Wealth Management Weekly Update March 17, 2014

U.S. and World News

  • Quickly condemned as an illegal referendum by the U.S., the overwhelming majority of Crimeans voted to secede from Ukraine and join Russia last Sunday. Russian President Vladimir Putin authorized the annexation despite warnings of economic sanctions from President Obama and European Union nations. Obama has since responded by imposing asset freezes and visa bans on some senior Russian officials and businessmen closely associated with Putin. Meanwhile, Ukraine plans to pull its troops out of Crimea, effectively accepting Russia’s annexation of the province and will now fortify its eastern border with Russia.
  • fed_000011172845SmallThe Federal Reserve board met this week and decided to continue on with the tapering of asset purchases, lowering monthly treasury purchases by another $10 billion to $55 billion per month. The Committee also provided an update to their forward guidance regarding raising short term interest rates from their near zero level. First, they have abandoned the use of a 6.5% unemployment rate threshold as a timing mechanism for raising rates. The unemployment rate has continued to fall, aided by a declining labor force, and was no longer useful to the policy makers as a true measure of labor market strength. Secondly, the Committee confirmed their use of a 2% inflation target when deciding on policy. Chairwoman Janet Yellen also made headlines when she estimated that rate hikes could come “around six months” after the Fed fully winds down its Quantitative Easing program. With the pace of tapering setting the course for an October end of asset purchases, higher rates could come in April of 2015, earlier than many expectations of late 2015/early 2016.

Markets

  • Despite the results of the Crimean annexation vote and an increase of international political tensions, stock markets rose this week. The S&P 500 was up 1.38% for the week, closing at 1,867. The Dow Jones climbed 1.48%, closing at 16,302. So far in 2014, the S&P is up 1.45% and the Dow Jones is now down 1.09%.
  • Treasury yields jumped higher this week, especially shorter maturity issues, after Janet Yellen’s hints that rate hikes may be coming sooner that expected. The 5 year and 10 year U.S. Treasury Notes yielding 1.71% and 2.75%, respectively.
  • The spot price of WTI Crude Oil ended the week up 1.04%, closing at $99.58 per barrel.  Year to date, Oil prices have risen 1.62%.
  • The spot price of Gold fell by 3.51% this week, closing at $1,334.32 per ounce. Year to date, Gold prices are up 11.04%.

Economic Data

  • Initial jobless claims edged up by 5,000 from last week, coming in at 320,000 vs. consensus estimates of 322,000. The four week moving average for claims fell to 327,000 continuing the positive trend in this timely employment indicator.
  • The Headline Consumer Price Index rose 0.1% in February, in line with expectations. Energy prices declined 0.5%, as a 3.6% increase in natural gas prices was offset by a 1.7% decline in motor fuel prices. Over the past year, headline CPI has increased 1.1%, consistent with a subdued inflationary environment.

Fact of the Week

  • According to a study by the National Institute on Retirement Security, 38 million of the 84 million American households (45%) that are headed by working-age people (ie. not retired) do not own any tax-advantaged retirement accounts like an IRA or 401(k).

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

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