July Fed Meeting: Wealth Economic Update Aug 22, 2016

U.S. and World News

  • Minutes from the July Federal Reserve meeting were released this week and showed that the Committee continues to be patient regarding further interest rate increases. Several members noted that inflation continued to be low and saw little risk of waiting for inflation data to firm up before taking further tightening action. Committee members also noted that while markets rebounded from the surprising Brexit vote, they continued to see a variety of risks overseas.
  • China_Great_Wall_340China’s State Council has approved the launch of the Shenzhen-Hong Kong Stock Connect, which will serve as a trading link between the two area’s stock markets. It will be operational in about four months and will be similar to the existing Shanghai-Hong Kong link that was launched in late 2014. It is expected that this new agreement will further open up China’s market to outside investors.
  • In a live broadcast, suspended Brazilian President Dilma Rousseff said that, “Impeachment without a crime, if consummated, would be a coup.” Rousseff also called for early elections in an attempt to unite the country that is currently in recession. Rousseff was suspended in May on accusations that she doctored government fiscal accounts in order to get re-elected in 2014. It’s widely expected that she will be impeached and permanently removed from office later this month.

Markets

  • This week the S&P 500 was up 0.06% and closed at 2,184. The Dow Jones rose 0.02% and closed at 18,553. So far in 2016, the S&P is up 8.28% and the Dow is up 8.31%.
  • Interest rates increased this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.16% and 1.58%, respectively.
  • The spot price of WTI Crude Oil gained 9.17% this week to close at $48.57 per barrel. WTI Crude is up 21.27% in 2016.
  • The spot price of Gold rose 0.41% this week, closing at $1,341.47 per ounce. Year to date, gold prices are up 26.42%.

Economic Data

  • Initial jobless claims came in at 262,000, moving down from last week’s reading of 266,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved up to 265,000.
  • The headline Consumer Price Index (measure of inflation) was unchanged in July, in line with forecasts as a decline in energy prices offset moderate gains in other components. Over the last 12 months, headline CPI has risen 0.8%.
    • Core CPI (excludes food and energy prices) showed gains of 0.1% in July, less than the expectation of 0.2%. Over the last year, ‘core’ prices have risen 2.2%.
  • New housing starts increased by 2.1% in July, beating consensus expectations of a -0.8% decline. Single family starts increased 0.5% in the month, while multi-family starts increased by 5.0%.

Fact of the Week

  • Of the households headed by a currently employed individual (i.e, a “working” household), 44% do not have any money invested on a pre-tax basis in a defined contribution plan, e.g., a 401(k) retirement plan. (Source: Government Accountability Office)

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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