Wealth Management Economic Update May 26, 2015

U.S. and World News

  • Greek officials say that the country will not be able make a €1.5 billion repayment to the International Monetary Fund that comes due on June 5th if there is no deal with its international creditors by then. Greek Prime Minister Alexis Tsipras has been in talks with French President Francois Hollande and German Chancellor Angela Merkel to try to unlock the last €7.2 billion tranche of the Greek bailout funds it needs to pay the IMF. While significant progress has reportedly been made, no agreement has been reached.
  • shoppers_000034535378Minutes from the April Fed meeting released this week were generally in line with expectations. Participants said that a hike in June was unlikely, but did not provide any further guidance on the likely timing of the first rate increase. While they noted concerns around weakness in consumer spending, the outlook for exports and underperformance in the energy sector, overall growth is expected to rebound in the near term. In a speech later in the week, Fed Chair Janet Yellen also downplayed the 1st quarter weakness and said that a rate hike will be appropriate at some point this year if the economy continues to improve in line with her expectations.

Markets

  • In a calm week, equity markets ended up mixed with both the S&P and Dow making New All Time Highs during the week. The S&P 500 gained 0.21%, closing at 2,126. Meanwhile, the Dow Jones decreased by 0.15% and closed at 18,232. Year to date, the S&P is up 4.11% and the Dow is up 3.33%.
  • Yields in the Treasury markets ended the week up moderately. The 10 year Treasury bond now yields 2.21% and the 5 year Treasury bond yields 1.57%.
  • The spot price of WTI Crude Oil was virtually flat this week, closing at $59.91 per barrel. In 2015, WTI Oil prices are now up 6.49%.
  • The spot price of Gold fell by 1.54% this week and closed at $1,205.90 per ounce. Year to date, gold prices are up 1.82%.

Economic Data

  • Initial jobless claims rose a bit from last week and remain quite low, coming in at 274,000, above consensus expectations of 270,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 266,250, the lowest it’s been since April 2000.
  • Housing starts rose 20.2% in April, beating consensus estimates of 9.6%. Both single-family (+16.7%) and multifamily (27.2%) starts posted large gains. After 1st quarter weakness, the April jump left both total and single-family starts at new highs for the recovery.
  • The headline Consumer Price Index (measure of inflation) rose 0.1% in April, in line with expectations. Core prices (ex-food and energy) rose 0.26%, slightly beating expectations of 0.2%. Inflation has been picking up a bit from its previously sluggish pace, over the past three months, core prices have risen at an annualized 2.6% rate.

Fact of the Week

  • In the iconic movie, Forest Gump, the title character made a very wise investment in ‘some kind of fruit company’ that turned out to be Apple Computers. If you were to have walked out of the theater on its day of release (July 6, 1994) inspired to follow his lead and invested $1,000 in Apple stock, you could have purchased 1,064 shares at a split adjusted price of $0.94/share. With a closing price of $132.54 on May 22nd and assuming that you reinvested the dividends you received, you would have turned that $1,000 into $144,214.56, a total return of 14,322% or a 27% annual return.

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

Visit Old Second Wealth Management

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