Wealth Management Economic Update March 16, 2015

U.S. and World News

  • The European Central Bank kicked off its quantitative easing program this week which calls for monthly purchases of €60 billion of government bonds. As a result, the Euro continued its steep decline against the U.S. Dollar, falling to new 12-year lows around $1.05 per €1, appearing to be on course for Euro/Dollar parity in the near future.
  • South Korea this week joined the 24 other countries across the world to ease monetary policy so far in 2015. After lowering economic growth forecasts for the next year from 3.9% to 3.4%, the central bank cut its base rate by 0.25% to a record low of 1.75%.
  • iceland_300Iceland dropped its bid to join the European Union this week. Its original application was submitted six years ago. Prime Minister Gunnlaugsson stated, “Participating in EU talks isn’t really valid anymore. Both due to changes in the EU and because it’s not in line with the policies of the ruling government to accept everything that the last government was willing to accept.”

Markets

  • Equity markets moved lower this week, the result of several volatile trading sessions. The S&P 500 lost 0.81%, closing at 2,053, while the Dow Jones fell 0.52% and closed at 17,749. Year to date, the S&P and Dow Jones are up 0.19% and 0.16%, respectively.
  • Yields in the Treasury markets drifted downward this week, following last week’s upward spike. The 10 year Treasury bond now yields 2.12% and the 5 year Treasury bond yields 1.59%.
  • The spot price of WTI Crude Oil fell to a new 52 Week Low this week, falling 8.40% this week, closing at $45.12 per barrel. In 2015, WTI Oil prices have fallen 16.80%.
  • The spot price of Gold fell by 0.94% this week and closed at $1,156.36 per ounce. Year to date, gold prices are down 2.36%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 289,000 vs. consensus estimates of 305,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 302,500.
  • Headline retail sales unexpectedly fell 0.6% in February, while expectations were for a 0.3% gain. Core retail sales, which are used by the Commerce Department to estimate consumer spending in the GDP calculation, were flat in February vs. expectations of +0.4%. Gasoline station sales rose 1.5% in the month, reflecting higher prices at the pump.
  • The University of Michigan consumer sentiment survey disappointed expectations, coming in at 91.2 in March, down from 95.4 in February. Both consumers’ assessment of current conditions and expectations for the future worsened. Despite the recent downtick, likely due to the recent rise in gas prices, consumer sentiment remains solidly above average levels over the last couple of years.

Fact of the Week

  • Individual Retirement Accounts, or IRAs, were established in the U.S. by the Employee Retirement Income Security Act of 1974, with the first year of contributions happening in 1975. A lot has changed for these retirement savings vehicles in their 40 year history. They were originally only available to workers who weren’t covered by employer retirement plans and the contribution maximum was $1,500. In 1981, a new tax law let anyone under the age of 70 ½ contribute to them. In 1986, the Tax Reform Act phased out the deductibility of IRA contributions for high income workers who were also covered by employer plans. Now, IRAs have a contribution limit of $5,500 per year or $6,500 if you’re over 50 years old. Over 43 million Americans now have one or more IRAs and the vast majority of IRA balances are from rollovers from previous employer plans. According to the Federal Reserve, at the end of 2014, there were $3.1 trillion in pension plans, $5.3 trillion in 401(k)-type defined contribution plans and $7.2 trillion invested in IRAs.

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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