Wealth Management Economic Update September 22, 2014

U.S. and World News

  • Following a two day policy meeting, the Federal Reserve announced another $10 billion reduction of its asset purchases and announced that they are on pace to completely end its quantitative easing purchases at its next policy meeting in October. Fed Chairperson Janet Yellen renewed her pledge to keep short term interest rates at zero for a “considerable time” after asset purchases have stopped, but did not provide any clarification as to how long of a time that would be. Yellen also made dovish comments regarding the labor market, saying that the slow increase in wages was indicative of labor market slack, laying the groundwork for delaying the raising of interest rates.
  • Ukraine and the European Union ratified their long awaited association and free trade agreement this week. This agreement was largely responsible for sparking the Ukrainian revolution last February. Ukrainian President Petro Poroshenko announced after the signing that by ratifying the agreement, the country is on course for membership in the EU. The deals implementation will be postponed until December 2015 however, as they are currently facing immense pressure from Russia and pro-Russian separatists in Ukraine.
  • Residents of Scotland have voted to remain a part of the United Kingdom. The independence referendum showed a very close race at times but with 55% of the vote, “No” to Scotland’s independence won out. UK Prime Minister David Cameron said that he was delighted by the referendum result and added that it was time for the UK to come together and move forward.
  • Stock_000001029623_320Today, the stock market closely monitored the biggest IPO in America’s history. Chinese internet retailer, Alibaba, made its debut today and closed at $93.89. This closing price was about a 38% increase from the original stock price of $68.

Markets

  • Markets improved this week as the S&P 500 gained 1.25% and closed at 2,010. The Dow Jones Industrial Average followed suit and increased 1.72% and closed at 17,280. Year to date, the S&P is up 8.77% and the Dow is up 4.24%.
  • Interest rates didn’t change much this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.81% and 2.58%, respectively.
  • The spot price of WTI Crude Oil climbed up slightly by 0.36% this week, closing at $92.60 per barrel. Year to date, Oil prices are down 1.49%.
  • The spot price of Gold continued its decline and fell by 1.06% this week, closing at $1,216.65 per ounce. Year to date, Gold prices are up 1.25%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 280,000 vs. consensus estimates of 305,000. The Labor Department noted that claims are difficult to measure around the Labor Day holiday. The four week moving average for claims now stands at 300,000.
  • Housing starts fell 14.4% in August vs. consensus estimates of a drop of 5.2%. Most of the decline occurred in the more volatile multifamily category which fell 31.7%, while single family starts moved down a more moderate 2.4%. Building permits also disappointed, declining 5.6% vs. expectations of -1.6%, again mainly due to the multifamily category.
  • The headline consumer price index declined 0.2% in August vs. expectations of flat prices, due in part to a 2.6% decline in energy prices. Core CPI, which doesn’t include volatile food or energy prices, was flat for the month and was disappointing compared to expectations of +0.2%. Over the past year, headline and core consumer prices both rose at a subdued rate of 1.7%.

Fact of the Week

  • According to a Federal Reserve Economic Well-Being Survey, 34% of Americans surveyed said that they have gone without some form of medical care (i.e. medication, surgery, therapy) in the last 12 months because they could not afford to pay for the product or service.

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

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