Wealth Management Economic Update January 13, 2015

U.S. and World News

  • Minutes from the December Federal Reserve meeting were consistent Janet Yellen’s comments press conference following the meeting. There was not much clarity given to the future path of monetary policy. However, there were a number of participants who saw a risk that inflation will persistently undershoot the Fed’s 2% target, calling into question when the central bank will begin to hike short term interest rates.
  • Starting in 2017, Illinois businesses with 25 or more employees that do not offer any type of retirement savings plan must automatically enroll it’s employees in the state’s Secure Choice Savings Program, which will allow them to invest in an IRA. The measure comes as a result of a law signed by outgoing governor Pat Quinn. The program is similar to one that President Obama has endorsed on the federal level, which promotes retirement savings for workers who may otherwise not have the access or knowledge to save in tax-advantaged retirement accounts. Workers will be allowed to opt out after initial enrollment if they choose not to participate. Those who don’t opt out will have a default of a 3% payroll deduction used to fund the account and have a limited amount of investment options to choose from.
  • iStock_000018702425XLarge320President Obama unveiled a proposal this week that would make community college free for the first two years for eligible students. Federal funding would cover 75% of the cost, while participating states would contribute the rest. Obama projects that 9 million students will participate in the program and save an estimated $3,800 a year on tuition. Explaining the proposal, the President said, “We have to make sure that everybody has the opportunity to constantly train themselves for better jobs, better wages and better benefits.”

Markets

  • Equity markets earnestly kicked off 2015 with a very volatile week which saw five straight triple digit moves in the Dow Jones Industrial Average. By the end of the week, the S&P had fallen 0.61% and closed at 2,045. Likewise, the Dow Jones moved down 0.49% and closed at 17,737.
  • Yields in the Treasury markets moved considerably lower this week. The 10 year Treasury bond now yields 1.96% and the 5 year Treasury bond yields 1.43%.
  • The spot price of WTI Crude Oil plunged again this week, falling 8.43% and closing at $48.25 per barrel. According to AAA, the national average gas price is now $2.17/gallon as compared to $3.31 a year ago.
  • The spot price of Gold rose by 2.86% this week and closed at $1,222.44 per ounce.

Economic Data

  • Initial jobless claims fell from last week, coming in at 294,000 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 290,500.
  • The monthly non-farms payroll report showed 252,000 jobs added in December, beating estimates of 240,000. This was the 11th consecutive month of job gains above 200,000 which is the longest such stretch since 1994.
    • The headline unemployment rate fell 0.2% to 5.6%. This was aided by a corresponding 0.2% drop in the labor force participation rate to 62.7%, lowest since 1977.
    • Average hourly earnings disappointed to the downside, declining by 0.2% in December vs. expectations of a 0.2% gain. In 2014, average earnings rose only 1.7% vs. consensus projections of 2.2%.

Fact of the Week

  • An individual who waits until age 70 to collect Social Security benefits will receive 76% more per month than if they had started taking benefits at age 62.

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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