Wealth Management Economic Update February 11, 2015

U.S. and World News

  • The second full week of the Syriza Party’s power in Greece was another tumultuous one that first started with Germany ruling out any debt write downs for Greece and an ECB policymaker threatening to cut off funding to Greek banks if Athens doesn’t agree to renew its bailout package. Fears were calmed a bit when Greece proposed ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus and targeting wealthy tax-evaders. However, later in the week the ECB put more pressure on Greece by revoking a waiver that allowed banks to use Greek government debt as collateral for loans. All of this is to say, stay tuned to the Greek situation.
  • australia_000047410124_300The Reserve Bank of Australia has joined the easing party, becoming the latest global central bank to cut interest rates in response to slowing inflation and concerns about economic growth. The RBA’s cut was its first change since August 2014 and lowered its benchmark rate by 0.25% to a new low of 2.25%

Markets

  • Equity markets rallied this week, with the S&P 500 gaining 3.09% and closing at 2,055. Likewise, the Dow Jones gained 3.86% and closed at 17,824. Year to date, the S&P and Dow Jones are virtually unchanged.
  • Yields in the Treasury markets spiked up this week, especially after a solid employment report seemed supportive of a Fed rate hike during the summer. The 10 year Treasury bond now yields 1.97% and the 5 year Treasury bond yields 1.49%.
  • The spot price of WTI Crude Oil continued to bounce from very low levels, rising 8.37% and closing at $52.28 per barrel. In 2015, WTI Oil prices have fallen 2.64%.
  • The spot price of Gold fell by 3.88% this week and closed at $1,234.04 per ounce. Year to date, gold prices are up 4.19%.

Economic Data

  • Initial jobless claims increased a bit from last week but remained quite low, coming in at 278,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 292,750.
  • The January nonfarm payroll employment report showed a gain of 257,000 jobs vs. expectations of 228,000. Job gains for November and December were revised up by a combined 147,000, bringing the three month average gain to 336,000 jobs.
    • The headline unemployment rate ticked up from 5.6% to 5.7%. However, the labor force participation rate increased 0.2% to 62.9% which is what pushed the unemployment rate up.
    • Another positive sign was average hourly earnings rising 0.5% vs. expectations of 0.3%. The 1 year growth in average hourly earnings now stands at 2.2%.

Fact of the Week

  • According to World Bank, if the state of California were a country, its $2.2 trillion economy would rank as the 8th largest in the world, ahead of Russia, Italy, India, Canada, Australia and Spain.

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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