Wealth Management Economic Update June 22, 2015

U.S. and World News

  • greek_coin46611238_320The highly anticipated Eurogroup meeting on Thursday ended without resolution for Greece’s debt crisis. Now Eurozone officials have called for an emergency summit on Monday. This is likely a last ditch effort to end the impasse that will lead to a Greek default or a Greek exit from the Eurozone if no agreement is reached by June 30th. While Greek Prime Minister Alexis Tsipras appears to remain confident that his country’s position in the euro is secure, many Greek citizens do not share that optimism with over €2 billion having been withdrawn from banks over the last three days and expectations that a bank run will continue through the weekend.
  • The Fed meeting this week produced little insight into the central bank’s timeline for raising the Fed Funds rate. Signs still point to a September hike, however Chairperson Janet Yellen continued to state that the Fed’s decision will be data dependent and that there still need to be improvements in inflation conditions which are still tracking below the Committee’s long-run objective. The assessment given to the US economy was brighter than the previous meeting, reflecting a bounce back following the stagnant 1st quarter.
  • As expected, the Bank of Japan maintained its massive stimulus program today, keeping intact its plan to make asset purchases of ¥80 trillion per year. Bank of Japan Governor Haruhiko Kuroda reiterated his expectations for consumer inflation to hit the central bank’s 2% target by mid-2016, a goal that many analysts believe is much too optimistic given Japan’s unfavorable demographic situation (rapidly aging population) and lack of natural resources.

Markets

  • Equity markets finished positively this week. The S&P 500 gained 0.76%, closing at 2,110. Similarly, the Dow Jones rose by 0.65% and closed at 18,014. Year to date, the S&P is up 3.47% and the Dow is up 2.27%.
  • Yields in the Treasury markets were volatile yet again this week and ended lower than the week prior. The 10 year Treasury bond now yields 2.26% and the 5 year Treasury bond yields 1.57%.
  • The spot price of WTI Crude Oil dipped by 0.95% from last week, closing at $59.48 per barrel. In 2015, WTI Oil prices are now up 5.72%.
  • The spot price of Gold increased this week by 1.58% and closed at $1,200.29 per ounce. Year to date, gold prices are up 1.34%.

Economic Data

  • Initial jobless claims declined from last week and remain quite low, coming in at 267,000, below consensus expectations of 277,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 276,750.
  • The headline Consumer Price Index (measure of inflation) rose 0.4% in May, below estimates of 0.5% and was boosted by a 4.3% increase in energy prices. Core CPI (does not include food or energy) rose 0.15% vs estimates of 0.2%. Over the last 12 months, headline prices are flat and core prices are now up 1.7%.

Fact of the Week

  • Famous economist John Maynard Keynes predicted in 1930 that by the year 2000, Americans would be able to choose to work as little as 15 hours per week because the bulk of their material needs would have been satisfied and a life of leisure would take precedence. The latest data showed that as of May 30th, the average American employee works 34.5 hours a week.

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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