Wealth Management Economic Update May 31, 2016

U.S. and World News

  • While there weren’t many resolutions reached at last weekend’s G7 summit of finance ministers and central bankers in Japan, the U.S. issued a fresh warning to the host country against intervening in the currency markets. Japan has been very active in trying to devalue their Yen currency in an attempt to boost growth, a practice that has been frowned upon by the country’s trading partners.
  • medical_000071969633_320Having been hit with substantial losses in Obamacare’s first few years, major health plans are looking for premium boosts of 10% to 20% or more in many states. Proposals for increases need to be approved by state regulators before they can be passed on to customers. In addition to higher than expected costs and a population of new enrollees skewing towards the unhealthy end of the spectrum, many of the relief programs in place to cushion insurers’ losses will come to an end in 2017. While some state insurance commissioners are taking a tough public stance in regard to approving increases, experts say that they will unlikely be able to deny the requests because the losses being sustained are legitimate and they are required by law to ensure plans have funds to pay out claims.

Markets

  • Equity markets moved higher this week. The S&P 500 gained 2.32% and closed at 2099. The Dow Jones rose 2.15% and closed at 17,873. So far in 2016, the S&P is up 3.61% and the Dow is up 3.74%.
  • Interest rates did not move much this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.39% and 1.85%, respectively.
  • The spot price of WTI Crude Oil gained 3.75% this week to close at $49.54 per barrel. WTI Crude is up 21.72% in 2016.
  • The spot price of Gold lost 3.22% this week, closing at $1,212.38 per ounce. Year to date, gold prices are up 14.26%.

Economic Data

  • Initial jobless claims came in at 268,000 which was a decrease from last week’s reading of 278,000. State-level details noted that prior increases in Missouri and Michigan, which were due to temporary auto plant shutdowns, reversed this week. The four week moving average for claims moved up to 278,500.
  • Pending home sales increased by 5.1% during the month of April, much higher than expectations of 0.7%. This was the largest monthly increase in pending home sales since October 2010. By region, sales rose in the West (+11.4%), South (+6.8%) and Northeast (+1.2%), but declined in the Midwest (-0.6%)
  • 1st quarter GDP was revised up to 0.8% from an initial reading of 0.5%. Most of the upward revision was due to larger inventory accumulation and a narrower trade deficit than was reported in the first estimates.

Fact of the Week

  • May 26th marked the 120th Anniversary of the opening of the Dow Jones Industrial Average in 1896. Of the original 12 members of the index, only General Electric remains in the index today. Rounding out the other 11 original companies which were the economic stalwarts of its time were: The American Cotton Oil Company, The American Sugar Refining Company, American Tobacco Company, Chicago Gas Light & Coke Company, Distilling & Cattle Feeding Co., The Laclede Gas Company, National Lead Company, North American Company, Tennessee Coal, Iron & Railroad Company, The United States Leather Company and The United States Rubber Company.

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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