Wealth Management Economic Update May 11, 2015

U.S. and World News

  • Federal Reserve Chair Janet Yellen attended an economic conference along with International Monetary Fund Managing Director Christine Lagard and shared some of her thoughts on the stock markets. Yellen said, “I would highlight that equity market valuations at this point are generally quite high. There are potential dangers there.” Although she noted the Fed was not seeing the hallmarks of a bubble, she did say that the central bank was watching the situation closely. Yellen had previous tried her hand at equity market calls in July 2014 when in her Congressional testimony she declared that many social media and biotech stocks were overvalued, only to see those sectors continue to rally to this day.
  • BRICS_000052133142_320Russian President Vladimir Putin ratified an agreement to set up a $100 billion reserve fund for the BRICS nations (Brazil, Russia, India, China and South Africa). The fund looks to reshape the Western-dominated financial system that is centered on the IMF and World Bank. China would provide the largest share to the fund at $41 billion, while Russia, Brazil and India will provide $18 billion each with South Africa pitching in $5 billion. Following Putin’s approval, the BRICS bank is on track to be finalized by the end of the month.

Markets

  • In quite another choppy week, equity markets were up on the week following a Friday rally on the monthly jobs report. The S&P 500 gained 0.44%, closing at 2,116, while the Dow Jones increased by 1.07% and closed at 18,191. Year to date, the S&P is up 3.48% and the Dow is up 2.89%.
  • Yields in the Treasury market were quite volatile this week but ended with only a modest rise. The 10 year Treasury bond now yields 2.15% and the 5 year Treasury bond yields 1.50%.
  • The spot price of WTI Crude Oil rose this week, gaining 0.43% and closing at $59.41 per barrel. In 2015, WTI Oil prices are now up 6.76%.
  • The spot price of Gold rose by 0.84% this week and closed at $1,188.39 per ounce. Year to date, gold prices are up 0.34%.

Economic Data

  • Initial jobless claims edged up from last week but remain quite low, coming in at 265,000, below consensus expectations of 280,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 279,500, the lowest it’s been since May 2000.
  • The April jobs report showed a gain of 223,000 nonfarm payrolls, lower than expectations of 228,000. The prior two months figures were revised downwardly by a combined 39,000, bringing the three month average for job gains to 191,000.
    • The headline unemployment rate declined by 0.1%, down to 5.4%. The labor force participation rate ticked up by 0.1%, to a still historically low 62.8%.
    • Average hourly earnings rose just 0.1% vs. consensus estimates of 0.2%. The 12 month increase in average wages now stands at 2.2%.

Fact of the Week

  • According to the Census Bureau, at the end of the 1st quarter of 2015, of the 116.2 million households in the United States, 74.0 million were homeowners and 42.2 million were renters. The 63.7% homeownership rate is the lowest nationally since 1990.

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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