Wealth Management Economic Update February 24, 2015

U.S. and World News

  • After a full week of contentious negotiations, a tentative agreement has been reached between Greece and Eurozone finance ministers, which would provide for a four month extension of Greece’s bailout program. This would allow Greece to access €10 billion of funding the country desperately needs. New Greek Prime Minister Alex Tsipras had been seeking a six month extension and a roll back of the austerity measures the original bailout had been contingent upon, instead winding up with only four months and no change to austerity. Greece must provide an action plan on Monday outlining steps they will be taking to improve its fiscal situation in order for the deal to be complete.  Additionally, Greece will be subject to reviews by the IMF and the ECB to ensure they are following the terms of the agreement, conditions which the country had been fighting against. Temporarily preventing Greece from exiting the Eurozone, this ‘kick the can down the road’ agreement will likely lead to the situation being revisited in four months.
  • russia_000057310942LargeThe U.S. has accused Russia of violating the ceasefire in Ukraine. This is amid reports that Ukrainian troops are pulling out of the key railroad hub town of Debaltseve after separatist forces fought their way into the key railway junction on Tuesday. Vice President Joe Biden strongly condemned the violence and warned the “costs to Russia will rise if it continues to violate the Minsk agreements.”
  • Minutes from the January Fed meeting showed the committee to be a bit more dovish than consensus believed. There was no clear indication that most participants thought that ‘patience’ should be removed from the upcoming Fed statement as it pertains to when an initial rate hike will come. Many still believe the Fed is on track for a June or September initial hiking of the Fed Funds rate, as long as employment and inflation data continue to improve.

Markets

  • Equity markets continued to rise this week following the four month Greek extension as both the S&P 500 and Dow Jones closed the week at new All-Time Highs. The S&P 500 gained 0.67%, closing at 2,110, while the Dow Jones gained 0.69% and closed at 18,140. Year to date, the S&P and Dow Jones are up 2.80% and 2.17%.
  • Yields in the Treasury markets continued to creep upwards this week. The 10 year Treasury bond now yields 2.12% and the 5 year Treasury bond yields 1.60%.
  • The spot price of WTI Crude Oil fell this week, losing 4.62% and closing at $50.34 per barrel. In 2015, WTI Oil prices have fallen 5.50%.
  • The spot price of Gold fell by 2.23% this week and closed at $1,229.66 per ounce. Year to date, gold prices are up 1.51%.

Economic Data

  • Initial jobless claims decreased from last week, coming in at 283,000 vs. consensus estimates of 290,000. The Labor Department noted that some states had to have their claims estimated due to severe weather. The four week moving average for claims now stands at 283,250.

Fact of the Week

  • Since the beginning of 1986 through close today, the Dow Jones Industrial Average has risen from 1,547 to 18,140, a price increase of 1,072%. Breaking down when these gains occurred results in a pretty interesting finding. The combined gains on the index on Mondays, Tuesdays and Wednesdays comes to 988.46%, while the combined gain of Thursdays and Fridays is just 8.95%. The Dow has been doing its work early in the week and been taking four day weekends for 30 years. (Source: Eddy Elfenbein, Crossing Wall Street)

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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