Wealth Management Economic Update September 21, 2015

U.S. and World News

  • The long awaited Fed decision on Thursday left investors concerned about financial markets and international developments after they decided to keep interest rates unchanged. Janet Yellen made it clear that the Fed is concerned about the slowing global economy and the negative effect that it may have on inflation. The Fed also mentioned that they need to see “some further improvement” in the labor market before they raise the interest rates. There is still a possibility of a rate hike by the end of this year and the decision will be based on a wide range of economic data.
  • ship_oil_000055076358_320House Republicans are expected to vote in the next few weeks to lift the ban on U.S. oil exports that has been in place for 40 years. The Obama administration does not support a house bill to do so, which leaves the decision to the U.S. Commerce Department.
  • The Obama administration may see a repeat of 2013 next month as we may experience another government shutdown if lawmakers do not reach a budget agreement before September 30th. There are various other issues that are contributing to this such as Planned Parenthood, the Iran deal, leadership challenges, the Export-Import Bank and/or Highway Trust Fund.
  • Japan’s credit rating for its $450B of debt outstanding has been cut by Standard & Poor’s to AA- from A+. Standard & Poor’s reduced the debt rating because of uncertainty regarding the ability of their government to revive economic growth and end deflation in the next few years.

Markets

  • Equity markets stabilized this week ahead of the Federal Reserve meeting next Wednesday and Thursday. The S&P 500 ended the week up 2.10%, closing at 1,961. Similarly, the Dow Jones rose 2.10% and closed at 16,433. Year to date, the S&P is down 3.38% and the Dow is down 6.15%.
  • Yields in the Treasury markets generally rose this week. The 10 year Treasury bond now yields 2.19% while the 5 year Treasury bond now yields 1.51%.
  • The spot price of WTI Crude Oil declined in another volatile week. Prices fell by 2.85%, closing at $44.74 per barrel. In 2015, WTI Oil prices are down 23.03%.
  • The spot price of Gold declined this week, falling 1.27% and closing at $1,107.65 per ounce. Year to date, gold prices are down 6.48%.

Economic Data

  • Initial jobless claims came in at 275,000 which was a decrease from the prior week’s figure of 282,000. 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 275,750.
  • The University of Michigan’s consumer sentiment index showed a decline in the preliminary September report from 91.9 in August to 85.7. The decline was a reflection of deterioration in consumers’ assessment of current conditions and for future expectations, most likely due to recently falling stock prices and market volatility.

Fact of the Week

  • According to the Federal Reserve, a $1 bill has an average life of only 22 months. Meanwhile, $5, $10 and $20 bills have average lives of 2, 3 and 4 years respectively. $50 and $100 bills both have life expectancies of 9 years. Finally, the Fed says that coins typically circulate for 30 years.

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.

*Image of Japanese Prime Minister Shinzo Abe. Author: 多摩に暇人. License: GNU Free Documentation License, also filed under Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license. (See, https://commons.wikimedia.org/wiki/File:Shinzo_Abe.jpg).

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