Wealth Management Economic Update January 5, 2015

U.S. and World News

  • greek320Greek politicians failed to elect a president in a key vote this week, leading to a snap election that will take place next month. There are fears in some corners of the market that the left-wing Syriza party could come into power and jeopardize the bailout that Greece received from the European Central Bank in exchange for austerity measures. This scenario would also increase the odds of Greece exiting the European Union because the nation cannot or will not undertake the imposed austerity measures.
  • Prime Minister Shinzo announced this week a new ¥3.5 trillion ($29 billion) stimulus package, aimed at boosting the country’s lagging economy that has contracted in each of the last two quarters. Abe also announced a cut to the corporate tax rate, lowering the effective rate 2.5% to 32.1%, evidence that Abe plans to make good on his pledge to lower the rate to below 30% in the coming years.
  • Lithuania has become the 19th member of the Eurozone and will be adopting the shared currency the euro (€). Lithuania is following the path of other former Soviet satellite states such as Latvia, Estonia and Slovakia, in joining the European Union.

Markets

  • Equity markets wrapped up 2014, posting solid double digit gains. In 2014, the S&P 500 returned 13.68%, while the Dow Jones Industrial Average returned 10.04%. On the week, the S&P fell 1.43% and closed at 2,058. Likewise, the Dow Jones moved down 1.22% and closed at 17,833.
  • Yields in the Treasury markets moved lower this week. The 10 year Treasury bond now yields 2.12% and the 5 year Treasury bond yields 1.61%. These benchmark yields stood at 3.00% and 1.71%, respectively at the beginning of 2014, which contradicted the majority of forecasts which called for higher interest rates in 2014.
  • The spot price of WTI Crude Oil fell again this week, reaching a new 52 week low. Prices fell 3.91%, closing at $52.59 per barrel. During 2014, Oil prices fell 41.59%. According to AAA, the national average gas price is $2.23/gallon as compared to $3.33 at the beginning of 2014.
  • The spot price of Gold dipped by 0.58% this week and closed at $1,189.05 per ounce. In 2014, Gold prices were down 1.44%.

Economic Data

  • Initial jobless claims rose from last week, coming in at 298,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report, although the holiday season is traditionally more volatile. The four week moving average for claims now stands at 290,750.
  • The Case-Shiller home price index rose 0.8% in October, beating estimates of 0.4%. This was the strongest monthly gain since March. Over the last year, home prices have risen 4.5% based on this measure.

Fact of the Week

  • The share of wages that Social Security replaced for the typical worker who retires at age 65 was 48% in 1980, 37% in 2000 and is projected to drop to 34% by 2020.

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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