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

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