Fed meeting: Wealth Economic Update Sept 26, 2016

U.S. and World News

  • federal_11172872_340The Federal Reserve held its September policy meeting this week and decided to hold the Fed Funds rate at its current level. The decision was not unanimous as there were three dissenting members of the committee that favored raising rates at this meeting. The statement given after the decision included the language “near-term risks to the economic outlook appear roughly balanced” which many interpret as a rate hike being near. The next policy meeting will be held in November but given that it will take place before the Presidential election, it is not expected that a rate hike would occur at that meeting. As a result, the December Fed meeting has become the focus with markets currently pricing in a roughly 50% probability of a hike.
  • The Bank of Japan also held interest rates steady, although speculation was that they could cut rates further into negative territory as opposed to raising them. While they did not move rates, the BOJ did modify its policy framework in an attempt to spur more economic growth. Among the changes, the central bank said it would introduce yield curve controls, eliminate the maturity range of its bond purchases and confirmed that cutting rates further remains an option down the line.

Markets

  • This week the S&P 500 finished up 1.19% and closed at 2,165. The Dow Jones rose 0.76% and closed at 18,261. So far in 2016, the S&P is up 7.51% and the Dow is up 6.83%.
  • Interest rates were down slightly from last week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.18% and 1.62%, respectively.
  • The spot price of WTI Crude Oil rose 3.84% this week to close at $44.68 per barrel. WTI Crude is up 11.56% in 2016.
  • The spot price of Gold was up 2.14% this week, closing at $1,338.38 per ounce. Year to date, gold prices are up 26.13%.

Economic Data

  • Initial jobless claims came in at 252,000, down from last week’s reading of 260,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 259,000.
  • Housing starts declined -5.8% in August, worse than expectations of a -1.7% drop. Starts on single family (-6.0%) and multi-family (-5.4%) were both weak in the month.
  • Existing home sales declined -0.9% in August, missing expectations of a 1.1% increase. On a regional level, existing home sales declined in the South (-2.7%), West (-1.6%) and Midwest (-0.8%), while sales rose in the Northeast (+6.1%).

Fact of the Week

  • The 6.22 million tax returns from 2014 that reported at least $200,000 of adjusted gross income (AGI) represented 4.2% of all returns filed, received 34.2% of all AGI nationwide and paid 58.2% of all federal income tax paid during that year. (Source: Internal Revenue Service)

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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