Wealth Management Weekly Update April 28, 2014

U.S. and World News

  • The agreement reached last week to de-escalate the situation in Ukraine doesn’t appear to have been of much use. Gun fights have broken out in Eastern Ukraine causing President Obama to have to warn of additional sanctions on Russia if Putin doesn’t act to ease tensions.  Russia has not heeded these warnings and has begun military exercises on the Ukrainian border after five pro-Russian rebels were killed during attempts to reassert Russian control over the eastern part of the country.
  • S&P has reduced Russia’s debt rating by a notch to BBB-, or just one grade above junk status. S&P also kept the country’s outlook at negative as the tensions with Ukraine continue to ratchet up.
  • Japan_Toyko_000037699828_316Japan has overhauled the investment committee of its $1.26 trillion Government Pension Investment Fund (GPIF), the world’s largest pension fund. Prime Minister Shinzo Abe wants the fund to improve returns by making higher risk investments (stocks) and reducing its reliance on low-yielding government bonds. The revamp is part of Abe’s “third arrow” of economic reform and an attempt to lift Japan out of deflation.

Markets

  • The S&P 500 dipped slightly by 0.81% for the week, closing at 1,863.The Dow Jones followed suit by falling 0.85%, closing at 16,361. So far in 2014, the S&P is up 0.81% and the Dow Jones is down 1.30%.
  • Treasury yields fell this week in conjunction with lower stock prices. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.73% and 2.66%, respectively.
  • The spot price of WTI Crude Oil ended the week down 2.64%, closing at $100.64 per barrel.  Year to date, Oil prices have climbed 3.45%.
  • The spot price of Gold rose by 0.69% this week, closing at $1,303.25 per ounce. Year to date, Gold prices are up 8.46%.

Economic Data

  • Initial jobless claims rose by 25,000 from last week, coming in at 329,000 vs. consensus estimates of 315,000. The Labor Department noted that seasonal adjustment presents difficulties during the Easter holiday and spring break from schools. The four week moving average for claims moved up to 317,000 after seeing several weeks of decline.
  • New home sales dropped by 14.5% in March vs. expectations of them rising by 2.3%. This was the largest decline in this measure since July 2013 shortly after last year’s sharp jump in mortgage rates. While it’s possible that adverse weather earlier in the winter had a lagged effect on March new home sales by delaying home searches, this is being viewed as a legitimately disappointing report.
  • China’s manufacturing sector has contracted for a fourth consecutive month in April as the HSBC PMI gauge registered another sub-50 (50 is breakeven) reading at 48.3. Given China’s slowing economy, many analysts believe that the Chinese government will add to its recent stimulus measures.

Fact of the Week

  • The U.S. government had a streak of 42 consecutive monthly deficits through 3/31/2012, an all-time record. Since then, 7 of the last 24 months have actually generated a surplus (tax receipts greater than expenditures). Higher taxes collected due to economic improvements and stock market gains, as well as reduced spending through measure like the sequester have helped to balance the budget.

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

April 2014 – National Financial Literacy Month

piggy_000004047530SmallDid you know April was National Financial Literacy Month? Everyone is encouraged to expand their knowledge and awareness of finance and money.

Old Second Bank is pleased to contribute to the financial literacy of customers and non-customers alike. Take advantage of the following Old Second resources:

Or simply visit oldsecond.com to learn more about all our many financial products and services.

Wealth Management Weekly Update April 14, 2014

U.S. and World News

  • The Senate has passed a bill that would extend unemployment benefits for 2.8 million people who have been out of work for at least six months. The legislation would restore the payout for five months retroactive to December, when the payouts expired. The bill will now be reviewed by the House, where approval is expected to be harder to come by due to concerns about costs of the extension.
  • The world’s largest election began this week in India with an electorate of 815 millionindia_taj_mahal_350 people. The ballot comprises of nine rounds and will take five weeks with results due on May 16th. The favorite to win is the Bharatiya Janata Party led by Narendra Modi, who has the support of businesses in the country. There are hopes that, if elected, he could form a stable coalition and revive India’s lackluster economy.
  • Ukraine’s security forces have been attempting to clear Kharkiv, the country’s second largest city, of separatists as the government tries to counteract what it sees as Russian schemes to engineer further annexations. Violence has flared up recently amid pro-Russian demonstrations in Ukraine.
  • The Illinois House and Senate approved a bill that would increase employee contributions to two Chicago city pension systems and will cut future cost of living increases for retirees. The bill is the start of an attempt to deal with a pension system that has a shortfall of around $20 billion, with some funds on track to completely run out of money within a decade.

Markets

  • Stock markets continued their slide this week that began last Friday. The S&P 500 was down 2.61% for the week, closing at 1,816.The Dow Jones fell 2.31%, closing at 16,026. So far in 2014, the S&P is down 1.20% and the Dow Jones is down 2.69%.
  • Treasury yields fell this week in conjunction with falling stock prices as the growth prospects of the U.S. economy have been called into question. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.58% and 2.63%, respectively.
  • The spot price of WTI Crude Oil ended the week up 2.28%, closing at $103.40 per barrel.  Year to date, Oil prices have risen 5.52%.
  • The spot price of Gold rose by 1.14% this week, closing at $1,318.34 per ounce. Year to date, Gold prices are up 9.71%.

Economic Data

  • Initial jobless claims dropped by 32,000 from last week, coming in at 300,000 vs. consensus estimates of 320,000. The level of claims was a post-recession low and was the best reading since May 2007. The four week moving average for claims fell to 316,000, continuing the improvement in this timely measure of employment.

Fact of the Week

  • According to the IRS, eliminating the deduction for home mortgage interest expense would increase annual tax revenues to the U.S. government by $175 billion, a boost of 6.3%.

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 April 8, 2014

cuffsU.S. and World News

  • The FBI, Justice Department and the SEC all announced this week that they are investigating whether high-frequency trading companies break insider trading laws by abusing the fast moving information that they are able to receive microseconds before investors. The traders in question are able to use this informational advantage to front run investor orders, generating riskless profit on their end. The announcements come of the heels of a media tour by author Michael Lewis, whose new book, ‘Flash Boys’, accuses the high-frequency traders of rigging the stock markets.
  • The government has met its goal of signing up 7 million people for Obamacare by the end of March. Over 7.1 million Americans enrolled despite significant technical issues in the final days before this enrollment deadline. The administration failed to disclose the detail behind those who have signed up, including the most important metric for the success of the program: how many young people enrolled.
  • China has unveiled another stimulus package as part of the country’s attempt to stabilize slowing growth and maintain confidence. The announcement comes even as the government looks to reform the economy so that it relies less on the state sector. The stimulus includes selling 150 billion Yuan ($25 billion) in bonds for railway construction, improved low income housing and tax relief for struggling small businesses.

Markets

  • Stock markets made new all-time highs in the middle of the week before experiencing a sharp sell-off on Friday following the monthly jobs report. The S&P 500 was up 0.43% for the week, closing at 1,865.The Dow Jones rose 0.58%, closing at 16,412. So far in 2014, the S&P is up 1.45% and the Dow Jones is now down 0.39%.
  • Treasury yields did not fluctuate much from last week despite seeing some moderate  mid-week swings. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.71% and 2.73%, respectively.
  • The spot price of WTI Crude Oil ended the week down 0.57%, closing at $101.09 per barrel.  Year to date, Oil prices have risen 3.16%.
  • The spot price of Gold rose by 0.70% this week, closing at $1,304.25 per ounce. Year to date, Gold prices are up 8.54%.

Economic Data

  • Initial jobless claims rose by 16,000 from last week, coming in at 326,000 vs. consensus estimates of 319,000. The four week moving average for claims ticked up to 320,000.
  • Monthly nonfarm payroll employment increased by 192,000 vs. expectations of 200,000 jobs gained. Revisions to the January and February reports added another 37,000 jobs. The unemployment rate held steady at 6.7% and the labor force participation rate rose by 0.2% in the month. Overall, the report was good but not great and employment numbers may have seen an artificial boost from the expiration of emergency unemployment benefits.

Fact of the Week

  • According to the IRS, the total number of pages in the Federal Tax Rules has increased by 34,108 pages since 1995. Now standing at a total of 74,608 pages, the U.S. tax code has expanded by 5 new pages per day every day in the last 19 years.

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