Wealth Management Economic Update April 1, 2015

U.S. and World News

  • oil_000013481523_290Oil markets jumped higher this week after Saudi Arabia and its Gulf allies started bombing militant targets in Yemen as the country moves closer toward civil war. While the Saudi attacks won’t directly disrupt importer’s supplies, the threat of a spreading war in the region could absolutely disrupt oil flows. There is a significant risk of a proxy war starting with Shiites in Iran backing the rebel Houthis of Yemen, with Saudi Arabia and other Sunni monarchies supporting current Yemeni President Abd-Rabbu Mansour Hadi.
  • In the face of defiance from allies that have signed up to become members, the Obama administration has now proposed that the new Asian Infrastructure Investment Bank (AIIB) work in partnership with U.S.-backed development institutions, such as the World Bank. The U.S. had previously warned against the Beijing-based AIIB due to quality and corruption concerns. At least 35 countries are scheduled to join the AIIB on March 31st, including U.S. allies Britain, France, Germany and Italy. Meanwhile, Australia, South Korea and Japan are notable regional absences from membership but are still weighing their options.
  • A U.S. trade group representing broadband providers has filed a court challenge against the FCC’s recently approved net neutrality rules. Once the rules are published in the Federal Register, it is expected that a flood of additional legal challenges will be instituted by other industry groups.

Markets

  • Equity markets dropped this week with the S&P 500 losing 2.21%, closing at 2,061, while the Dow Jones fell 2.29% and closed at 17,712. Year to date, the S&P is up 0.58%, while the Dow is flat.
  • Yields in the Treasury markets remained about the same this week, at lower levels than seen at the beginning of the year. The 10 year Treasury bond now yields 1.97% and the 5 year Treasury bond yields 1.44%.
  • The spot price of WTI Crude Oil rose this week following a reigniting of violence in the Middle East. Prices rose 5.77% this week, closing at $48.36 per barrel. In 2015, WTI Oil prices have fallen 12.00%.
  • The spot price of Gold rose by 1.33% this week and closed at $1,198.29 per ounce. Year to date, gold prices are up 1.17%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 282,000 vs. consensus estimates of 284,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 297,000.
  • Headline Consumer Price Index rose 0.2% in February, in line with consensus. Core prices (excludes food and energy) also rose 0.2%, beating expectations. Over the last year, Headline CPI is flat, while Core CPI is up 1.7%, consistent with subdued inflation.
  • New home sales rose 7.8% in February vs. expectations of a fall of 3.5%. Meanwhile, existing home sales increased 1.2% in February vs. forecasts of 1.7%. Both figures were welcome given recently lagging housing numbers.
  • University of Michigan consumer sentiment improved to a 93.0 reading in March vs. expectations of 92.0. Both the respondents’ assessment of current conditions and expectations for the future improved. Although sentiment has declined from its January peak, it remains at a relatively high level.

Fact of the Week

  • According to Freddie Mac, the average interest rate nationwide on a 30-year fixed rate mortgage was at least 10% for 12 consecutive years, spanning from 1979 to 1990. The average rate on a 30 year mortgage today is 3.78%.

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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