Wealth Management Economic Update February 23, 2016

U.S. and World News

  • Helping to at least stabilize the oil markets temporarily, top officials from Russia, Saudi Arabia and several key OPEC members have agreed to freeze crude oil output at January levels. Iran was notably absent from this agreement as the country is planning ramp up oil output to regain market share following years of international sanctions that limited the country’s production.
  • cuba_field_000015487392_320U.S. and Cuban officials have signed an agreement that will reopen airline services between the two nations for the first time in more than 50 years. Meanwhile, President Obama is planning a trip to the island nation next month; marking the first time in more than 80 years a sitting U.S. President will visit Cuba. The trip to Havana would cap off one of Obama’s foreign policy goals of normalizing relations with Cuba and moving toward expanded commercial relations after a 54 year hiatus.
  • Minutes from the Federal Reserve’s January meeting were released this week and were broadly in line with recent comments made by Fed officials. The minutes emphasized continued progress in labor market conditions and positive fundamentals but also noted increased downside risks associated with recent tightening of financial conditions and weaker growth abroad. Fed officials remain data dependent and would like to see more information in order to assess if further rate hikes are warranted.
  • Fears that Britain will leave the European Union had heightened as Prime Minister David Cameron has been engaging in tough negotiations to limit concessions necessary for Britain to stay in the bloc. Diplomats who have been negotiating around the clock during a two-day summit on issues such as welfare curbs and financial regulation have reached a deal late Friday afternoon and it appears now that Britain will remain in the EU.

Markets

  • Markets continued on from last Friday’s rally to finish up on the week. The S&P 500 gained 2.89% and closed at 1,918. Likewise, the Dow Jones rose 2.71% and closed at 16,392. So far in 2016, the S&P is down 5.87% and the Dow is down 5.50%.
  • Interest rates were little changed this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.20% and 1.74%, respectively.
  • The spot price of WTI Crude Oil gained 1.53% this week to close at $29.89 per barrel. WTI Crude has fallen 21.69% in 2016.
  • The spot price of Gold decreased 0.82% this week, closing at $1,227.77 per ounce. Year to date, gold prices are up 15.71%.

Economic Data

  • Initial jobless claims came in at 262,000 which was a decrease from last week’s reading of 269,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 273,250.
  • Housing starts unexpectedly declined by -3.8% in January, below expectations of a 2.0% gain. More severe weather in January compared to December may have been a factor. Both multi-family (-3.7%) and single family (-3.9%) housing starts were weaker than expected.
  • The Consumer Price Index (measure of inflation) was unchanged in January, more than expectations for a -0.1% decline in prices, despite a 2.8% decline in energy prices. Core CPI (excludes food and energy costs) increased by 0.3% in January, the largest gain since March 2006. This was better than expectations of a 0.2% gain. Over the last 12 months, CPI is up 1.4% and Core CPI is up 2.2%.

Fact of the Week

  • According to the Institute of Policy Studies, the 20 wealthiest Americans are worth a combined $732 billion. This is more than combined net worth of the bottom 50% of the U.S. population which stands at 323 million people.

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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