Wealth Management Economic Update November 24, 2014

U.S. and World News

  • President Obama has outlined plans to use an executive order to aid millions of illegal immigrants, granting them the chance to apply for work permits and a temporary reprieve from deportation. Obama announced, “I will make it easier and faster for high-skilled immigrants, graduates and entrepreneurs to stay and contribute to our economy, as so many business leaders have proposed.” The move would mark the most drastic changes to the nation’s immigration laws in nearly 30 years and has predictably set off a fierce fight with Republicans over the limits of presidential powers.
  • China_shanghai_finance_000038795732_320In a surprising move, China has cut its benchmark interest rates for the first time in more than two years in response to a slowing economy. China is still growing faster than most developed nations but saw its growth slow to a five year low of 7.3% last quarter. The one year benchmark lending rate was lowered by 0.4% to 5.6% and the one year deposit rate was cut by 0.25% to 2.75%.
  • Data this week showed that Japan has fallen back into recession after posting a 1.6% GDP contraction in the 3rd quarter. In response, Japanese Prime Minister Shinzo Abe announced that he will delay a sales tax hike that was set to take effect next year. He also announced that snap elections will be held after the Japanese parliament is dissolved.
  • The U.S Senate fell one vote short in its attempt to approve construction of the Keystone XL pipeline, with the final tally of 59-41. Republican leadership believes that approval will come next year when the party takes majority in the Senate. It was widely believed that President Obama would have vetoed the bill had it passed in the Senate.

Markets

  • Equity markets continued to head higher this week as the S&P 500 and Dow Jones both closed Friday at new All-Time Highs. The S&P 500 advanced 1.20% and closed at 2,063. Likewise, the Dow Jones moved up 1.04% and closed at 17,810. Year to date, the S&P is up 13.68% and the Dow Jones is up 9.69%.
  • Yields in the Treasury markets traded flat this week. The 10 year Treasury bond now yields 2.31% and the 5 year Treasury yields 1.61%.
  • The spot price of WTI Crude Oil stopped its decline this week, rising 1.21%, closing at $75.98 per barrel. Year to date, Oil prices are down 17.21%.
  • The spot price of Gold increased this week, advancing by 1.04% and closing at $1,201.16 per ounce. Year to date, Gold prices are virtually unchanged.

Economic Data

  • Initial jobless claims rose from last week, coming in at 291,000 vs. consensus estimates of 284,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 288,000, which is near the lowest it’s been since April 2000.
  • Existing home sales rose 1.5% in October vs. expectations of a 0.4% decline. Existing home sales have generally trended upward since their recent trough in March, which was largely weather related.
  • The Headline Consumer Price Index was flat in October vs. expectations of -0.1%. Energy prices declined 1.9% in the month, mainly due to gasoline. Meanwhile, Core CPI (does not include food or energy) increased 0.2% this month against expectations of 0.1%.

Fact of the Week

  • According to the Social Security Administration, about 75% of single elderly people receiving Social Security benefits get more than half of their income from the program. In addition, 22% of married couples and 47% of single people receiving Social Security benefits count on the program for 90% or more of their income.

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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Wealth Management Economic Update November 17, 2014

U.S. and World News

  • china_US_currency_000003445678-320The United States and China announced two landmark deals this week. The first was an agreement to drop tariffs on a wide range of technology products which have sales of roughly $1 trillion. The agreement has yet to be signed off on by other countries involved in the talks and will be discussed in Geneva by members of the World Trade Organization in December. The second deal was a joint agreement between the two countries to cut carbon emissions. Under the plan, the U.S. would emit roughly 25% less carbon in 2025 than it did in 2005. China in turn pledged to stop its emissions from growing by 2030, its first ever commitment to do something about air quality in the country.
  • Individual global investors will get a chance to buy Shanghai-listed stocks for the first time on Monday 11/17. The original start date had been for October but it was delayed amid the pro-democracy protests in Hong Kong. The move is a big step towards Chinese markets’ integration with the rest of the global financial system, and could open the door for China to be added to international benchmark indices.
  • Saudi Arabia’s oil minister, Ali al-Naimi, dismissed speculation of an OPEC “price war”, saying that it has “no basis in reality.” These were his first public comments since the price of crude oil has plunged nearly 30% in the last four months. The Saudis have typically cut production in periods of oversupply in order to keep prices elevated, but seem to have deviated from this strategy during this most recent episode.

Markets

  • Equity markets continued to head higher this week as the S&P 500 closed Friday at a new All-Time High. The S&P 500 advanced 0.43% and closed at 2,040. Likewise, the Dow Jones edged up 0.40% and closed at 17,634. Year to date, the S&P 500 is up 12.33% and the Dow Jones is up 8.54%.
  • Yields in the Treasury markets traded flat this week. The 10 year Treasury bond now yields 2.32% and the 5 year Treasury yields 1.61%.
  • The spot price of WTI Crude Oil continued its decline again this week, dipping 3.38%, closing at $75.98 per barrel. Year to date, Oil prices are down 18.04%.
  • The spot price of Gold increased this week, advancing by 0.95% and closing at $1,189.21 per ounce. Year to date, Gold prices are down 1.03%.

Economic Data

  • Initial jobless claims rose from last week, coming in at 290,000 vs. consensus estimates of 280,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 285,000, which is near the lowest it’s been since April 2000.
  • The University of Michigan consumer sentiment survey rose to a reading of 89.4 in November, beating estimates of 87.5. This is a new high mark reading for the post-2008 recovery. Most of the gains were seen in consumers’ assessment of their current situation, which can be attributed to lower gas prices and favorable employment trends.

Fact of the Week

  • According to the Federal Reserve Board, the proportion of young adults aged 18 to 31 that are living with their parents has risen from 31% in 2005 up to 36% today. The study found that rising student debt, as opposed to economic conditions or housing costs, was the primary reason for the roughly 30% increase.

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 November 10, 2014

U.S. and World News

  • senateThe midterm elections resulted in large gains for the Republican Party. Republicans won control of the Senate and expanded their margin in the House. This leaves the Democratic Party without a majority in either chamber of Congress for the first time since 2006. Lawmakers will now try to come together to pass legislation that has stalled in the face of partisan brinksmanship. Key issues include infrastructure spending, healthcare, the Keystone XL pipeline and tax reform.
  • China’s top regulator is working to loosen restrictions on foreign investment in certain sectors of the Chinese economy. The move is aimed at adapting to a more globalized economy and improving the efficiency of its domestic companies. The proposal from the National Development and Reform Commission includes new rules that would cut the number of sectors where China limits foreign investment to 35 from the current 79, opening up areas such as oil refining, paper making, steel and premium spirits.

Markets

  • Equity markets continued to rally this week as both the S&P 500 and Dow Jones Industrial Average closed at new All-Time Highs. The S&P 500 advanced 0.75% and closed at 2,032. Likewise, the Dow Jones climbed up 1.14% and closed at 17,574. Year to date, the S&P 500 is up 11.83% and the Dow Jones is up 8.07%.
  • Yields in the treasury markets traded down a bit this week. The 10 year treasury now yields 2.31% and the 5 year treasury yields 1.59%.
  • The spot price of WTI Crude Oil fell again this week, dipping 2.56%, closing at $78.48 per barrel. Year to date, Oil prices are down 15.36%.
  • The spot price of Gold increased marginally this week, advancing by 0.39% this week, closing at $1,177.56 per ounce. Year to date, Gold prices are down 2.00%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 278,000 vs. consensus estimates of 285,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 279,000, which is the lowest it’s been since April 2000.
  • Non-farm payroll jobs increased by 214,000 in October vs. consensus expectations of 235,000. Including revisions of previous months’ figures, the three-month average pace of job gains stands at a solid 224,000.
    • The headline unemployment rate unexpectedly fell to 5.8%. The drop was especially surprising given that the labor force participation rate went up by 0.1% to 62.8% (still a very low level).
    • Average hourly earnings rose only 0.1% vs. expectations of 0.2%. Over the last 12 months, hourly earnings have grown a subdued 2.0%.

Fact of the Week

  • Since 1946, the S&P 500 has never had a decline in the 12 months following a midterm election. There have been 16 midterm elections in that span and the S&P has risen by an average of 16.1% in the 12 months following these elections.

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 November 3, 2014

U.S. and World News

  • The Federal Reserve Committee met this week and decided to end the remaining $15 billion of monthly asset purchases. With QE3 officially over, attention now turns to when the Fed will begin raising short term interest rates. Janet Yellen’s statement maintained that this action is still a “considerable time” off and will be entirely data dependent. While employment has certainly picked up and has surpassed the Fed’s stated goals, inflation remains very subdued below the 2% target. Consensus expectations for the first rate hike have been pushed back from March 2015 to around September 2015.
  • As the US winds down its QE program, the Bank of Japan has unexpectedly announced it will increase its asset purchases from ¥60 trillion to ¥80 trillion ($725 billion). japan_flag_000042392394_320The move resulted from the BOJ downgrading its projections for inflation and growth in the country. The announcement sent the Nikkei stock index soaring by 4.8% and led to rallies across most global markets.
  • Russia and Ukraine have signed an agreement that will guarantee the flow of Russian gas exports into Ukraine through the winter. The deal follows weeks of negotiations and a bitter dispute over payments. The European Union energy chief, Guenther Oettinger, helped broker the deal as the region depends on Russia for 1/3 of its gas.

Markets

  • Equity markets continued to rally this week as both the S&P 500 and Dow Jones Industrial Average closed at new All-Time Highs. The S&P 500 advanced 2.74% and closed at 2,018. Likewise, the Dow Jones climbed up 3.48% and closed at 17,390. Year to date, the S&P 500 is up 10.97% and the Dow Jones is up 6.83%.
  • Yields in the treasury markets continued to come back up this week. The 10 year treasury came up to 2.33% and the 5 year treasury is yielding 1.61%.
  • The spot price of WTI Crude Oil fell slightly this week, dipping 0.35%, closing at $80.73 per barrel. Year to date, Oil prices are down 12.93%.
  • The spot price of Gold plummeted by 4.87% this week, closing at this year’s low of $1,171.59 per ounce. Year to date, Gold prices are down 2.50%.

Economic Data

  • Initial jobless claims rose a bit from last week but remain quite low overall, coming in at 287,000 vs. consensus estimates of 285,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 281,000, which is the lowest it’s been since May 2000.
  • The first estimate of 3rd quarter GDP surprised to the upside, rising 3.5% vs. expectations of 3.0%. There was a 0.8% boost from government spending in the quarter which includes defense spending, while consumer spending added 1.2%. The report shows that government drag on growth appears to be waning, and the U.S. private sector continues to function as a consistent source of demand in the global economy.
  • Pending home sales rose 0.3% in September vs. expectations of 1.0%. Sales were mixed by region of the country with the South and Northeast showing gains with the Midwest and West posting losses. This leading indicator for existing home sales has been fairly flat over the past couple of months.

Fact of the Week

  • According to the US Census Bureau, 35% of Americans age 65 and older have no other source of retirement income other than Social Security. The maximum benefit paid by Social Security to a worker retiring at “full retirement age” in 2014 is $2,642 per month or $31,704 per year.

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