Wealth Management Economic Update September 29, 2014

U.S. and World News

  • syria_000034095892SmallThe U.S., joined by five Arab allies, launched the first air strikes on Islamic State (ISIS) targets in Syria early this week. This marked the first U.S. military intervention in Syria since the start of the country’s civil war. About 190 air strikes have already been carried out in Iraq since August, so these new strikes open up a new front to this conflict. The strikes are on top of the extra funding approved by Congress last week to train Syrian rebels to combat Islamic State.
  • Treasury Secretary Jack Lew announced new rules this week that would deter U.S. companies from moving their country of domicile overseas to benefit from lower tax rates abroad. The changes to tax treatment make it harder for companies to complete these overseas mergers, and if they do decide to invert, new restrictions limit the use of untaxed cash that has been accumulated overseas to complete the transaction. The new rules are effective immediately and apply to all deals not yet closed. Despite the new rules, Lew warned that lawmakers will have to complete the job, “Administrative action cannot shut the door completely, and Congress will still need to act.”

Markets

  • Markets fell this week as the S&P 500 shed 1.36% and closed at 1,983. The Dow Jones Industrial Average followed suit and decreased 0.96% and closed at 17,113. Year to date, the S&P is up 8.88% and the Dow is up 5.01%.
  • Interest rates moved down modestly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.80% and 2.53%, respectively.
  • The spot price of WTI Crude Oil climbed by 1.93% this week, closing at $93.42 per barrel. Year to date, Oil prices are virtually unchanged.
  • The spot price of Gold rose slightly by 0.16% this week, closing at $1,217.60 per ounce. Year to date, Gold prices are up 1.33%.

 Economic Data

  • Initial jobless claims rose from last week, coming in at 293,000 vs. consensus estimates of 296,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 299,000, near the post-crisis lows.
  • New home sales rose 18.0% in August (vs. consensus of 4.4%), the largest monthly gain since 1991. Although this economic data point is volatile and often significantly revised in later months, the report is a welcome surprise in the face of recent mixed housing data.

Fact of the Week

  • According to a report released by the Government Accountability Office, the total outstanding student loan debt held by seniors (65+) has risen from $2.8 billion in 2005, to $18.2 billion today. While around 20% of this outstanding debt was taken out for the benefit of their children or other dependents, the other 80% came from loans seniors took out for their own education. These older borrowers are more likely to hold defaulted loans and due to the fact that student loans can’t be discharged in bankruptcy like other debt, more and more seniors are seeing a portion of their Social Security benefits garnished to pay back the debt.

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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