Wealth Management Weekly Update May 27, 2014

U.S. and World News

  • Ukrainians are due to vote in presidential and mayoral elections on Sunday, with billionaire “chocolate king” Petro Poroshenko well ahead in the presidential polls. This election will come after 13 Ukrainian soldiers were killed during a skirmish with pro-Russian separatists earlier this week. The pro-Russian rebels are attempting to make sure the elections don’t take place in regions where they have influence, while another major issue is whether Russia will accept the outcome of the election after previously saying they may not.
  • The military chief of Thailand, General Prayuth Chan-ocha, had imposed martial law in the country earlier this week before announcing on Thursday that the military has taken control of the country in a coup. Nightly curfews have been imposed and the country’s constitution has been suspended in the process. The Thai military claims the actions seek to restore order following six months of violent and sometimes deadly protests, which have brought the country’s economy to the brink of recession. It also comes amid a period of limbo for Thailand after a court dismissed Prime Minister Yingluck Shinawatra and nine other ministers earlier this month for abuse of power.
  • swiss_000002085816SmallVoters in Switzerland have overwhelmingly rejected a proposal to institute a minimum wage of 22 Swiss francs (~$25) an hour, which would have been the highest in the world. Over 76% of voters cast a No ballot. Swiss Economy Minister Johann Schneider-Ammann said, “Accepting the initiative would have led to job cuts in economically weak, rural areas.”

Markets

  • Markets rose across the board this week with the S&P 500 rising 1.25% to a new All-Time high of 1900.The Dow Jones was also up this week, rising by 0.76% and closing at 16,606. Year to date, the S&P is now up 3.67% and the Dow Jones is up 1.17%.
  • Treasury yields remained steady this week following a gradual decline in interest rates this year. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.53% and 2.54%, respectively.
  • The spot price of WTI Crude Oil rose in the days leading up to the holiday weekend, ending the week up 2.77%, closing at a 52-week high of $104.39 per barrel. Year to date, Oil prices have climbed 8.23%.
  • The spot price of Gold decreased minimally this week, closing at $1292.59 per ounce. Year to date, Gold prices are up 7.57%.

Economic Data

  • Initial jobless claims rose by 29,000 from last week, coming in at 326,000 vs. consensus estimates of 310,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 323,000.
  • Existing home sales rose 1.3% in April which was lower than consensus estimates of  2.2%. Meanwhile, new home sales rose 6.4% in April vs. consensus estimates of a 10.7% gain. The rebound in housing following an extremely harsh winter hasn’t been as robust as expected.

Fact of the Week

  • According to data released by the IRS, federal employees owe a total of $3.3 billion in back taxes. While the delinquency rate of federal employees of 3.2% is expectedly lower than national average of 8.7%, there are 318,462 federal employees who owe back taxes, putting the average outstanding tax bill at $10,391. There is a wide dispersion of non-payment rates within the different divisions of the federal government. The highest rates of tax delinquencies are found in small agencies dealing with civil rights and the disabled such as The National Council on Disability (11.5% delinquent) and the Civil Rights Commission (9.5%). Employees of the House of Representatives (not necessarily Congressmen) have a delinquency rate of 4.9%, while the Senate is a bit better at 3.2%. The Treasury Department, of which the IRS is a part of, has the lowest non-payment rate of 1.2%, with active duty military personnel not far behind at #2 with a tax delinquency rate of 1.7%.

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 CFP® – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update May 19, 2014

U.S. and World News

  • Pro-Moscow separatists have declared victory in a referendum on “self-rule” for the “People’s Republic of Donetsk” in eastern Ukraine, saying that 89% of voters have approved the measure. Russia said it “respects” the results of the ballot, which should be implemented “in a civilized manner.” However, the Ukraine government, the U.S. and the EU have condemned the ballot as illegal. The fear is that if Donetsk does try to implement the poll outcome, Ukraine will slide into civil war.
  • oil_000013481523_290Saudi Arabia could increase oil production if the tension between Russia and Ukraine causes market shortages, Saudi Oil Minister Ali al-Naimi said today. Absent of any crude shortages, al-Naimi doesn’t expect OPEC to increase its output cap of 30M barrels a day when it meets next month. He also described $100 a barrel as a fair price “for everybody – consumer, producer and oil companies.”
  • Narendra Modi’s opposition Bharatiya Janata Party looks to have won India’s biggest election victory in thirty years. At the time of writing, counting showed that the BJP and its allies were ahead in 336 out of 542 seats in the lower house of parliament, well above the 272 needed for a majority. India’s Sensex stock index was +0.9% – although down sharply from earlier highs – on the prospect of a stable government that’s perceived as business friendly and committed to economic reform.

Markets

  • The S&P 500 declined by 0.03% for the week, closing at 1,878.The Dow Jones also fell this week by 0.55% closing at 16,491. So far in 2014, the S&P is up 1.60% and the Dow Jones is down 0.51%.
  • Treasury yields declined this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.55% and 2.52%, respectively.
  • The spot price of WTI Crude Oil ended the week up 2.15%, closing at $102.14 per barrel.  Year to date, Oil prices have climbed 5.00%.
  • The spot price of Gold increased by 0.31% this week, closing at $1292.93 per ounce. Year to date, Gold prices are up 7.60%.

Economic Data

  • Jobless claims dropped to 297,000 (vs. consensus 320,000) from an upwardly-revised 321,000 in the prior week. The Labor Department cited no special factors in the data. The four-week moving average of initial claims edged down to 323,000.
  • Headline consumer prices rose 0.3% in April, in line with consensus expectations. Core consumer prices rose 0.24% on an unrounded basis (vs. consensus +0.1%), somewhat higher than our view. Over the past year, headline consumer prices rose 2.0% and core prices rose 1.8%, bringing inflation numbers closer to the Fed’s stated targets.

Fact of the Week

  • Bill Gates is ranked # 1 as the richest American today ($72 billion), but the 6 living heirs of Sam Walton (who died in 1992) are worth a combined $145 billion (source: Forbes).

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 CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

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Wealth Management Weekly Update May 12, 2014

U.S. and World News

  • ukraine_moscow_mapViolence continued to escalate in Ukraine this week as the country sent special forces to the port city of Odessa after pro-Russian separatists stormed a police station and freed 70 fellow activists. Then, pro-Russian militants killed four government servicemen and downed a military helicopter as Ukraine sought to regain ground lost in the Eastern part of the country. Meanwhile, Putin and other Russian leaders have called to postpone the May 25th elections in Ukraine, a move in an effort to further destabilize the country. Secretary of State John Kerry warned that the U.S. will impose further sanctions if “Russian elements” continue to sabotage the democratic process in Ukraine.

Markets

  • The S&P 500 fell slightly by 0.06% for the week, closing at 1,878.The Dow Jones rose to a new record high this week, climbing by 0.54% and closing at 16,583. So far in 2014, the S&P is up 2.35% and the Dow Jones is up 0.84%.
  • Treasury yields were largely flat this week, keeping this year’s unexpected drop in interest rates intact. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.64% and 2.63%, respectively.
  • The spot price of WTI Crude Oil ended the week up 1.04%, closing at $100.08 per barrel.  Year to date, Oil prices have climbed 2.88%.
  • The spot price of Gold fell by 0.84% this week, closing at $1,288.79 per ounce. Year to date, Gold prices are up 7.25%.

Economic Data

  • Initial jobless claims fell by 25,000 from last week, coming in at 319,000 vs. consensus estimates of 325,000. The Labor Department noted no special factors in the data like they had done the last few weeks during the Easter and spring break seasons. The four week moving average for claims moved up for the third consecutive week, up to 325,000, after seeing several weeks of decline.
  • 1st quarter earnings reports are nearly all in with 91% of the S&P 500 having reported. Overall, corporate profits weren’t as bad as many analysts had feared given the harsh weather to start the year. 69% of companies beat bottom line earnings expectations while 53% were able to beat top line sales expectations. Utilities faired the best in the first quarter, aided by increased demand due to the colder than normal winter. Consumer staples stocks featured the worst reports with 52% of the sector exceeding earnings expectations and only 39% having better than expected revenue.

Fact of the Week

  • In a recent study conducted by Mark Rank of Washington University and Thomas Hirschl of Cornell, 44 years of personal income data for individuals from ages 25 to 60 (prime working years) were analyzed to see what levels of affluence Americans may experience during their lives. Surprisingly, it turns out that 12% of the U.S. population will find themselves in the infamous “1%” of income distribution for at least one year. Additionally, 39% of Americans will spend at least a year in the top 5% of income distribution, 56% will be in the top 10% at some point and a whopping 73% of the population will have at least one year in the top 20% of the country’s income distribution. The findings cast serious doubt on the notion of a static 1% and 99% class structure that is often portrayed in the U.S.

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 CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update May 5, 2014

U.S. and World News

  • iStock_000024203309Small_350President Obama has announced new targeted sanctions against Russia that will impact more wealthy individuals and companies in the country. The G7 (the G8 excluding Russia) deemed that Russia hasn’t met its pledge to de-escalate the conflict with Ukraine. The sanctions won’t target broad sections of Russia’s economy as many European nations fear the consequences for their own economies due to energy dependence on Russia.
  • The April Federal Reserve meeting didn’t provide any major surprises as the Committee continued to taper their asset purchases by another $10 billion, bringing monthly purchases down to $45 billion per month. If Janet Yellen and the Fed continue to reduce asset purchases at this rate, they will wind down the Quantitative Easing program in October. Most of the language in the Committee’s statement was the same but they did note that “economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions.”

Markets

  • The S&P 500 rose slightly by 0.95% for the week, closing at 1,881.The Dow Jones followed suit by climbing 0.93%, closing at 16,512. So far in 2014, the S&P is up 1.77% and the Dow Jones is down 0.38%.
  • Treasury yields fell again this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.67% and 2.59%, respectively.
  • The spot price of WTI Crude Oil ended the week down 0.77%, closing at $99.83 per barrel.  Year to date, Oil prices have climbed 1.59%.
  • The spot price of Gold fell by 0.33% this week, closing at $1,298.93 per ounce. Year to date, Gold prices are up 8.10%.

Economic Data

  • Nonfarm payrolls gained 288,000 jobs surpassing estimates of 218,000 jobs gained. The unemployment rate dipped to 6.3% from 6.6%. The unemployment rate is at the lowest level since September 2008.
  • Initial jobless claims rose by 15,000 from last week, coming in at 344,000 vs. consensus estimates of 320,000. 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 for the second consecutive week to 320,000 after seeing several weeks of decline.
  • The Case-Shiller home price index rose a solid 0.8% in February, in line with consensus expectations. Over the past year, the national index has risen 12.9%, although prices have varied widely in different geographic areas.
  • The preliminary 1st quarter GDP reports showed growth of only 0.1% vs. consensus expectations of 1.2%. This was the slowest growth rate since the 4th quarter of 2012. Adverse weather is primarily being blamed for the weak number and despite the disappointing headline number, there are some positive signs in this report that suggest a solid bounce in GDP growth could be coming in the 2nd quarter.

Fact of the Week

  • Households in the U.S. are split 68%/32% between homeowners and renters. Of those homeowners, 32% of them own their home outright (no mortgage). Therefore, 22% of all U.S. households are homeowners with no debt (32% of 68%).

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