Wealth Management Economic Update September 2, 2014

U.S. and World News

  • The hostilities between Ukraine and Russia continued this week on reports of Russian tanks, artillery and infantry being passed over the border of eastern Ukraine. This follows an in-person meeting between Ukrainian President Petro Poroshenko and Russia’s Vladimir Putin which failed to yield any substantial progress between the two nations as Putin claimed that it is ultimately up to Kiev to work out conditions for a ceasefire with separatist rebels. The United States and European Union are now considering another round of sanctions on Russia based on NATO reports that well over 1,000 Russian troops have breached the border. Despite the recent escalation, President Obama has ruled out military intervention in the region.
  • drone_000030705766_330The U.S. is preparing to expand its military air campaign beyond Iraq. This week, President Obama authorized surveillance flights to gather intelligence on Islamic State (formerly ISIS) targets in Syria. A decision to launch air strikes in Syria has not been made yet as the drones being utilized are just collecting information at this time.

Markets

  • Markets were positive this week despite continued geopolitical turmoil. The S&P 500 closed at a new All-Time High on Friday, gaining 0.79% this week and closing at 2,003. The Dow Jones Industrial Average gained 0.63% and closed at 17,098. Year to date, the S&P is up 9.87% and the Dow is up 4.84%
  • Interest rates dipped a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.63% and 2.35%, respectively.
  • The spot price of WTI Crude Oil rose by 2.33% this week, closing at $95.84 per barrel. Year to date, Oil prices have increased 1.96%.
  • The spot price of Gold increased by 0.49% this week, closing at $1287.32 per ounce. Year to date, Gold prices are up 7.13%.

Economic Data

  • Initial jobless claims held steady from last week, coming in at 298,000 vs. consensus estimates of 300,000. The level of claims remains 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 300,000.
  • Several reports on housing data were released this week, showing a mixed but possibly improving picture:
    • New home sales declined by 2.4% in July vs. consensus estimates of a gain of 5.8%.
    • The Case-Shiller home price index declined by 0.2% in June vs. expectations of remaining flat. Over the past year, the home price index has risen 8.1%.
    • Pending home sales rose 3.3% in July vs. expectations of 0.5%. This number, which is based on contract signings instead of closings, is a good leading indicator of existing home sales one to two months in the future.

Fact of the Week

  • According to the Office of Management and Budget, the government is projecting a $525 billion deficit for fiscal year 2014 (the government’s fiscal year ends on September 30). If that amount comes to fruition, this would be the smallest national budget deficit since fiscal 2008.

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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