Wealth Management Economic Update April 6, 2015

U.S. and World News

  • nuclear_000017116815_320After eight straight days of high level diplomatic negotiations between six world powers and Iran in Switzerland, an interim agreement has been reached on principles for dismantling Iran’s nuclear program in exchange for lifting heavy economic sanctions. Iran agreed to inspections and monitoring of nuclear facilities for 20 years, as well as dismantling already existing equipment. Iran will continue to be allowed to research and develop advanced nuclear technology. In exchange, the punitive economic sanctions that have crippled Iran will be lifted over time. While the interim deal marks progress, there are still several months of negotiations ahead before a deal is finalized.
  • Russia, Australia, Denmark, the Netherlands and Taiwan have become the latest countries to announce they’d be joining the China-led Asian Infrastructure Investment Bank (AIIB). That over 40 nations have pledged to join the AIIB is seen as a significant setback to the U.S. efforts to extend its influence in the region and balance China’s growing financial clout. Meanwhile, Japan and Canada missed the March 31st initial deadline for membership but are weighing the option of joining at a later time.

Markets

  • Equity markets were slightly positive during the holiday shortened week. The S&P 500 rose 0.32%, closing at 2,067, while the Dow Jones also gained 0.32% and closed at 17,763. Year to date, the S&P is up 0.92%, while the Dow is up 0.27%.
  • Yields in the Treasury markets dipped this week, particularly following the disappointing jobs report which may further delay the Fed rate hike. The 10 year Treasury bond now yields 1.85% and the 5 year Treasury bond yields 1.26%.
  • The spot price of WTI Crude Oil rose 1.61% this week, closing at $49.14 per barrel. In 2015, WTI Oil prices have fallen 10.59%.
  • The spot price of Gold rose by 0.87% this week and closed at $1,208.95 per ounce. Year to date, gold prices are up 2.07%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 268,000 vs. consensus estimates of 286,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 285,500.
  • The monthly jobs report showed a rise of only 126,000 jobs in March, falling well short of consensus estimates. January and February’s figures were revised downward a total of 69,000, bringing the three month average pace of job gains to 197,000.
    • The headline unemployment rate held steady at 5.5%, in line with expectations. The labor force participation rate declined by 0.1%, down to 62.7%, a historically low level.
    • Average hourly earnings surprised to the upside, increasing by 0.3% against expectations of 0.2%. Over the last 12 months, average earnings have increased by a total of 2.1%.
  • The Case-Shiller home price index rose 0.87% in January vs. expectations of 0.65%. All 20 cities covered in the index posted monthly gains. Over the past year, home prices as measured by the index have risen 4.5%.
  • Pending home sales (based on contract signings as opposed to closings) rose 3.1% in February, beating expectations of 0.3%. Pending home sales have risen 12.0% over the last year.

Fact of the Week

  • According to the Institute of Medicine, U.S. health care spending topped $2.9 trillion in 2013. An estimated 75% of that total ($2.2 trillion) was spent on medical care for chronic illnesses that are preventable. This incorporates illnesses that are a function of avoidable behaviors including obesity, poor diet, smoking, excessive alcohol consumption, lack of physical activity and poor oral health.

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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