Wealth Management Economic Update October 19, 2015

U.S. and World News

  • Officials in the U.S. Treasury Department and Puerto Rico are discussing the possibility of issuing a ‘superbond’ that would help restructure the commonwealth’s $72 billion of debt. Preliminary discussions of the plan include the Treasury or designated third party administering an account holding at least some of Puerto Rico’s tax collections, with those funds being used to pay holders of the ‘superbond’. Puerto Rico has warned that the country will run out of cash in November, before a debt payment of almost $300 million is due on December 1st.
  • Iran’s parliament passed a bill this week supporting the Obama-brokered nuclear deal, removing a major obstacle to putting the agreement into practice. The Iran nuclear deal which was reached with six other world powers provides for the lifting of sanctions for oil exports out of Iran and would double its oil exports to 2.3 million barrels per day in exchange for monitoring of Iran’s nuclear capabilities.

    Embed from Getty Images

Markets

  • Equity markets continued to advance upwards this week. The S&P 500 ended the week up 0.93%, closing at 2,033. Similarly, the Dow Jones increased 0.77% and closed at 17,216. Year to date, the S&P is up 0.37% and the Dow is down 1.58%.
  • Yields in the Treasury markets moved lower this week. The 10 year Treasury bond now yields 2.04% while the 5 year Treasury bond now yields 1.36%.
  • The spot price of WTI Crude Oil declined this week. Prices fell by 4.78% closing at $47.26 per barrel. In 2015, WTI Oil prices are down 19.61%.
  • The spot price of Gold increased this week, gaining 1.80% and closing at $1,177.30 per ounce. Year to date, gold prices are down 0.60%.

Economic Data

  • Initial jobless claims came in at 255,000 which was a decrease from the prior week’s figure of 263,000. This was the lowest level of claims since December 1973. The Labor Department noted that there were no special factors that affected the claims figure, although it’s believed a portion of the decline may have been due to seasonal adjustment factors. The four week moving average for claims now stands at 265,000.
  • Retail sales increased by only 0.1% in September, falling short of estimates of a 0.2% gain. Details of the report offered no obvious explanation for the weak print which was actually worse than the headline as retail sales excluding cars declined by 0.3%.
  • The Consumer Price Index (measure of inflation) declined by 0.2% in September, reflecting another drop in energy prices (-4.7%). The Core CPI reading (excludes food and energy) increased by 0.2%, bring the 12 month increase to 1.9%.
  • The University of Michigan’s consumer sentiment index increased to 92.1 in the first October reading, up from 87.2 in September. The rebound is an encouraging sign in light of recent weakness in other timely economic measures. Both the report’s measure of perception of current conditions and expectations for the future increased.

Fact of the Week

  • Until the year 2000 stock prices on U.S. exchanges were expressed in fractions (ie. $49 3/8). The US lagged behind other major stock markets like the London Stock Exchange which had switched to a decimal format several years earlier. Eventually the U.S. caught up when congressional leaders enacted a law that mandated the switch to decimals as an effort to make understanding stock values easier for the average investor.

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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