Wealth Management Economic Update March 25, 2015

U.S. and World News

  • In a unanimous decision, the Federal Reserve has dropped “patient” from their description of their philosophy regarding raising interest rates. The committee ruled out the chances of a hike during its next meeting in April, seeming to indicate that the first move could come as early as June. However, the Fed acknowledged that there has been a soft patch in U.S. economic data and that, “the Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term.” Adding that, “This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.”
  • brazil_280Brazil’s government will present a package of anti-corruption measures after more the 1 million people took to the nation’s streets in protest, many of them calling for President Rousseff’s impeachment. In the midst of the biggest corruption scandal in the country’s history, higher taxes and increased prices for government regulated goods are further fueling the discontent of Brazilian citizens. Brazil’s currency has fallen to its weakest level in 12 years and its benchmark stock index has fallen over 15% since Rousseff was re-elected last October.

Markets

  • Equity markets rallied this week following the seemingly dovish message sent by the Federal Reserve despite the dropping of the “patient” language. The S&P 500 rose 2.65%, closing at 2,108, while the Dow Jones climbed 2.13% and closed at 18,127. Year to date, the S&P and Dow Jones are up 2.84% and 2.29%, respectively.
  • Yields in the Treasury markets moved downward after the Fed downgraded its view on the economy. The 10 year Treasury bond now yields 1.93% and the 5 year Treasury bond yields 1.41%.
  • The spot price of WTI Crude Oil rose a bit this week, gaining 1.96% this week, closing at $45.72 per barrel. In 2015, WTI Oil prices have fallen 14.17%.
  • The spot price of Gold rose by 2.16% this week and closed at $1,183.47 per ounce. Year to date, gold prices are virtually unchanged.

Economic Data

  • Initial jobless claims rose a bit from last week, coming in at 291,000 vs. consensus estimates of 293,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 304,750.
  • Housing starts plunged 17% in February vs. expectations of only a 2.4% decline. This was the largest decline since February 2011. The data may have been skewed by a colder and snowier than normal February, as data from the Midwest (-37%) and Northeast (-57%) were extremely poor.

Fact of the Week

  • According to the Urban Institute, an average ‘high income’ U.S. couple (defined as joint income over $125,000) that will retire in 2020 will have paid $909,000 in Social Security taxes in their lifetime, but only receive $756,000 of Social Security benefits. This is the equivalent to receiving $0.83 in benefits for every $1 put into the system.

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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