Wealth Management Economic Update August 25, 2014

U.S. and World News

  • Middle_East_000038001262_320President Obama says that the U.S. will continue limited airstrikes against Islamic State militants. The efforts have helped Iraqi and Kurdish forces retake the vital Mosul dam and halted the advance of Islamic State on the city of Erbil. News of the recaptured dam has helped to push down oil prices this week.
  • The latest cease-fire in the Gaza Strip has collapsed, after rocket fire from the Palestinians resumed eight hours before the cease-fire was due to expire. Israel responded with airstrikes and ordered its delegates back from Cairo saying they will not negotiate under fire. Egyptian officials have been struggling to mediate during the conflict, striking several temporary cease-fires, but not achieving a permanent truce as of yet.
  • Vladimir Putin is scheduled to meet face to face with Ukrainian President Petro Poroshenko in Belarus on August 26th. Among the issues surely to be discussed will be stabilizing the border situation with Ukraine and addressing Ukraine’s energy concerns. Ukraine’s energy sector is faltering considerably and estimates suggest that coal supplies to electricity producers may run out in about a month due to rail lines that were damaged by pro-Russian separatists.
  • The annual retreat in Jackson Hole, Wyoming where central bankers, finance ministers and academics from all around the world come to discuss global economic issues went on this week without too many market moving headlines. Fed Chairwoman Janet Yellen’s comments noted both a more rapid than expected pace of recent labor market improvements, as well as the still significant level of labor underutilization. She continued to emphasize that future policy decisions will be data driven and that the Fed could raise rates earlier than expected should the data improve more than expected but that it could also raise rates later than expected if labor and inflation data disappoints.

Markets

  • Markets were positive this week despite continued geopolitical turmoil. The S&P 500 closed at a new All-Time High on Thursday but lost ground on Friday, gaining 1.74% this week and closing at 1,988. The Dow Jones Industrial Average gained 2.07% and closed at 17,001. Year to date, the S&P is up 9.00% and the Dow is up 4.16%
  • Interest rates floated back up a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.66% and 2.40%, respectively.
  • The spot price of WTI Crude Oil fell by 1.91% this week, closing at $93.50 per barrel. Year to date, Oil prices have dipped 0.53%.
  • The spot price of Gold decreased by 1.89% this week, closing at $1280.04 per ounce. Year to date, Gold prices are up 6.52%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 298,000 vs. consensus estimates of 303,000. The level of claims is near the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 301,000.
  • Nearly all of the 2nd quarter earnings reports from the S&P 500 have come out with 94% of companies reporting. Overall, 67% of companies exceeded earnings expectations with healthcare and financial stocks beating the highest percentage of the time and telecommunication stocks performing the worst. On the top line, 63% of companies beat revenue expectations, again with healthcare leading the way while telecom and staples lagged.
  • Housing starts rose a stronger than expected 15.7% in July vs. consensus expectations of 8.1%. Both single family and multifamily starts contributed to the gains and left the level of housing starts just shy of the post-recession high seen last November.

Fact of the Week

  • According to a study conducted by Reuters, 40% of people identifying themselves as retired reported that they had stopped working involuntarily. Additionally, 30% of those retired people surveyed said that if the labor market improved and a job became available, they would effectively “unretire” and rejoin the workforce. These findings show that headline unemployment rate isn’t always a representative statistic, as those 30% are currently not counted as being in the workforce but would reenter it if conditions improve.

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

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