Wealth Management Weekly Update December 30, 2013

Piggy Bank Over American FlagU.S. and World News

  • President Obama has signed the two year budget into law that was passed by the House and Senate in previous weeks. Even though it’s a holiday week, legislators on the Appropriations Committees say that they have been making good progress on dividing up the money that has been approved.
  • The deadline to register for Obamacare in order for the policy to take effect on January 1st has been extended amid technical problems and a late surge of interest. The original deadline was Monday but some states are even allowing residents to sign up as late as New Year’s Eve for coverage beginning at the start of the year. The continued changing of rules and deadlines has caused a lot of frustration among consumers and insurers alike.

Markets

  • Stock markets rallied to make new all-time highs during the holiday shortened trading week. The S&P 500 Index was up 1.30%, closing at 1,841 and the Dow Jones Industrial Average was up 1.59% to close at 16,478. The S&P and the Dow respectively are up 29.11% and 25.75% year to date.
  • Treasury yields continued to rise on last week’s Fed tapering new. The 5 year and 10 year treasury are now yielding 1.74% and 3.00% respectively.
  • The spot price of WTI Crude Oil rose this week by 0.88%, closing at $100.19 per barrel. Year to date, oil is now up 7.71%.
  • The spot price of Gold rose a bit this week, gaining 0.84% and closing at $1,213.40 per ounce. Gold is now down 27.56% this year.

Economic Data

  • Initial jobless claims fell from last week to 338,000 vs. consensus estimates of 345,000. The four week moving average for claims rose to 348,000. The Labor Department noted that while no states estimated claims, seasonal adjustment around the holidays may be affecting claims numbers.

Fact of the Week

  • This week marked the 100th anniversary of President Woodrow Wilson signing the Federal Reserve Act, which led to the establishment of the central bank. The original intention of the law was to prevent most bank failures by creating a central banking system. The Fed has taken on a much more hands on role in recent years, becoming one of the major driving forces of the markets.

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 December 23, 2013

U.S. and World News

  • Capital HillThe Federal Reserve announced this week that the central bank will be tapering their asset purchases in January from $85 billion per month to $75 billion. The $10 billion reduction will be split evenly between Treasury and Mortgage Backed Securities. The Committee expects that the conclusion of the asset purchase program (QE) will come in the second half of 2014.
  • The Fed also commented on the path of the Federal Funds Rate (overnight rate banks loan money to each other at) and stated that these rates will be held near zero until well past the time unemployment declines to 6.5%, especially if inflation continues to run below the group’s 2% long term goal. These statements were slightly more dovish than they had been before and were much of the reason that equity markets rallied on the news.
  • The Senate has passed the budget deal that went through the House last week and will now go to President Obama. The agreement sets spending levels for the next two years and replaces some of the automatic budget cuts that had been put in place by the sequester. However, there is still debate to be had as to how to spend the money, with some in Congress still seeking to remove funding for Obamacare.

Markets

  • Stock markets rallied to make new all-time highs following the Federal Reserve’s announcement that they will be moderately tapering asset purchases starting in January. The S&P 500 Index was up 2.03%, closing at 1,818 and the Dow Jones Industrial Average was up 2.69% to close at 16,221. The S&P and the Dow respectively are up 27.49% and 23.79% year to date.
  • Treasury yields rose on the news of the Fed tapering. The 5 year and 10 year treasury are now yielding 1.68% and 2.89% respectively.
  • The spot price of WTI Crude Oil rallied this week with prices rising by 2.27% and closing at $99.13 per barrel. Year to date, oil is now up 6.57%.
  • The spot price of Gold fell to a 52 week low, dropping 2.95% and closing at $1,202.16 per ounce. Gold is now down 28.24% this year.

Economic Data

  • Initial jobless claims rose from last week to 379,000 vs. consensus estimates of 336,000. The four week moving average for claims rose to 344,000. The Labor Department noted that while no states estimated claims, seasonal adjustment around the holidays may be affecting claims numbers.
  • Existing home sales continued to decline in November, falling 4.3% vs. expectations of -2.0%. Sales fell in all four regions of the country. Existing home sales are based on contract closings and not signings, so they are a bit of a lagging indicator.

Fact of the Week

  • The size of the Federal Reserve’s balance sheet eclipsed $4 trillion for the first time this week. Its balance sheet has quadrupled since 2008 when the Fed’s extremely accommodative monetary policy began and has increased by more than $1.2 trillion since September 2012 when its latest round of Quantitative Easing began.

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 December 16, 2013

U.S. and World News

  • iStock_000003379334XSmallHouse and Senate negotiators surprisingly announced they have reached a budget agreement, well before the mid-January deadline. The agreement sets spending levels for the next two years and replaces some of the automatic budget cuts that had been put in place by the sequester. Both sides had motivation to get a deal done early with Republicans still repairing the damage the October shutdown did for the party’s polling numbers and the Democrats looking to take attention away from the botched implementation of Obamacare. The House has passed the bill and it will now move to the Senate for voting next week.
  • The World Trade Organization has agreed to a new trade pact after the latest round of talks that have been going on since 2001. Once adopted, the deal should speed up customs procedures, and make trade easier, faster and cheaper. The agreement is designed to cut the cost of trade by 10-15%, which could add $400 billion to $1 trillion to the global economy and create 21 million jobs.

Markets

  • The stock market made a slight decline for the week, as it was down 1.65%, closing at 1775. The Dow Jones Industrial Average was also down 1.65% to close at 15,755. The S&P and the Dow respectively are up 24.48% and 20.23% year to date.
  • Treasury yields rose this week based on better economic data. The 5 year and 10 year treasury are now yielding 1.53% and 2.87% respectively.
  • The spot price of WTI Crude Oil fell this week with prices declining by 1.20% and closing at $96.48 per barrel. Year to date, oil is now up 3.53%.
  • The spot price of Gold rose a bit this week, coming up 1.96% and closing at $1,238.69 per ounce. Gold is now down 26.06% this year.

Economic Data

  • Initial jobless claims rose quite a bit from last week to 368,000 vs. consensus estimates of 320,000. The four week moving average for claims rose to 329,000. The Labor Department noted that while no states estimated claims, seasonal adjustment around the holidays may be affecting claims numbers.
  • The health of corporate pension funds has rebounded to cover 96% of future obligations, up from 77% last year making it’s the strongest recovery since 1986. Public pension funds are also turning things around a bit, with financing levels climbing to 76% from 66% last year. The recovery has been boosted by strong stock markets and rising interest rates.

Fact of the Week

  • The total outstanding balance of student loans reached $1.027 trillion as of September 30th. The delinquency rate (defined as at least 90 days late and weighted by amount owed) is at 11.8%, where it used to be just 6% in 2003.

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 December 9, 2013

U.S. and World News

  • Japan has approved a ¥18.6 trillion ($182 billion) stimulus plan to offset a hike in sales tax that is due to go into effect in April. The government plans on using the new tax revenue to finance the spending and will forgo raising new debt. The cabinet expects the measures to add 1% to GDP and create around 250,000 jobs, although many economists aren’t as optimistic.
  • The state of Illinois’ Senate and House have approved an overhaul of the state’s pension system, one of the most underfunded in the country with an funding gap of almost $100 billion. The plan is designed to fully fund Illinois’ five pension systems by 2044 by saving an estimated $160 billion over 30 years with cuts and other measures. The state’s unions strongly oppose the proposals and intend to go to court to try to block them, although it is not clear if the unions actually have an alternative plan.
  • ?????????The House of Representatives has overwhelmingly passed legislation designed to discourage patent trolls from filing frivolous lawsuits by requiring them to disclose more information about who owns the intellectual property involved. The Innovation Act as it’s called, also requires judges to decide early on in the proceedings of a case whether a patent is valid, thereby potentially saving companies millions of dollars on discovery. The legislation now heads to the Senate.

Markets

  • Stock markets rallied on Friday to end the week mostly flat as the S&P 500 Index was unchanged, closing at 1,805. The Dow Jones Industrial Average was down 0.37% to close at 16,020. The S&P and the Dow respectively are up 26.57% and 22.25% year to date.
  • Treasury yields rose this week based on better economic data. The 5 year and 10 year treasury are now yielding 1.49% and 2.86% respectively.
  • The spot price of WTI Crude Oil rallied this week with prices rising by 5.37% and closing at $97.70 per barrel. Year to date, oil is now up 6.40%.
  • The spot price of Gold fell a bit this week, dropping 1.96% and closing at $1,228.81 per ounce. Gold is now down 26.65% this year.

 

Economic Data

  • Initial jobless claims fell from last week to 298,000 vs. consensus estimates of 320,000. The four week moving average for claims fell to 322,000. The Labor Department noted that while no states estimated claims, seasonal adjustment around the holidays may be affecting claims numbers.
  • The monthly nonfarm payrolls number increased by more than expected, showing gains of 203,000 jobs vs. expectations of 185,000. The unemployment rate fell to 7.0% vs. expectations of 7.2%. The labor force participation rate also saw a gain (although it remains near cycle lows) which is a positive sign. The strong data leaves open the possibility of a December Fed taper, although it is probably unlikely to occur before the end of the year.
  • Retail sales data over the Thanksgiving holiday weekend came in mixed. The National Retail Federation estimated that consumers spent $57.4 billion from Thursday through Sunday, which was down 2.7% from last year even with the number of shoppers increasing to 141 million from 139 million a year ago. Meanwhile, Adobe estimates internet sales on Cyber Monday climbed 16% from last year to a record $2.29 billion. Internet sales over the five-day Thanksgiving shopping period rose by 26% over last year to $7.4 billion.

Fact of the Week

  • The number of banks in the United States has dropped to below 7,000 for the first time since records began in 1934. The number of banks fell to 6,891 as of the end of the 3rd quarter from a peak of over 18,000. Reasons for the trend include consolidation and failure, while tighter regulation makes it harder to open banks.

 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 December 2, 2013

iStock_000005557972XSmallU.S. and World News

  • A historic deal was agreed to last weekend in Geneva, Switzerland between Iran and the P5 + 1 group of six world powers (United States, Russia, China, United Kingdom and France, plus Germany). The deal consists of a short-term freeze on portions of Iran’s nuclear program in exchange for decreased economic sanctions on Iran with the hope of there being a long-term agreement down the line. Although the deal doesn’t relax restrictions on Iran’s crude oil sales, some believe that this deal will be a precursor to the eventual resumption of exports. The agreement represents the only one of its kind between the U.S. and Iran in over 34 years.
  • According to Ardo Hansson, Governing Council member of the European Central Bank, the ECB is prepared to further lower interest rates and even impose a negative deposit rate. Hansson believes that the potential benefits of a move like this are justified as he does not see any outright deflationary risk in having a negative deposit rate. These comments come after the ECB surprisingly reduced its main refinancing rate from 0.5% to a record low 0.25% earlier this month.

Markets

  • Stock markets set new record highs again in this shortened holiday week as the S&P 500 Index increased by 0.09%, closing at 1,806. The Dow Jones Industrial Average was up 0.20% to close at 16,086. The S&P and the Dow respectively are up 26.62% and 22.76% year to date.
  • Treasury yields remained relatively stable this week, the 5 year and 10 year treasury are now yielding 1.37% and 2.75% respectively.
  • The spot price of WTI Crude Oil fell this week, likely due to potential implications of the Iran deal. Spot prices dropped by 2.17% and closed at $92.78 per barrel. Year to date, oil is now down 0.44%.
  • The spot price of Gold rose a bit this week, climbing 0.7% and closing at $1,252.44 per ounce. Gold is now down 25.24% this year.

 

Economic Data

  • Initial jobless claims fell from last week to 316,000 vs. consensus estimates of 330,000. The four week moving average for claims fell to 332,000. The Labor Department noted that while no states estimated claims, seasonal adjustment around the holidays may be affecting claims numbers.
  • Pending home sales declined 0.6% in October, worse than expectations of a 1.0% rise. Pending sales, which are based on contract signings rather than closings, are a timely indicator of sales activity and suggest that existing home sales data in coming months may be weak. In the past 12 months, pending home sales have decline 2.2%.
  • The Case-Shiller home price index rose 1.0% in September, beating consensus expectations of a 0.9% rise. Prices have risen a strong 13.3% over the past 12 months, but remain well below their 2006 peak levels.
  • Eurozone unemployment unexpectedly fell for the first time since February 2011, dropping to 12.1% in October from 12.2% a month prior. Austria had the lowest unemployment rate in the region at 4.8%, while Spain had the highest at 26.7%.

Fact of the Week

  • The National Retail Federation has forecasted that 140 million consumers will go shopping over the long Thanksgiving weekend, up from 139.4 million last year. Also, IBISWorld has projected that total sales through Cyber Monday will rise 2.2% to $40.5 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 – (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