Wealth Management Economic Update October 27, 2015

U.S. and World News

  • The People’s Bank of China surprised global markets on Friday by cutting its benchmark lending and deposit rates by 0.25%. The measure was taken to try to stimulate borrowing and spending without squeezing banks’ ability to profit from the spread of the two rates. The PBOC also cut banks’ reserve-requirement ratios by 0.5% to further pump liquidity into the economy. The move by the central bank comes after China reported growth of 6.9% in the 3rd quarter, which while beating estimates of 6.8%, was its slowest pace of growth since the global financial crisis.
  • Gaining over 40% of the popular vote, Justin Trudeau of the Liberal Party has been elected the Prime Minister of Canada, ousting Conservative PM Stephen Harper after nine years in power. Trudeau has pledged to run a large budget deficit over the next three years to invest in infrastructure and try to stimulate Canada’s economy that has suffered from the steep decline of oil prices.
  • At a policy meeting in Malta this week, European Central Bank President Mario Draghi signaled his willingness to increase stimulus to try to spur economic growth in the Eurozone but stopped short of announcing any new policy measures. Draghi said, “We are ready to act if needed…and we are open to the full menu of monetary policy.” Global markets reacted positively to the statements which also caused a significant drop in the euro.

Markets

  • Equity markets continued to advance upwards this week. The S&P 500 ended the week up 2.09%, closing at 2,075. Similarly, the Dow Jones increased 2.56% and closed at 17,647. Year to date, the S&P is up 2.45% and the Dow is up 0.93%.
  • Yields in the Treasury markets moved a bit higher this week. The 10 year Treasury bond now yields 2.09% while the 5 year Treasury bond now yields 1.42%.
  • The spot price of WTI Crude Oil declined this week. Prices fell by 6.33% closing at $44.70 per barrel. In 2015, WTI Oil prices are down 24.81%.
  • The spot price of Gold decreased this week, losing 1.09% and closing at $1,164.45 per ounce. Year to date, gold prices are down 1.68%.

Economic Data

  • Initial jobless claims came in at 259,000 which was an increase from the prior week’s figure of 255,000. 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 263,000, which is a new low for this economic cycle.
  • Housing starts increased by 6.5% in September, solidly beating consensus expectations. The gains were largely driven by an 18.3% increase in starts for the more volatile multi-family structures, while single-family starts increased only 0.3%.
  • Existing home sales rose by 4.7% in September, beating consensus expectations. The increase followed a dip in August and was entirely due to purchases of single-family homes, which rose 5.3%. The median price of existing home sales was up 6.6% from a year earlier.

Fact of the Week

  • According to the Bureau of Labor Statistics, the average American worker will hold 9.9 jobs between the ages of 25 and 48, for an average of 2.4 years per job.

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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