kohn, both of whom helped shape the Fed’s super easy monetary policy, of which Summers was a critic.
  • The U.S. and Russia have reached a deal whereby Syria will have a week to provide information about its chemical weapons and then until the middle of next year to let international inspectors destroy them. However, given Syria’s civil war, it’s not clear how realistic the timetable is. President Obama stated that if the agreement is not implemented, the U.S. is prepared to take military action.

 

Markets

  • Stock markets gained again this week, reaching all-time highs midweek following the Fed’s decision to delay the tapering of asset purchases. The S&P 500 Index rose by 1.30%, closing at 1,710. The Dow Jones Industrial Average was up 0.49% to close at 15,451. The S&P and the Dow respectively are up 19.89% and 17.91% year to date.
  • Treasury yields dropped this week on the back of the Fed’s decision to delay tapering of asset purchases with the 5 year and 10 year treasury yielding 1.49% and 2.74% respectively.
  • The spot price of WTI Crude Oil declined this week on lessening odds of a Syria strike, falling by 2.47%, closing at $104.88 per barrel. Year to date, oil is up 12.20%.
  • The spot price of Gold was flat this week, rising by 0.1% and closing at $1,326.41/ounce. Gold is now down 20.82% this year.

 

Economic Data

  • Weekly Initial Jobless Claims came in artificially low again this week, rising by 17,000 and coming in at 309,000 vs. expectations of 330,000. Again, this data cannot be relied upon as an indication of labor market strength as the Labor Department noted the low level of claims was due to processing problems in two states that underestimated the amount of claims.
  • Total housing starts rose 0.9% in August which was lower than expectations of 2.3%, however the less volatile single family home starts posted a solid 7.0% gain, rising to a five-month high.
    • Total building permits also came in lower than expectations, falling by 3.8%. Again however, the single family permits showed strength as they rose by 3.0%, a new post-recession high.

 

Fact of the Week

  • The United States and China are the top two oil consuming nations in the world with a combined 28.8 million barrels consumed per day. This is more consumption than the next 10 countries combined.

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update September 16, 2013

map-syria-middleeast_000019350818

U.S. and World News

  • President Obama has asked Congress to delay any vote on military strikes against Syria while talks take place between the U.S., Russia and Syria over a proposal in which Syria would forfeit all of its chemical weapons. Obama in his televised address this week remained skeptical of the plan as Syria may use it as a delay tactic and continued to try to make his case for action.
  • According to sources out of Japan, President Obama plans to name Larry Summers as the next Chairman of the Federal Reserve, replacing Ben Bernanke. The report said the announcement could come as early as next week at the Fed’s next policy meeting. However, given that the report strangely emanated from Japan, many are questioning its legitimacy.
  • In the largest shakeup since 2004, the Dow Jones Industrial Average index announced that Alcoa (AA), Bank of America (BAC) and Hewlett-Packard are being removed from the iconic 30 stock index on September 20th. Replacing them will be Nike (NKE), Goldman Sachs (GS) and Visa (V). The index is constructed to have constituents of all of the economic sectors and be representative of the U.S. economy as a whole.
  • House Republican leaders have postponed a vote that would have approved the financing of the government through December, creating the possibility of a government shutdown. The delay came because of opposition among conservative Republicans to parts of the Obamacare legislation. The government faces a shutdown if legislation isn’t approved by September 30th. This is in addition to the impending reaching of the debt ceiling, which will be occurring in mid-October.

 

Markets

  • Stock markets gained again this week as the S&P 500 Index rose by 1.98%, closing at 1,688. The Dow Jones Industrial Average was up 3.04% to close at 15,376. The S&P and the Dow respectively are up 18.36% and 17.34% year to date.
  • Treasury yields dipped this week with the 5 year and 10 year treasury yielding 1.70% and 2.89% respectively.
  • The spot price of WTI Crude Oil declined this week on lessening odds of a Syria strike, falling by 1.85%, closing at $108.49 per barrel. Year to date, oil is up 15.91%.
  • The spot price of Gold tumbled this week, declining by 4.82% and closing at $1,324.74/ounce. Gold is now down 20.93% this year.

 

Economic Data

  • Weekly Initial Jobless Claims fell sharply this week, dropping by 38,000 and coming in at 292,000 vs. expectations of 330,000. However, this data cannot be relied upon as an indication of labor market strength as the Labor Department noted the decline was due to processing problems in two states that underestimated the amount of claims.
  • Chinese data provided yet more evidence that the country’s economy is stabilizing and will avoid a hard landing, with industrial production accelerating to 10.4% on the year vs. expectations of 9.9%. Retail sales and urban investment also grew strongly and beat forecasts.

 

Fact of the Week

  • Saturday marks the 5 year anniversary (9/14/08) of the U.S. government declining to rescue Lehman Brothers, forcing the 158 year old firm to file for Chapter 11 bankruptcy in what is regarded as beginning of the global financial crisis. It was the largest bankruptcy in U.S. history with Lehman claiming over $691 billion in assets at the time of the filing.

 

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update September 6, 2013

iStock_000017188309XSmallU.S. and World News

  • Congress is expected to vote next week on the country’s course of action regarding Syria following a week filled with political debate on the issue. President Obama has found stiff opposition to his attempt to obtain congressional authorization for strikes against the Assad regime in Syria. In a press conference at the G20 Summit in St. Petersburg, Russia, Obama admitted that he is facing an uphill battle and will make a televised address about the situation next Tuesday. The President did not rule out the possibility of ordering a strike on Syria anyways if it is not given approval in Congress.  
  • As expected the Bank of Japan voted unanimously to keep its extremely accommodative monetary policy intact as inflation and jobless data paints a more upbeat picture of Japan’s economic prospects. The question now is whether a sales tax hike, designed to help shore up the country’s public debt, will derail the recovery.

 

Markets

  • Stock markets rebounded this week as the S&P 500 Index rose by 1.36%, closing at 1,655. The Dow Jones Industrial Average was up 0.76% to close at 14,922. The S&P and the Dow respectively are up 16.06% and 13.88% year to date.
  • Treasury yields climbed higher this week with the 10 year treasury briefly touching 3% before ending the week at 2.93%. Meanwhile, the 5 year treasury rose too and ended the week at 1.76%.
  • The spot price of WTI Crude Oil increased again this week, rising by 2.44%, closing at $110.28 per barrel. Year to date, oil is up 17.82%.
  • The spot price of Gold paused this week after its recent climb higher, declining by 0.29% and closing at $1,391.22/ounce. Gold is now down 16.96% this year.

 

Economic Data

  • Weekly Initial Jobless Claims fell this week, dropping by 8,000 and coming in at 323,000 vs. expectations of 330,000. The 4-week moving average of jobless claims fell to 329,000, a new post-recession low.
  • The August employment report was a moderate disappointment as payrolls rose by 169,000 vs. expectations of 180,000. Also, the payroll numbers from the last two months were revised downwardly by a combined 74,000 jobs. The unimpressive labor report brings into doubt the timeline for the Fed tapering asset purchases as many believe it may now be pushed off until after September.
    • Meanwhile the unemployment rate fell to 7.3% from 7.4% last month. However, as has largely been the case with any recent fall in the unemployment rate, the cause of the decline was entirely due to a lower labor participation rate. As more and more Americans become discouraged looking for jobs or are satisfied with the unemployment benefits they are receiving and dropped out of the workforce, the labor force participation rate has declined to a new cycle low of 63.2%, the lowest level since 1978.
  • The August ISM manufacturing survey was better than expected with a reading of 55.7 vs. expectations of 54.0 which is the highest reading since June 2011. The forward looking new orders component of the index posted the most surprising gain this month.
  • U.S. light vehicle sales hit 1.5 million units in August to record the best month for the auto industry since May 2007.

Fact of the Week

  • The average single family home nationwide peaked in value on June 30, 2007 and subsequently dropped 21% from that point. Home prices have since rebounded and as of June 30, 2013, the average single family home is now down just 11% from the all-time high value.

 

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update August 30, 2013

map-syria-middleeast_000019350818U.S. and World News

  • As evidence of a chemical strike against its own people has come to light in Syria, the prospect of military intervention against the Assad regime in the country’s civil war has intensified. World leaders are considering their best course of actions with the U.S. originally stating its intention to act early in the week. The Obama administration has since backed off those comments in the wake of differences of opinions between the U.S. and its allies such as the U.K. with the President saying today that no final decision has been made yet and that any military intervention would be limited and with no “boots on the ground”. The situation is very fluid and has been affecting stock and oil markets as new details have come available.
  • Nasdaq has taken responsibility for the three-hour trading outage last week, known as the Flash Freeze after trying to place blame initially on the New York Stock Exchange. The exchange said the outage was caused by a software bug and other technology issues related to a data feed. Banks and brokerages are reportedly discussing how to prevent another outage, including giving a non-exchange entity responsibility for managing data feeds.

 

Markets

  • Stock markets fell this week on the Syrian conflict, Fed tapering concerns and light volume. The S&P 500 Index fell by 1.84%, closing at 1,633. The Dow Jones Industrial Average was down 1.33% to close at 14,810. The S&P and the Dow respectively are up 14.50% and 13.02% year to date.
  • Treasury yields were volatile again this week with the 10 year treasury falling a bit to 2.79%. Meanwhile, the 5 year treasury rose a bit and ended the week at 1.65%.
  • The spot price of WTI Crude Oil increased this week by 1.18%, closing at $107.67 per barrel. Year to date, oil is up 15.03%.
  • The spot price of Gold paused this week after its recent climb higher, declining by 0.18% and closing at $1,395.20/ounce. Gold is now down 16.72% this year.

 

Economic Data

  • Weekly Initial Jobless Claims fell this week, dropping by 5,000 and coming in at 331,000 vs. expectations of 332,000. The 4-week moving average of jobless claims remained steady at 331,000, a post-recession low.
  • The Case-Shiller home price index rose less than expected in June, continuing the recent trend toward more moderate rates of home price appreciation. Prices rose 0.9% in June vs. expectations of 1.0% and have increased by 12.1% over the past 12 months.
    • Pending home sales also came in lower than expected, declining by 1.3% in July vs. expectations of flat sales. In the last 12 months, pending home sales have risen 6.7%.
  • GDP growth in the 2nd quarter was revised up more than expected to 2.5% vs. expectations of 2.2%. The initial estimate of 2nd quarter GDP growth was 1.7%. Stronger net exports and inventories than originally estimated accounted for the majority of the upward revision.

 

Fact of the Week

  • Highlighting some of the troubles with instituting “universal health care”, a study by the National Institute for Health Care Management shows that 1% of the population accounts for 21.8% of all health care expenditures in the U.S. and 5% of the population accounts for nearly half of the nation’s health care spending at 49.5%. Meanwhile, 50% of the population accounts for just 2.7% of health care expenditures and 15% of the population account for a negligible amount of the country’s total health care costs.

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