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

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