Wealth Management Weekly Update February 24, 2014

U.S. and World News

    • The Congressional Budget Office released the findings of a study on President Obama’s proposal to raise the minimum wage to $10.10/hour by 2016 from a current level of $7.25/hour. The study found that the proposal could lead to the loss of about 500,000 jobs as some businesses would likely need to cut staff. However, the study also said that the plan would increase the pay of 16.5 million people and potentially lift 900,000 people out of poverty. A total of 45 million people are projected to be categorized as poor in 2016.

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  • The Bank of Japan surprised markets by expanding lending facilities that are designed to spur corporate investment by offering low interest loans to commercial banks in the hope that they will lend the money to businesses. The Japanese central bank also decided to maintain its asset purchasing program of ¥60-70 trillion per year. The decisions come after 4th quarter GDP data show growth of 0.3% which was much less than expected.
  • Progress toward approval of the Keystone XL pipeline hit a snag this week after a Nebraska judge overruled a law that had allowed the state’s Governor Dave Heineman to approve the building of the pipeline through the state. As a result of the ruling, the decision now rests with the Public Service Commission.

Markets

  • Stock markets rose slightly this week as the S&P 500 ended up 0.35%, closing at 1,836 and the Dow Jones rose by 0.47%, closing at 16,103. So far in 2014, the S&P and Dow have declined 0.66% and 2.86%, respectively.
  • Treasury yields rose slightly in the week with the 5 year and 10 year U. S. Treasury Notes yielding 1.53% and 2.73%, respectively.
  • The spot price of WTI Crude Oil increased this week by 2.1%, closing at $102.23 per barrel.  Year to date, Oil prices rose 3.85%.
  • The spot price of Gold increased moderately this week, gaining 0.42% and closing at $1,323.97 per ounce. Year to date, Gold prices are up 10.18%.

Economic Data

  • Initial jobless claims fell by 3,000 from last week, coming in at 336,000 vs. consensus estimates of 335,000. The four week moving average for claims rose to 338,500. The Labor Department noted that there were no special factors affecting last week’s claims.
  • Housing starts declined 16.0% in January vs. consensus estimates of a decline of 4.9%. Adverse weather conditions played a significant role in the drop off, as the Midwest region saw housing starts fall to their lowest level in the 55 year history of the economic series.

Fact of the Week

  • The proportion of workers who voluntarily left their jobs, known as the “quit rate”, rose to a post-recession high of 1.8% in November. That compares with a low of 1.2% in September 2009, but is still well under the average of 2.1% seen from 2000-2006. Many economists, including new Fed Chief Janet Yellen, view the quit rate rising as a positive indicator of the state of the labor market as they believe that people resign from their jobs either because they have a new one or are confident of finding another position.

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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