Wealth Management Economic Update August 10, 2015

U.S. and World News

  • greece_000044812184_320The Athens Stock Exchange reopened on Monday after being closed for more than a month during the most recent Greek debt crisis. The benchmark index in Greece saw significant losses, falling by as much as 30% in its first day of resumed trading. Volatility has subsided somewhat after Greece and its lenders stated they were optimistic they could broker the final details of a bailout within days. A funding deal worth up to €86 billion must be settled by August 20th so that Greece can pay off €3.5 billion in debt it owes to the European Central Bank.
  • Puerto Rico announced that over the weekend it failed to make a debt payment, placing the U.S. commonwealth into default for the first time in its history. What happens next is unclear. Congress may assist the territory by passing a bankruptcy bill, allowing Puerto Rico to restructure its debts; however that effort has faced opposition. Another option may be for the Treasury Department to guarantee Puerto Rico’s debt when it seeks to borrow from the market again, significantly lowering the country’s future borrowing costs.
  • The Federal Reserve meeting this month produced little insight into when the Committee plans on raising the Federal Funds Rate. Policymakers continued to see an improving economy and labor situation but said that it requires additional improvement in labor market conditions before ‘liftoff’. The Committee also noted concerns about ‘international developments’, most likely referencing the summer’s Greek drama and the volatility in China’s stock markets.

Markets

  • Equity markets dwindled this week. The S&P 500 lost 1.25%, closing at 2,078. Similarly, the Dow Jones fell 1.79% and closed at 17,374. Year to date, the S&P is up 0.91% and the Dow is down 2.52%.
  • Yields in the Treasury markets went in opposite directions this week. The 10 year Treasury bond fell and now yields 2.16%. On the other hand, the 5 year Treasury bond rose and now yields 1.57%.
  • The spot price of WTI Crude Oil plummeted this week, dropping 6.98% and closed at $43.83 per barrel. In 2015, WTI Oil prices are down 23.77%.
  • The spot price of Gold continued its decline, dropping 0.13% and closing at $1,094.35 per ounce. Year to date, gold prices are down 7.60%.

Economic Data

  • Initial jobless claims came in at 270,000 which was an increase from the prior week’s figure of 267,000. The Labor Department noted that there were no special factors that affected the claims figure. The four week moving average for claims now stands at 268,250.
  • The July jobs report showed a gain of 215,000 nonfarm payrolls, lower than expectations of 225,000. The figures were revised up by 14,000 to prior months.
    • The headline unemployment rate remained unchanged at 5.30%. The labor force participation rate also remained unchanged at 62.60%.
    • Average hourly earnings rose by 0.20% vs. consensus estimates of 0.20%.

Fact of the Week

  • Approximately 21% of 401(k) plan participants who are eligible to borrow from their balances have outstanding loans. Additionally, participants in the U.S. left $24 billion in company matching funds unused because they didn’t save enough to claim the full match. (Source: ThinkAdvisor)

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

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

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