Wealth Management Economic Update March 2, 2015

U.S. and World News

  • Greece submitted its list of economic reform plans to the Eurozone finance ministers just before Monday’s deadline. While the list was approved, clearing the path for a four month extension to Greece’s bailout funding, the finance ministers warned that the reforms must be expanded in detail before new bailout funding would be released.
  • Following months of negotiations, West Coast ports have been reopened and are working at full speed after a new five year labor contract agreement was reached. Port officials estimate that it will take at least three months to clear the backlog of containers that have been piling up during the labor stoppage. The strike has disrupted shipments for companies across the country as merchandise has been sitting idle in stacked containers, waiting to be unloaded.
  • world_internet_000003759439_320The FCC has approved net neutrality restrictions on the internet, reclassifying broadband services under the Telecommunications Act. The vote for the measure was 3 to 2 and went down party lines with the Democrats carrying the vote. The new rules will prevent internet service providers from prioritizing the speeds of service they provide to customers and charging higher rates for ‘fast lanes’ of the internet. FCC Chairman Tom Wheeler said the action was an “irrefutable reflection of the principle that no one, whether government or corporate, should control free and open access to the internet.”

Markets

  • Equity markets were mostly flat this week. The S&P 500 lost 0.24%, closing at 2,104, while the Dow Jones gained 0.02% and closed at 18,033. Year to date, the S&P and Dow Jones are up 2.57% and 2.22%.
  • Yields in the Treasury markets moved down this week. The 10 year Treasury bond now yields 2.00% and the 5 year Treasury bond yields 1.50%.
  • The spot price of WTI Crude Oil fell this week, losing 3.05% and closing at $49.26 per barrel. In 2015, WTI Oil prices have fallen 9.21%.
  • The spot price of Gold rose by 0.92% this week and closed at $1,213.00 per ounce. Year to date, gold prices are up 2.41%.

Economic Data

  • Initial jobless claims jumped up from last week, coming in at 313,000 vs. consensus estimates of 290,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 294,500.
  • The Case-Shiller home price index rose 0.9% in December vs. consensus estimates of a 0.6% increase. Appreciation was seen across all 20 of the cities monitored in this index. Over the past year, home prices have risen 4.5% as measured by the index.
  • The headline Consumer Price Index (measure of inflation) fell 0.7% in January, pushed lower by an 18.7% drop in gasoline prices. Core CPI, which does not include food or energy, rose 0.2%, better than the expected 0.1%. Despite this better core CPI number for January, the one year rate of change stands at a subdued 1.6%.

Fact of the Week

  • On July 15, 2014, Federal Reserve Chair Janet Yellen stated in her scheduled testimony to Congress that, “Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched…” This sort of sector specific commentary from a Fed Chair was highly unusual and questioned at the time. Her call on social media stocks was good, as since then, those stocks have returned -1.11% (as measured by the Global X Social Media ETF, SOCL) compared to the S&P 500 return of 7.9% during that time. However, her biotech call doesn’t look so good as those stocks have gained 52.3% (as measured by the SPDR Biotech ETF, XBI) in that time. Yellen was back in front of Congress again this week but didn’t provide any asset class valuation calls this time around.

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

Visit Old Second Wealth Management

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