Wealth Management Economic Update May 4, 2015

U.S. and World News

  • The April Federal Reserve statement given this week was roughly in line with market expectations. The Committee acknowledged that economic data recently has been somewhat disappointing but was sure to mention several temporary factors they believed were causing the weakness. It is widely believed that a June rate hike has been taken off the table given the below target inflation data which continues to track below 2%.
  • china_bank_000038439476After months of urging allies not to join the China-led Asian Infrastructure Investment Bank, the Obama administration now says the new bank could be a promising development. During his press conference with Japanese Prime Minister Shinzo Abe, Obama said the bank could be very positive if it is able to overcome the issue of lack of transparency. Despite 47 nations gaining membership to the AIIB, the U.S. and Japan remain the only two major economies that have not sought to join.

Markets

  • In quite a volatile week, equity markets were down modestly. The S&P 500 fell 0.42%, closing at 2,108, while the Dow Jones decreased by 0.31% and closed at 18,024. Year to date, the S&P is up 3.03% and the Dow is up 1.81%.
  • Yields in the Treasury market rose pretty significantly this week. The 10 year Treasury bond now yields 2.11% and the 5 year Treasury bond yields 1.50%.
  • The spot price of WTI Crude Oil rose this week, gaining 3.53% and closing at $59.17 per barrel. In 2015, WTI Oil prices are now up 6.33%.
  • The spot price of Gold was virtually unchanged this week and closed at $1,178.80 per ounce. Year to date, gold prices are down 0.47%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 262,000, below consensus expectations 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 283,750.
  • The first estimate of U.S. GDP growth in the 1st quarter showed disappointing growth of 0.2% vs. estimates of 1.0%. Harsh weather was one of the causes of the lackluster growth, something that was seen last year at this time when GDP came out negative. With energy prices down, consumer spending posted a larger than expected 1.9% gain.
  • The Case-Shiller home price index rose 0.93% in February, beating consensus expectations of 0.7%. All 20 cities in the index saw prices increase on the month and have now risen 5.0% in the past year.

Fact of the Week

  • According to the Tax Policy Center, the top 1% of US taxpayers from tax year 2014 are expected to pay 45.7% of all federal income tax collected by the IRS this year, up from 43% last year. The bottom 60% of taxpayers are estimated to pay less than 3% of federal income taxes for 2014.

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®, CFP® – (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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