Wealth Management Economic Update July 28, 2014

World News*

  • ukraine_moscow_mapThe Ukrainian government said Friday it regained control of the separatist stronghold of Lysychansk after several days of fierce fighting, a move it said would pave the way to take back a string of other important rebel-held positions.   Kiev has reported steady progress in its fight against the separatists. But its efforts have been hampered by what it says is a flow of weapons and artillery fire from across the border that hasn’t stopped even after last week’s downing of Malaysia Airlines Flight 17–an allegation the U.S. backed on Thursday but that Russia has repeatedly denied.
  • Hundreds of Palestinians in the West Bank protested Israel’s military operation in the Gaza Strip on Friday, as an 18th day of fighting in the coastal territory claimed the life of an Israeli soldier, an Islamic Jihad official, and Palestinian civilians. Protesters waving the green flag of Hamas marched through the center of Ramallah, calling on Israeli forces to get out of Gaza and urging the leaders of the Fatah movement, a longtime rival of Hamas, to support Gaza’s Islamist leaders. One of the West Bank’s largest street protests in years on Thursday ended in clashes with the Israeli army that left two Palestinians dead. The West Bank, separated from Gaza by Israeli territory, had remained relatively calm this month as Palestinian Authority President Mahmoud Abbas’s security forces, with the urging of Israel, worked to contain unrest. But tension there boiled over Thursday after 16 Palestinians were killed in Gaza in the shelling of a United Nations-run shelter where hundreds had taken refuge from Israeli shelling.
*Source: Dow Jones & Company

Markets

  • Markets rose this week despite the geopolitical turmoil and a sharply negative Thursday trading session. The S&P 500 was flat and closed at 1,978. The Dow Jones dipped slightly (0.8%) closing at 19,961. Year to date, the S&P is up 7.0% and the Dow is up 2.3%.
  • Interest rates remained steady this week, with the 5 year and 10 year U.S. Treasury Notes are yielding 1.67% and 2.46%, respectively.
  • The spot price of WTI Crude Oil rose by .03% this week, closing at $101.99 per barrel. Year to date, Oil prices have risen 7.72%.
  • The spot price of Gold dropped .25% this week, closing at $1,307.55 per ounce. Year to date, Gold prices are up 8.8%.

Economic Data

  • The Consumer Price Index Ex-food and energy was reported to +1.9% above year ago levels and in line with the expected +2.0%.
  • Existing home sales was for the month of June were reported to be 5.04 million units ahead of the expected 4.99 units.
  • Initial jobless claims created excitement by being reported 18,000 below expectations.
  • On July 30, 2014, the Federal Reserve Open Market Committee is expected to release the Federal Funds Rate; with no change being anticipated.

Fact of the Week

  • … is out of the office.
  • Happy Summer

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 CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update July 21, 2014

U.S. and World News

  • jet_plane_350pxMalaysian Airlines flight MH 17 appears to have been shot down by surface to air missiles over the battle-torn east Ukraine region of Donetsk. U.S. intelligence is pointing to pro-Russian separatists in Ukraine as the group behind the attack. There were 298 passengers and crew members on the aircraft, all of which were killed. President Obama called the event an “outrage of unspeakable proportions” and has again warned Vladimir Putin of increased sanctions if Russia does not change its stance of backing the Ukrainian rebels. Putin for his part placed the blame on the Ukrainian government, claiming that the tragedy would not have happened had Ukraine not resumed a military campaign against the pro-Russian separatists in the country.
  •  Israeli soldiers and tanks have entered Gaza after cease-fire efforts collapsed and 10 days of bombardments from the air failed to stop the rocket attacks by Hamas from the Gaza Strip. Israeli Prime Minister Benjamin Netanyahu says the campaign is aimed at “destroying the terror tunnels dug from the Gaza Strip into Israeli territory.” Israel had previously been reluctant to launch a ground assault for fear of endangering its own soldiers and drawing international condemnation over mounting Palestinian civilian deaths. The offensive follows an Egyptian effort earlier this week to halt hostilities in which Israel agreed to the terms, but Hamas refused, demanding that Israel and Egypt first give guarantees to ease the blockade on Gaza.
  •  The Obama administration is calling for new legislation that will limit the benefits of U.S. companies which reincorporate overseas in order to take advantage of the lower corporate tax rates of other countries. In the last decade, 50 U.S. firms have relocated for these tax inversions, with many of them being announced this year. Treasury Secretary Jacob Lew has written to congressional tax-writing committees stating that lawmakers “should enact legislation immediately to shut down this abuse of our tax system,” adding that any legislation should be retroactive to May to prevent a rush to do deals before it is potentially enacted.
  • The long awaited New Development Bank has been launched after the BRICS (Brazil, Russia, India, China and South Africa) leaders put their finishing touches on the $100 billion bank and currency reserve pool aimed at reshaping the Western-dominated international financial system centered on the International Monetary Fund and the World Bank. The bank is scheduled to start lending in 2016 and is a major accomplishment by the BRICS countries which account for almost half of the world’s population.

Markets

  • Markets rose this week despite the geopolitical turmoil and a sharply negative Thursday trading session. The S&P 500 gained 0.56% and closed at 1,978. The Dow Jones followed suit by rising 0.97% and closing at 17,100. Year to date, the S&P is up 8.21% and the Dow is up 4.46%.
  • Interest rates fell a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.67% and 2.49%, respectively.
  • The spot price of WTI Crude Oil rose by 2.13% this week, closing at $102.98 per barrel. Year to date, Oil prices have risen 7.72%.
  • The spot price of Gold decreased by 2.08% this week, closing at $1,310.88 per ounce. Year to date, Gold prices are up 9.09%.

Economic Data

  • Initial jobless claims fell 2,000 from last week, coming in at 302,000 vs. consensus estimates of 310,000. The level of claims is approaching the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 309,000, the lowest it’s been since June 2007.
  • Housing starts unexpectedly fell 9.3% in June vs. expectations of a rise of 1.9%. Both single family and multifamily starts fell much more than expected. The report contrasts with more positive recent news on home sales and the National Association of Home Builders index so it may have been an anomaly this month.

Fact of the Week

  • On June 12th, the Supreme Court ruled 9-0 that funds received via an inherited IRA from a non-spouse are not protected in bankruptcy. The case revolved around Heidi Clark who inherited $450,000 in an IRA from her deceased mother in 2001. She then went on to file bankruptcy along with her husband in 2010. The court ruled that the inherited IRA could be taken by creditors to cover the Clark’s debts.

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 CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update July 14, 2014

U.S. and World News

  • money_printing_000013471715Minutes from the latest Federal Reserve meeting were released this week and were generally in line with expectations. The tone was slightly on the more dovish side but also confirmed the Fed’s plan to continue to decrease bond purchases (quantitative easing) at the next three meetings, completely stopping purchases in October.
  • The results of Indonesia’s presidential election will remain uncertain until next week, as 130 million votes need to be hand-counted. The latest polls show a narrow margin between candidates Joko Widodo and ex-general Prabowo Subianto. Subianto faces a U.S. visa ban for allegations of past human rights violations. The new president will come into office facing several issues including foreign investment, a crumbling currency and a need to cut fuel subsidies.
  • Tensions are mounting in the Middle East, after Gaza militants fired new M-302 rockets deep into Israel. Israel has ramped up its air strike campaign as a result, targeting militant positions including rocket launching sites and smuggling tunnels. The newly acquired rockets put about 2/3 of Israel’s 8 million people into Gaza’s range of fire, increasing pressure to neutralize any threats.
  • The Ukrainian army is preparing its invasion of Donetsk, the pro-Russian separatist stronghold and city of nearly 1 million. Rebel leaders are urging residents to evacuate the city and have vowed to never surrender. Separatists have continued to call on Russia for aid, although the country has not yet offered any direct military assistance. While Russia openly condemns Ukraine’s military crackdown, Russia faces heavy economic sanctions should it intervene.

Markets

  • Markets fell this week after making new highs the week prior. The S&P 500 shed 0.86% and closed at 1,968. The Dow Jones followed suit by dropping 0.68% and closing at 16,944. Year to date, the S&P is up 7.60% and the Dow is up 3.46%.
  • Interest rates fell this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.64% and 2.52%, respectively.
  • The spot price of WTI Crude Oil continued to fall this week due to waning concerns about Iraqi oil supplies in the near term. Prices fell 3.26%, closing at $100.67 per barrel. Year to date, Oil prices have risen 5.30%.
  • The spot price of Gold increased by 1.34% this week, closing at $1,338.20 per ounce. Year to date, Gold prices are up 11.36%. 

Economic Data

  • Initial jobless claims dropped 11,000 from last week, coming in at 304,000 vs. consensus estimates of 315,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 311,500.

Fact of the Week

  • According to the Federal Reserve, outstanding student loans total $1.11 trillion while outstanding credit card debt stands at $857 billion. In the last 12 months, student debt has increased $124 billion while credit card debt has increased just $7 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 CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Economic Update July 7, 2014

U.S. and World News

  • Tensions are mounting in Ukraine again, as the extended cease-fire agreement between the Ukrainian government and pro-Russian separatists has expired. Both sides were accused of violating the agreement while it was in place which has added to the strained situation. In a four-way phone call with Vladimir Putin and German and French leaders, Ukrainian President Petro Poroshenko accused separatists of not staying on track with the agreed upon peace plan.
  • argentina_000041006656SmallArgentina has entered a state of technical default, as the $832 million payment given to holders of the country’s restructured bonds was declared illegal last week. The dispute continues as the New York judge that is presiding over the case insists that holdout creditors must be paid $1.5 billion before any other payments can be made. The country will have a 30 day grace period until it enters a formal default. Ratings agency Standard & Poor’s has responded by placing Argentina’s current CCC- rating on watch for downgrade.
  • The Iraqi parliament failed to elect a new speaker this week, postponing the opportunity to form a new government. The Obama administration is still urging Iraqi leaders to overcome sectarian divides and to quickly create a more politically inclusive regime. Escalating violence has led to an estimated 2,417 Iraqis killed in June, as ISIS insurgents continue to overrun many cities and regions within the country.

Markets

  • Markets made new All-Time Highs this holiday shortened week as the Dow Jones surpassed the 17,000 barrier.  The S&P 500 gained 1.28% and closed at a record high 1,985 while the Dow Jones followed suit by rising 1.31% and closing at 17,068, also a record high. Year to date, the S&P is up 8.53% and the Dow is up 4.17%.
  • Interest rates rose this week on stronger economic data including the monthly employment report. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.74% and 2.64%, respectively.
  • The spot price of WTI Crude Oil fell a bit this week due to waning concerns about Iraqi oil supplies in the near term. Prices fell 1.74%, closing at $103.90 per barrel. Year to date, Oil prices have climbed 8.68%.
  • The spot price of Gold increased by 0.28% this week, closing at $1,319.83 per ounce. Year to date, Gold prices are up 9.84%.

Economic Data

  • Initial jobless claims edged up a bit from last week, coming in at 315,000 vs. consensus estimates of 313,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 315,000.
  • The June nonfarm payrolls report was better than expected, showing an increase of 288,000 jobs vs. expectations of 215,000. The report brings the three month average job gains up to 272,000.
    • The unemployment rate unexpectedly fell to 6.1% from 6.3% last month. Labor force participation remained unchanged and at a very low level of 62.8%.
    • Average hourly earnings slightly outpaced expectations by rising 0.25% vs. 0.2%. Over the last year, wage growth has been 2.0% which is consistent with subdued wage growth but is slightly above expectations of +1.9%.
  • Pending home sales came in better than expected his month, rising 6.1% vs. expectations of a 1.5% gain. Pending home sales are based on contract signings rather than closings and are a decent leading indicator of future existing home sales. Despite the recent improvement, over the last year pending home sales have declined by 6.9%.

Fact of the Week

  • According to a study by the Employee Benefit Research Institute, more than half (56%) of Americans at least age 25 have never attempted (nor has their spouse attempted) to calculate how much they will need to accumulate for their eventual retirement.

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