OPEC, Castro: Wealth Economic Update Dec. 5, 2016

U.S. and World News

  • castro-172756369_320Oil prices rallied this week as OPEC has appeared to come to an agreement to cut production for the first time in eight years following a meeting of its member nations in Vienna this week. Prospects for a harmonious meeting were shaky early on as Saudi Arabia and Iran were initially opposed to cuts and tensions between Russia and OPEC flared up. Even with an agreement in place, questions still remain regarding the implementation and monitoring of production cuts given the cartel’s history of not always honoring these types of agreements.
  • Former President of Cuba, Fidel Castro, died at the age of 90 last week. His brother, Raul, who has been in the President of the still Communist nation since 2008, is tasked with the continuation of U.S.-Cuba relations which have softened in the last year as the U.S. embargo on the country was lifted by President Obama. President-Elect Trump has been critical of re-establishing diplomatic ties with Cuba and may be willing to reverse those policies.
  • Protests in South Korea have intensified as more than 1 million people gathered to rally against President Park Guen-hye and call for her impeachment. This was the 5th consecutive week of mass protests in Seoul. Park is embroiled in a corruption scandal that has paralyzed her government for weeks, leading her to request a shorter term from parliament and relinquishing some of her powers. Her opposition, however, believes this is a tactic to avoid impeachment and is attempting to put an impeachment motion up for vote in the coming weeks.

Markets

  • This week the S&P 500 decreased 0.91% and closed at 2,192. The Dow Jones rose 0.22% and closed at 19,170. So far in 2016, the S&P is up 9.31% and the Dow is up 12.65%.
  • Interest rates paused from the dramatic increase they have seen in recent weeks. The 5 year and 10 year U.S. Treasury Notes now yield 1.82% and 2.38%, respectively.
  • The spot price of WTI Crude Oil spiked 12.20% this week on reports of an agreement by OPEC to cut production. Oil closed at $51.68 per barrel. WTI Crude is up 29.04% in 2016.
  • The spot price of Gold fell 0.52% this week, closing at $1,177.43 per ounce. Year to date, gold prices are up 10.96%.

Economic Data

  • Initial jobless claims came in at 268,000, an increase from last week’s reading of 251,000. The claims figure may have been higher this reading due to the Thanksgiving holiday last week. The four week moving average for claims moved up to 252,000.
  • The monthly employment report for November showed job gains of 178,000, slightly lower than consensus estimates of 180,000. The prior two months’ employment numbers were revised down a combined 2,000 jobs, bringing the three month average for job gains to 176,000.
    • The headline unemployment rate fell 0.3% to a new cyclical low of 4.6%, lower than estimates of 4.9%. Part of this decline in the unemployment rate can be explained by a 0.1% decline in the labor force participation rate to 62.7%.
    • The wage component of the report was disappointing as average hourly earnings declined 0.1%, compared to expectations of a 0.2% increase. Year-over-year wage growth is now down to 2.5%.
  • The Case-Shiller home price index rose 0.4% for September, in line with expectations. Prices rose in all 20 cities that are part of the index. Home prices have now risen 5.1% over the last 12 months.
  • The PCE price index (measure of inflation) rose by 0.2% in October, in line with expectations. Headline prices as measured by the PCE index have now risen 1.4% over the last 12 months.
    • Core PCE (excludes food and energy, Fed’s preferred inflation measure) rose by 0.1% in October, also in line with consensus. Core PCE prices have now risen 1.7% over the last 12 months, still a bit below the Fed’s 2% target.

Fact of the Week

  • The national homeownership rate in the U.S. as of September 30th was 63.5%. This is down from the peak level of 69.2% seen on 12/31/2004. Every 1% reduction in the homeownership rate represents 1.2 million households that have changed from homeownership to renter status. (Source: Census Bureau)

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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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