Wealth Management Economic Update October 27, 2014

U.S. and World News

  • pipeline_000039527184_300Russia and Ukraine failed to reach a gas deal during EU-brokered talks this week but agreed to meet again next week. Negotiations regarding prices for the winter supply of gas from Russia through Ukraine and the rest of Europe stalled when Russia added new conditions to the deal. Russia cut off supplies to Ukraine in June, demanding that Ukraine pay a debt of $5 billion which Russia is still requiring before any deal is made.
  • The panel chosen to pick candidates for Hong Kong’s 2017 election could be made more democratic according to the territory’s leader Leung Chun-ying. The comment was made just before the start of the first public talks between pro-democracy student leaders and government officials. Expectations are low for any major breakthroughs during the talks, but the mere concession that the candidate selection process could be more open is a step towards a more democratic process in Hong Kong.

Markets

  • The markets bounced back this week with the S&P 500 coming up 4.12% and closed at 1,965. Likewise, the Dow Jones Industrial Average climbed up 2.59% and closed at 16,805. Year to date, the S&P 500 is up 6.29% and the Dow Jones is up 1.38%.
  • Yields in the treasury markets also increased. The 10 year treasury came up to 2.27% and the 5 year treasury is yielding 1.50%.
  • The spot price of WTI Crude Oil fell slightly this week, dipping 0.95%, closing at $81.28 per barrel. Year to date, Oil prices are down 12.34%.
  • The spot price of Gold fell 0.59% this week, closing at $1,231.01 per ounce. Year to date, Gold prices are up 2.44%.

Economic Data

  • Initial jobless claims rose a bit from last week but remain quite low overall, coming in at 283,000 vs. consensus estimates of 281,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 283,000, which is the lowest it’s been since May 2000.
  • The Headline Consumer Price Index (measure of inflation) rose 0.1% in September vs. consensus expectations of it being flat. Core CPI (excludes food and energy) was also up 0.1% in September, picking up from a flat August. Over the past year, both headline and core CPI have risen a modest 1.7%.

Fact of the Week

  • According to Forbes, Bill Gates is the richest person in the world today with a net worth of $81 billion. The six living heirs of Sam Walton (Wal-Mart founder) who died in 1992 are worth a combined $153 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, 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 October 20, 2014

Comments on Recent Market Activity

  • Volatility in the markets continued this week as major indices reached correction territory before stabilizing later in the week. It’s the first significant market correction that’s been experienced since 2011. Factors at play could be fears of the Ebola outbreak spreading more widely in the U.S., drastic declines in oil prices which could be a deflationary signal and the struggles of policy makers in Europe to spur growth in the stagnant economies of the region. Earnings releases and recent economic data continue to show improvement in the U.S., but markets recently have been trading on sentiment and macro headlines. Case in point, the market declines ceased on news that St. Louis Fed president James Bullard (who is a non-voting member of the Federal Reserve) suggested that although U.S. fundamentals remain strong, it may be “a logical policy response at this juncture to delay the end of QE,” which is set to be terminated at the end of this month.

 U.S. and World News

  • A second healthcare worker from the Texas Health Presbyterian Hospital has contracted Ebola after caring for Thomas Duncan, who died of the virus earlier this month. The diagnosis and the revelation that the CDC allowed the woman to fly on a commercial flight to Ohio has increased fears of the virus spreading further. President Obama has promised to ramp up the government’s response to Ebola in an effort to contain the spread of the virus. Obama will reportedly appoint Ron Klain as the “Ebola Czar” to coordinate the U.S. response to the virus. Klain’s resume includes being former chief of staff for VP’s Biden and Gore and being general counsel for a large investment organization but does not include any sort of medical background.
  • In further efforts to kick start the Eurozone economies, the ECB will reportedly start buying asset-backed securities and covered bonds. Executive Board member of the central bank, Benoit Coeure, said that the purchases could start as soon as the next few days and that “the object is to steer the balance sheet toward higher levels and improve the transmission to the real economy.” Previous efforts in Europe similar to this one have so far failed to generate real economic growth.

Markets

  • After another volatile week, the markets recouped some of their losses but the S&P 500 still declined 1.00% and closed at 1,887. Similarly, the Dow Jones Industrial Average fell by 0.96% and closed at 16,544. Year to date, the S&P 500 is up 3.71% and the Dow Jones is up 0.60%.
  • It was also a very volatile week in the treasury markets which saw the 10 year treasury dip below 2% during some of the panic selling of stocks. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.43% and 2.20%, respectively.
  • The spot price of WTI Crude Oil continued to fall this week, dropping 3.32%, closing at $82.97 per barrel. Saudi Arabia has reportedly been telling oil market investors that it is ready to accept oil prices below $90 per barrel, and even as low as $80 for a couple of years it an attempt to retain market share. The world is currently flush with oil supply which has led to the steep decline in oil as well as gas prices which have fallen to a national average of $3.14/gallon compared to $3.37/gallon one month ago (Source: AAA). Year to date, Oil prices are down 11.11%.
  • The spot price of Gold increased by 1.22% this week, closing at $1,238.09 per ounce. Year to date, Gold prices are up 3.03%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 264,000 vs. consensus estimates of 290,000. Initial claims now stand at a 14 year low. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 283,500, which is the lowest it’s been since June 2000.
  • Housing starts rose 6.3% in September vs. expectations of 5.4%. This was a welcome bounce back from last month’s report. Multifamily starts rose 16.7%, while single family starts rose a more modest 1.1%.
  • University of Michigan consumer sentiment rose to a reading of 86.4 vs. expectations of 84. The increase was due to better expectations for the future, while the assessment of current conditions was unchanged. The commentary noted that the recent developments have had a limited effect on sentiment thus far and that sentiment may be aided by recently dropping gas prices.

Fact of the Week

  • It was 6 years ago (10/16/08) that Warren Buffet wrote his “Buy America, I Am” op-ed article in the New York Times. Buffet encouraged investors to “be fearful when others are greedy, and be greedy when others are fearful. Since he penned this letter, the S&P 500 has gained 130.9% total return through the close of trading Friday 10/17/14.

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 October 13, 2014

U.S. and World News

  • hong_kong_boat_320The crowds of pro-democracy protestors in Hong Kong have started to dwindle this week, after activist leaders agreed to talks with the government which are unlikely to go anywhere. Talks will center on “the basis for political development”, referring to plans for an open 2017 election of Hong Kong’s leader. The discussions are set against a backdrop of mistrust, with protesters accusing the government of insincerity, and the government complaining that pro-democracy leaders continue to encourage protestors to remain in the streets. Protest spokespeople have claimed that if these meetings are unsuccessful, they may take the campaign beyond street occupations that would include pro-democracy lawmakers getting involved with “non-cooperative actions.”
  • The Obama administration has called for new protocols to help stop the spread of Ebola, including additional passenger screening at airports and increased efforts to educate medical providers on how to handle cases. This comes following the death of the man who was hospitalized in Dallas with the virus and a nurse in Spain becoming the first person to contract the virus outside of West Africa.
  • Minutes released from the most recent Federal Reserve meeting showed the committee’s concern with slowing growth overseas, the strengthening dollar and weakening inflationary pressures. These issues indicate that the Fed will move cautiously on raising rates following the end of its Quantitative Easing program, which is set to terminate at the end of this month. The release of these minutes led to a strong rally in stock markets on Wednesday, but those gains were short lived.

Markets

  • After quite a volatile week, the markets tumbled with the S&P 500 declining 3.14% and closed at 1,906. Similarly, the Dow Jones Industrial Average dwindled down 2.74% and closed at 16,544. Year to date, the S&P is up 3.13% and the Dow is down .20%.
  • Following the Federal Reserve’s announcement, interest rates continued their decline this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.54% and 2.29%, respectively.
  • The spot price of WTI Crude Oil continued to fall this week, dropping 4.68%, closing at $85.54 per barrel. Year to date, Oil prices are down 8.36%.
  • The spot price of Gold increased by 2.65% this week, closing at $1,222.96 per ounce. Year to date, Gold prices are up 1.77%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 287,000 vs. consensus estimates of 295,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 288,000, which is an 8 year low.

Fact of the Week

  • The national debt as of September 30th stood at $17.824 trillion, a more than $1 trillion increase from last year when it stood at $16.738 trillion. Ten years ago the national debt was at $7.379, meaning that it has increased $10.445 trillion over that time.

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 October 6, 2014

U.S. and World News

  • Pro-democracy demonstrations have been taking place in Hong Kong for more than a week, blocking many central transportation routes with tens of thousands joining in the protests. Leaders of the protests are calling for Hong Kong Chief Executive Leung   Chun-ying to resign and for the government in Beijing to drop its plans to control the 2017 Hong Kong leadership election. Crowds began to dissipate a bit late in the week as Chun-ying agreed to meet with protest leaders over their demands for electoral reforms, which would include open nominations for Hong Kong’s first election to choose the territory’s leader.
  • ebola_virus_320The Centers for Disease Control and Prevention announced this week that a patient being treated at a Dallas hospital has tested positive for Ebola, the first case diagnosed in the U.S. The patient was placed under strict isolation. The CDC and Texas health officials are also monitoring anyone who may have come in contact with the affected man and remain confident in their ability to confine the spread of the virus in the country.
  • In another attempt to do “whatever it takes” to jumpstart the stagnant Eurozone economies, ECB President Mario Draghi announced this week that the central bank intends to purchase junk-rated Greek and Cypriot bank loans to give those nations more liquidity. Germany opposes the plan for the ECB to relax its existing requirements for quality of assets purchased by the bank, but they are likely to be outvoted by other members of the EU.

Markets

  • Markets fell this week despite rallying on Friday, the S&P 500 fell 0.73% and closed at 1,968. The Dow Jones Industrial Average followed suit and decreased 0.58% and closed at 17,009. Year to date, the S&P is up 8.10% and the Dow is up 4.40%.
  • Interest rates moved down this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.73% and 2.44%, respectively.
  • The spot price of WTI Crude Oil fell sharply this week, dropping 4.05%, closing at $89.75 per barrel. Year to date, Oil prices are down 3.85%.
  • The spot price of Gold fell by 2.24% this week, closing at $1,217.60 per ounce. Year to date, Gold prices are up 1.33%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 287,000 vs. consensus estimates of 297,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 295,000, near the post-crisis lows.
  • The September non-farm payroll report showed job gains of 248,000 vs. consensus expectations of 215,000. The July and August numbers were revised up a combined 69,000, bringing the three month average of job growth to a solid 224,000.
    • The unemployment rate fell to 5.9% vs. expectations of 6.1%. This was aided in part by a 0.1% drop in the labor force participation rate to 62.7%, a new cycle low.
    • Average hourly earnings disappointed and were flat for the month vs. expectations of a 0.2% gain. Over the last year, hourly earnings have increased 2.0%, a sluggish pace of wage growth.
  • Pending home sales declined 1.0% in August vs. expectations of -0.5%. Sales declined in the Northeast, Midwest and South, while rising in the West. Pending home sales are viewed as a leading indicator of existing home sales.
  • The Case-Shiller home price index declined by 0.5% in July vs. expectations of flat prices. This is the third consecutive monthly decline and home prices have now risen 6.7% over the past year.

Fact of the Week

  • According to the Federal Reserve, the top 3% of household income earners owned 54.4% of the wealth in the country last year, up from 44.8% in 1989. This is largely a function of a rising stock market disproportionately benefitting the top group.

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