Wealth Management Economic Update January 11, 2016

U.S. and World News

  • Global tensions rose over the weekend when Saudi Arabia cut off diplomatic relations with Iran and gave diplomats 48 hours to leave the country as a result of protestors storming and destroying the Saudi Arabian Embassy in Tehran. The destruction of the embassy was in response to Saudi Arabia’s execution of 47 prisoners, including a prominent Shiite cleric. The two sides are also fighting in the oil markets as Iran is poised to re-enter the global oil markets following the nuclear deal signed over the Summer.
  • China’s unstable economy and markets are again sending shockwaves throughout the globe. Following weak manufacturing and economic data, Chinese shares plummeted and the Chinese government attempted to stop the bleeding through intervention. Newly implemented, and since suspended, market circuit breakers were tripped twice as the markets were shut down following declines breaching the 7% threshold. The ban on selling by major shareholders was also kept in place indefinitely and further currency devaluation methods were deployed in an attempt to boost exports and maintain the country’s growth targets.
  • Initially detected as a 5.1 magnitude earthquake by various agencies, North Korea has claimed to have successfully test detonated its first hydrogen bomb, the fourth nuclear device that the country has detonated. According to North Korean news, the country wanted an ‘H-bomb of justice’ in order to protect from the ‘ever-growing nuclear threat and blackmail by the U.S.-led hostile forces.” In addition to condemning the tests, some U.S. officials are skeptical that the bomb tested was a hydrogen bomb, which is 1,000 times stronger than a typical atomic bomb.

Markets

  • Markets started the year in the red rather dramtically. The S&P 500 declined 5.96% and closed at 1922. The Dow Jones fell 6.19% and closed at 16346.
  • Interest rates declined slightly this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.56% and 2.11%, respectively.
  • The spot price of WTI Crude Oil dropped 11.12% this week, closing at $32.88 per barrel.
  • The spot price of Gold rose 4.05% this week, closing at $1104.16 per ounce.

Economic Data

  • Initial jobless claims came in at 277,000 which was an decrease from last week’s reading of 287,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 276,000.
  • The monthly non-farm payrolls report showed a strong increase of 292,000 jobs in December, beating consensus estimates of 200,000. There were also upward revisions to the prior two months’ figures totaling 50,000. This brings the three month average of job gains to 284,000.
    • Average hourly earnings were flat for the month, behind forecasts of 0.2% growth. Wages increased by 2.5% in calendar year 2015.
    • The headline unemployment rate held steady at 5.0% which was in line with forecasts. The labor force participation rate rose 0.1% to 62.6%.

Fact of the Week

  • The total return for the S&P 500 in 2015 was a gain of 1.4%. If an investor in the index was able to avoid the worst three trading days during the year, that return would have risen to 12.3%. Conversely, if the investor missed the three best trading days, the 1.4% gain falls to a 7.1% loss. (Source: By The Numbers Research)

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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