Rate forecast, OPEC: Wealth Economic Update Jan. 9, 2017

U.S. and World News

  • money_chess-523185447_360Minutes from the December Federal Reserve meeting were released this week, giving insight into the Committee’s discussions leading up to the only Fed Funds rate increase of 2016. The transcripts showed that part of the reasoning behind the 0.25% rate hike was an expectation of coming fiscal stimulus under an upcoming Trump presidency. The Federal Reserve will meet again at the end of January but no further action is expected to be taken until the March meeting at the earliest.
  • The start of the year marked the beginning of the deal agreed upon by OPEC countries to reduce oil production and so far it appears as though all parties are complying with the agreement. OPEC and some non-OPEC member countries agreed last November to decrease crude output by 200,000 barrels per day in an effort to support prices and several countries, including Iraq, have already taken measures to reduce production.

Markets

  • This week the S&P 500 kicked off 2017 by rising 1.76%, closing at 2,277. The Dow Jones Industrial Average increased by 1.07% and closed at 19,763. The Dow was unable to reach the 20,000 milestone again this week, coming within 0.37 points of the elusive mark.
  • Interest rates continued to retreat a bit from their recent highs. The 5 year and 10 year U.S. Treasury Notes now yield 1.92% and 2.42%, respectively.
  • The spot price of WTI Crude Oil declined by 0.24% this week and closed at $53.70 per barrel.
  • The spot price of Gold increased by 2.19% this week, ending the year at $1,172.63 per ounce.

Economic Data

  • Weekly initial jobless claims came in at 235,000, a decrease from last week’s reading of 265,000. The Labor Department noted no major distortions to the data this week. The four week moving average for jobless claims now stands at 257,000.
  • The December payroll report showed a gain of 156,000 jobs in the month, lower than consensus forecasts of 175,000. The prior two months’ figures were revised up by a total of 19,000 which brings the three month average for job gains to 165,000.
    • The headline unemployment rate rose by 0.1% to 4.7%, in line with expectations. The small tick up in the unemployment rate was the result of a 0.1% increase in the labor force participation rate to 62.7%.
    • Average hourly earnings rose 0.4% in December, better than expectations of 0.3%. Over the last 12 months, wages have grown 2.9%, the highest mark during the recovery.
  • The ISM manufacturing index increased to a two-year high of 54.7 in December, rising from 53.2 in November. This was another positive data point indicating further signs of recovery in the U.S. manufacturing sector.

Fact of the Week

  • The total return for the S&P 500 during 2016 was +12.0%. If you missed the 3 best percentage gain days last year, that 12.0% return falls to 4.4%. If you avoided the 3 worst percentage loss days last year, that 12.0% gain rises to a 22.1% gain. (Source: BTN Research)

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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