Wealth Management Economic Update May 9, 2016

U.S. and World News

  • Puerto Rico missed a $422 million bond payment due to its Government Development Bank this week, pushing the island’s debt crisis to a new level. The missed payment is the largest so far by Puerto Rico and is believed by many analysts to be a precursor to additional defaults this summer, when more than $2 billion in bonds come due. U.S. Treasury Secretary Jack Lew warned in a letter to Congress that a U.S. “taxpayer-funded bailout may become the only course available” if the proposed restructuring legislation on the table is not approved.
  • politician_podium76797371_320Texas Senator Ted Cruz and Ohio Governor John Kasich have both officially suspended their presidential campaigns following large losses in the Indiana primary this week. This leaves Donald Trump as the presumptive Republican nominee for the 2016 Presidential Election. Trump’s next step seems to be the selection of a running mate for which he reportedly has a short list. On the Democratic side, Bernie Sanders won the Indiana primary and remains in the race with Hilary Clinton, though his path to nomination is a very narrow one.

Markets

  • Equity markets were down marginally this week. The S&P 500 fell 0.33% and closed at 2,057. Likewise, the Dow Jones dipped 0.10% and closed at 17,741. So far in 2016, the S&P is up 1.37% and the Dow is up 2.67%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.23% and 1.78%, respectively.
  • The spot price of WTI Crude Oil dropped 2.81% this week to close at $44.63 per barrel. WTI Crude is up 9.63% in 2016.
  • The spot price of Gold lost 0.38% this week, closing at $1,288.60 per ounce. Year to date, gold prices are up 21.44%.

Economic Data

  • Initial jobless claims came in at 274,000 which was an increase from last week’s reading of 257,000. The Labor Department noted no special factors in the data. The four week moving average for claims ticked up to 258,000.
  • The monthly non-farm payrolls report showed an increase of 160,000 jobs in April, below expectations of 200,000 jobs. With 19,000 of negative revisions to the prior two months’ figures, the three month average of job gains stands at 200,000.
    • The headline unemployment rate remained at 5.0%, missing expectations of 4.9%. The miss was largely due to a 0.2% decline in the labor force participation to 62.8%.
    • Average hourly earnings rose 0.3% in April, in line with expectations. Over the last 12 months, wages have grown 2.5%.

Fact of the Week

  • Of the 5.26 million existing home sales in 2015, 30% (1.58 million) were completed by first-time home buyers. (Source: National Association of Realtors)

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
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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