EU/Saudi bonds: Wealth Economic Update Oct 24, 2016

U.S. and World News

  • The European Central Bank elected to take no further action following their policy meeting this week, disappointing investors who had hope for further clarification on the central bank’s plan of action. At a news conference, ECB President Mario Draghi said that policy maker’s hadn’t even discussed whether to extend its €80 billion per moth bond-purchase program which is due to end in March 2017.
  • saudi_arabia_riyhad_66106939_340Saudi Arabia tapped the global debt markets for the first time this week, selling $17.5 billion in sovereign bonds. The bond issue had high demand as banks and investors flocked to buy debt issued by the emerging market country. In fact, it’s reported that the country received orders totaling $67 billion. The sale of bonds is part of the Saudi’s plan to open up its $650 billion economy to global investment and reduce its over-reliance on oil in the face of lower prices.

Markets

  • This week the S&P 500 rose 0.41% and closed at 2,141. The Dow Jones rose 0.09% and closed at 18,146. So far in 2016, the S&P is up 6.52% and the Dow is up 6.28%.
  • Interest rates edged down slightly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.24% and 1.74%, respectively.
  • The spot price of WTI Crude Oil was up 0.39% this week to close at $50.95 per barrel. WTI Crude is up 16.24% in 2016.
  • The spot price of Gold rose 1.23% this week, closing at $1,266.46 per ounce. Year to date, gold prices are up 19.35%.

Economic Data

  • Initial jobless claims came in at 260,000, an increase from last week’s reading of 246,000. The Labor Department noted that claims may have been distorted by a bounce back from the effects of Hurricane Matthew which led to closures of filing offices in affected regions in previous weeks. The four week moving average for claims moved up to 251,750.
  • The headline Consumer Price Index rose 0.3% in September, in line with expectations. This was boosted by a 2.9% increase in energy prices. Over the last year, headline prices have risen 1.5%.
    • Core CPI (excludes food and energy) rose 0.1% in September, below estimates of 0.2%. Over the last 12 months, Core prices are up 2.2%.
  • Housing starts declined -9.0% in September, substantially missing expectations of a 2.8% gain. The composition of the housing starts was less negative than indicated by the headline figure as the more volatile multifamily category declined 38.0% in the month while more stable single family home starts rose by 8.2%.
  • Existing home sales increased by 3.2% in September, beating expectations of a 0.4% increase. September saw a 4.1% increase in single family starts which more than offset the -3.2% decline in the volatile multi-family home sales category.

Fact of the Week

  • American families in the bottom 50% of pre-tax household income are expected to receive 17.7% of national income in 2017. American families in the top 1% of pre-tax household income are expected to receive 15.4% national income in 2017. (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

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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