Interest rate outlook: Wealth Economic Update September 12, 2016

U.S. and World News

  • European Central Bank President Mario Draghi

    European Central Bank President Mario Draghi*

    The European Central Bank decided to hold interest rates at their record low levels and refrained from adding any new stimulus to the economy. Investors had anticipated that ECB President Mario Draghi would take more action or at least provide clearer indications of future actions. However Draghi stated, “Our program is effective and we should focus on its implementation.”

  • Markets were hit with their worst day in months on Friday, largely believed to be due to comments made by historically dovish Boston Fed President Eric Rosengren. Rosengren stated that “a reasonable case can be made” for raising interest rates and that the Fed faced increasing risks if it waited too much longer to hike. He did not specifically address September’s policy meeting but these comments, coupled with the ECB’s inaction have led many investors to believe that a September rate hike is very much on the table.

Markets

  • This week the S&P 500 was down 2.36% and closed at 2,128. The Dow Jones fell 2.15% and closed at 18,085. So far in 2016, the S&P is up 5.64% and the Dow is up 5.78%.
  • Interest rates moved up during the week, particularly following Boston Fed President Rosengren’s comments. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.22% and 1.67%, respectively.
  • The spot price of WTI Crude Oil rose 3.21% this week to close at $45.70 per barrel. WTI Crude is up 14.11% in 2016.
  • The spot price of Gold was up 0.20% this week, closing at $1,327.83 per ounce. Year to date, gold prices are up 25.14%.

Economic Data

  • Initial jobless claims came in at 259,000, moving down from last week’s reading of 263,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 261,000. 

Fact of the Week

  • The average interest rate paid by the U.S. government on its debts was 2.26% as of July 31st. This has come down more than 2% from an average 4.38% the government paid eight years ago. Every 1% increase in the cost of debt for the nation’s estimated $14 trillion in debt is equal to an additional $140 billion in annual interest payments. (Source: Treasury Department)

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

*Image of Mario Draghi, Photo credit: World Economic Forum, via Wikimedia Commons. License: Creative Commons Attribution-Share Alike 2.0 Generic license. (See, https://commons.wikimedia.org/wiki/File:Mario_Draghi_-_World_Economic_Forum_Annual_Meeting_2012.jpg).

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s