UK Election, Qatar, Puerto Rico: Wealth Economic Update June 9, 2017

U.S. and World News

  • UKflag-518908074_360The decision to hold snap elections in the United Kingdom seems to have back-fired on Prime Minister Theresa May and her Conservative Party as they lost their majority with the Labour Party gaining significant ground in Thursday’s vote. In April, Theresa May decided to hold the snap general election in an attempt to gain a significant majority for her ahead of the Brexit negotiations but with the poor results there have been calls for her resignation. The split parliament could make Brexit negotiations with the UK’s European Union partners more difficult.
  • Four Arab states (Saudi Arabia, Egypt, the United Arab Emirates and Bahrain) have cut off diplomatic ties with Qatar, as well as closing air and sea routes. This marked a significant escalation of a rift between the Persian Gulf countries that has been brewing for a few months. President Trump stated that he wished to “de-escalate” the situation but appeared to support the isolation of Qatar, noting that his message against funding terror and extremism is being heeded by those other countries in the region.
  • Citizens of Puerto Rico are voting this weekend in a referendum on the island’s political status. There will be three choices on the ballot: statehood, “current territorial status” and independence. It’s not clear what would happen in the case of any of these choices winning decisively or how Congress would interpret the results. This is the island’s fifth referendum since 1898 and comes amid a crippling economic crisis.

Markets

  • Markets were mixed this week. The S&P 500 dropped by 0.27% and closed at 2,432. The Dow Jones gained 0.33% for the week and closed at a New All Time High 21,272. Year to date, the S&P is up 9.57% and the Dow is up 8.84%.
  • Interest rates edged higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.77% and 2.20%, respectively.
  • The spot price of WTI Crude Oil lost 3.80% this week, closing at $45.85 per barrel. Year to date, Oil prices have fallen 14.65%.
  • The spot price of Gold ended the week higher, closing at $1,267.45 per ounce. Year to date, Gold prices are up 10.45%.

 Economic Data

  • Initial jobless claims decreased by 10,000 from last week, coming in at 245,000. Most of the decreases in claims were attributed to California and Tennessee, reversing their increases last week. The four week moving average for claims moved up to 242,000.

Fact of the Week

  • The New York Stock Exchange (NYSE) has more than twice the number of listed securities as the NASDAQ exchange (8,500 vs. 3,100). Despite this difference, The NASDAQ, which lists mostly technology companies, averages more than double the daily trading volume of the NYSE (2 billion shares for the NASDAQ vs. 880 million for the NYSE). (Average daily trade volume based on 1-month average figure)

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
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

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Climate, Illinois downgraded: Wealth Economic Update June 3, 2017

U.S. and World News

  • weather-171576532_360President Trump has announced that the United States will withdraw from the Paris Climate Accord. The landmark 2015 agreement between 195 nations aimed at fighting climate change and promoting clean energy, however Trump has been staunchly against the deal as he feels that it puts America at an economic disadvantage compared to many of the other countries in the agreement. While according to the language of the agreement makes it so the U.S. can’t officially withdraw until 2020, the administration says they will simply not enforce any of the provisions of the deal until that time. Trump added that the U.S. could begin negotiations to re-enter the Paris accord down the road or “a new transaction on terms that are fair to the United States, its businesses, its workers, its people, its taxpayers.”
  • Standard and Poor’s has downgraded the debt rating of the State of Illinois down to BBB- from BBB, one notch above ‘Junk’ status. This was the third downgrade of Illinois’ debt by S&P in the past year. Illinois is by far the lowest rated state and it is the only state that S&P has in the BBB tier and indications are that the rating could fall further in what was described as a ‘negative credit spiral’. Gabriel Patek of S&P noted, “If lawmakers fail to reach agreement on a budget with provisions designed to reduce the state’s structural deficit, it’s likely we will again lower the ratings.”

Markets

  • Markets ended the week on a positive note. The S&P 500 rose by 1.01% and closed at 2,430. The Dow Jones gained 0.69% for the week and closed at 21,144. Year to date, the S&P is up 9.87% and the Dow is up 8.48%.
  • Interest rates edged higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.72% and 2.16%, respectively.
  • The spot price of WTI Crude Oil lost 4.14% this week, closing at $47.74 per barrel. Year to date, Oil prices have fallen 11.13%.
  • The spot price of Gold ended the week higher, closing at $1,279.17 per ounce. Year to date, Gold prices are up 11.47%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 248,000. Most of the increases in claims were attributed to California and Tennessee. The four week moving average for claims ticked up to 238,000.
  • The Headline PCE index (measure of inflation) rose 0.2% in April, in line with expectations. Over the last year, PCE inflation has risen 1.7%.
    • Core PCE (excludes food and energy, preferred inflation measure of the Federal Reserve) rose by 0.15% in April, slightly better than expectations of 0.1%. Core PCE has risen 1.5% over the last 12 months.
  • The Case Shiller home price index rose by 0.9% in April, in line with expectations. Prices rose in all 20 cities measured with Minneapolis (+1.3%), Detroit (+1.2%), Seattle (+1.1%) and New York (+1.1%) showing the largest monthly increases. Over the last 12 months, home prices as measured by the index have risen 5.9%.

Fact of the Week

  • Apple (AAPL) reported cash and cash equivalents of $256.8B at the end of Q1. That is enough cash to purchase any company held in the S&P 500, outside of the top 10 holdings. Alternatively, Apple could purchase all of the bottom 45 companies held in the S&P 500. (Based on Market Capitalization)

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
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

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OPEC, Budget, Manchester: Wealth Economic Update May 29, 2017

U.S. and World News

  • oil-518901244The OPEC meeting on Thursday concluded with an agreement to extend oil production cuts for an additional nine months, however crude oil prices fell sharply on the day despite the positive result as expectations were high after OPEC displayed unusual optimism prior to the meeting. Iraq was surprisingly in support of the production cuts as they have been one of the more hesitant OPEC members to favor production cuts in the past. There still remain OPEC members that will not be required to comply with the extension cap such as Libya, Iran, and Nigeria.
  • President Trump has submitted a budget proposal that aims to cut $3.6 trillion in spending over the next ten years which includes cutting Medicaid and other social programs. The budget entails a $4.1 trillion spending allowance in 2018 which includes defense, border security, and infrastructure.
  • The U.K.’s terror threat level was raised to “critical” after an explosion following the Ariana Grande concert in Manchester, England killed 22 people and injured 59. Salman Abedi is the name of the man believed to be responsible for the attack and Prime Minister Theresa May raised the U.K. threat level to its maximum level of “critical” implying that another attack is potentially imminent.

Markets

  • Markets ended the week on a positive note. The S&P 500 rose by 1.47% and closed at 2,416. The Dow Jones gained 1.35% for the week and closed at 21,080. Year to date, the S&P is up 8.78% and the Dow is up 7.75%.
  • Interest rates edged higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.79% and 2.25%, respectively.
  • The spot price of WTI Crude Oil lost 1.74% this week, closing at $49.79 per barrel. Year to date, Oil prices have fallen 7.32%.
  • The spot price of Gold ended the week higher, closing at $1,267.14 per ounce. Year to date, Gold prices are up 10.43%.

 Economic Data

  • Initial jobless claims increased by 1,000 from last week, coming in at 234,000. Most of the increases in claims were attributed to California and Michigan. The four week moving average for claims dropped to 235,000.
  • Sales of new single-family homes fell 11.4% in April reaching a four-month low, however, new home sales in the prior three months were all revised upwards. The decline in April was largely attributed to new single-family home sales in the West.
  • Existing home sales fell 2.3% in April, but still remains at a March cycle-high. Existing sales of single-family units fell by 2.4%, while sales of condos declined by 1.6%. Existing home sales decreased in the South, West, and Northeast, but increased in the Midwest region.
    • The recent loss of momentum in the housing market and existing home sales is believed to be the negative affect from higher mortgage rates.
  • During the May Federal Open Market Committee meeting on Thursday, the Fed concluded that “it would soon be appropriate” for another rate hike. There is an 80% probability of a rate hike in June and another hike is expected in September. The Fed also noted that the weak Q1 GDP figure was likely transitory.

Fact of the Week

  • There was approximately $1.54 trillion in circulation as of April 5, 2017, of which $1.49 trillion was in Federal Reserve notes (Dollars). (Source: Board of Governors of the Federal Reserve System.)

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
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

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Stocks, Brazil, Macron: Wealth Economic Update May 19, 2017

U.S. and World News

  • woman_finance-668680856_360After an extended period of low-volatility and complacency in the markets, global political news shook markets on Wednesday. Weighing on U.S. markets were reports of President Trump allegedly sharing classified information with Russia’s foreign minister and ambassador, and ongoing inquiries to the Comey termination. U.S markets have recovered most of the losses since Wednesday.
  • A political crisis has unfolded in Brazil as the potential for a second impeachment in a just over a year has arisen after reports that President Temer was recorded discussing and endorsing payment of hush money to a former associate who was jailed for corruption. The Brazilian currency and stock market were sharply negative on the news. Just this morning, President Temer announced that he refuses to step down and that his innocence would be revealed by a full investigation.
  • Emmanuel Macron was sworn in as the new President of France Sunday. The European equity market saw equity fund inflows of a record $6.1 billion following Macron’s victory and analysts are projecting even more in the months ahead. Emmanuel Macron is dedicated to returning growth and confidence to the economy and in his first joint news conference with Angela Merkel he stated “First, we need to work on what we want to change, and then if it turns out it needs a treaty change, then we’re prepared to do that.”
    Markets

Markets

  • Markets dipped a bit this week, continuing the period of low volatility. The S&P 500 fell 0.26% and closed at a of 2,391. The Dow Jones lost 0.34% for the week and closed at 20,897. Year to date, the S&P is up 7.56% and the Dow is up 6.67%.
  • Interest rates also moved lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.77% and 2.23%, respectively.
  • The spot price of WTI Crude Oil rose 5.29% this week, closing at $50.37 per barrel. Year to date, Oil prices have fallen 6.24%.
  • The spot price of Gold ended the week higher, closing at $1,255.07 per ounce. Year to date, Gold prices are up 9.37%.

 Economic Data

  • Initial jobless claims fell by 4,000 from last week, coming in at 232,000. Claims remained particularly low in several energy-producing states year-to-date. The four week moving average for claims ticked down to 241,000.
  • Housing starts were down -2.6% in April which were below expectations of a 3.7% gain. The decline was led by multifamily homes which declined by -9.2%.
    • Building permits declined -2.5% versus expectations of 0.2%.
    • Industrial production increased 1% versus expectations of 0.4%.
    • Manufacturing production increased 1% versus expectations of 0.4%.

Fact of the Week

  • According to a recent research report by Strategas Research Partners, “Twenty years ago, there were nearly 7,500 publicly traded U.S. stocks and only a handful of major indexes to track them. Fast forward to 2017 and the number of individual equities has declined to just barely 4,000 and astonishingly, the number of indexes now totals more than 5,000. There are now more indexes than publicly traded U.S. equities.” (Source: Strategas Research Partners)

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
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

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French Election, China, Fed: Wealth Economic Update May 15, 2017

U.S. and World News

  • France-516919908_360As expected, Emmanuel Macron won the French Presidential election in convincing fashion, securing 66% of Sunday’s runoff vote against National Front leader Marine Le Pen. “I will fight with all my strength against the divisions that are undermining us,” Macron declared in his victory speech. Global market reaction was subdued as the polls showed this to be the likely result, but the victory was nonetheless welcomed as it solidifies France’s place in the European Union. Also part of Macron’s policy goals are to reform France’s labor market, unify the country’s pension plans and reduce the budget deficit.
  • Reshaping their trade relationship, the U.S. and China have revealed a new 10-point plan that will see China open its market to American companies and agencies. Commerce Secretary Wilbur Ross said the import/export deals on beef, poultry, natural gas, agriculture, financial services and biotechnology will help reduce the massive trade deficit that the U.S. currently has with China.

Markets

  • Markets dipped a bit this week, continuing the period of low volatility. The S&P 500 fell 0.26% and closed at a of 2,391. The Dow Jones lost 0.34% for the week and closed at 20,897. Year to date, the S&P is up 7.56% and the Dow is up 6.67%.
  • Interest rates moved modestly lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.85% and 2.33%, respectively.
  • The spot price of WTI Crude Oil rose 3.46% this week, closing at $47.82 per barrel. Year to date, Oil prices have fallen 10.98%.
  • The spot price of Gold was mostly unchanged this week, closing at $1,228.43 per ounce. Year to date, Gold prices are up 7.18%.

 Economic Data

  • Initial jobless claims fell by 2,000 from last week, coming in at 236,000. The Labor Department did not note any factors that may have affected the data this week. The four week moving average for claims ticked up to 244,000.
  • Retail sales increased 0.4% in April, falling short of expectations for a 0.6% gain. Retail sales ex-autos increased 0.3% in the month.
  • The headline Consumer Price Index (measure of inflation) rose by 0.2% in April, in line with expectations. This modest rise came despite a 1.1% rise in energy prices and a 0.2% increase in food prices. Over the last 12 months, headline CPI has risen 2.2%.
    • Core CPI (excludes food and energy costs) disappointed and rose only 0.1% compared to expectations of 0.2%. Over the last 12 months, core prices have risen 1.9%.
  • The University of Michigan consumer sentiment index rose by 0.7 to a reading of 97.7 in the preliminary May report. The survey found consumers’ expectations for the future rose during the month and their assessment of current conditions was flat.

Fact of the Week

  • Core CPI (excludes food and energy costs) disappointed and rose only 0.1% compared to expectations of 0.2%. Over the last 12 months, core prices have risen 1.9%.

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
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.

French Election, AHCA, Fed: Wealth Economic Update May 5, 2017

U.S. and World News

  • Voters in France will head to the polls on Sunday to elect a new President, selecting either Emmanuel Macron or Marine Le Pen. The two candidates have been campaigning tirelessly since the first round of the election led to their selection in the run-off. In order to try to gain more broad appeal, the typically anti-EU Le Pen has eased off of her stance that if elected she would push for France’s exit from the European Union. Despite these efforts, Macron currently holds a sizable lead in the polling figures and is viewed as the more ‘status-quo’ candidate.
  • medical_360The U.S. House of Representatives passed the American Health Care Act by a slim 217-213 margin this week. “Make no mistake: This is a repeal and replace of Obamacare,” President Trump said after the bill’s passage. The legislation now faces an uphill battle in the Senate, where several Republican members have already signaled it could see major revisions. Reports also suggest that the Senate may write its own version of a bill.
  • The Federal Reserve held a policy meeting this week and held interest rates at their current levels as was the expectation in the market. The post-meeting statement acknowledged but downplayed the weak 1st quarter GDP growth, stating that it was likely ‘transitory,’ maintaining expectations of a June rate hike. The market is currently pricing in a nearly 100% probability that the Fed Funds Rate will be increased at the next meeting.

Markets

  • Markets continued to climb higher this week as economic data came in strong and international risks appeared to ease. The S&P 500 rose 0.66% and closed at a New All-Time High of 2,399. The Dow Jones gained 0.33% for the week and closed at 21,007. Year to date, the S&P is up 7.84% and the Dow is up 7.04%.
  • Interest rates moved modestly higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.88% and 2.35%, respectively.
  • The spot price of WTI Crude Oil dropped 5.68% this week, closing at $46.53 per barrel. Year to date, Oil prices have fallen 13.38%.
  • The spot price of Gold declined 3.12% this week, closing at $1,228.70 per ounce. Year to date, Gold prices are up 7.08%.

 Economic Data

  • Initial jobless claims fell by 19,000 from last week, coming in at 238,000. The drop appears to be a reversal from the effects of the Easter and spring break holidays that elevated the figures last week. The four week moving average for claims ticked up to 243,000.
  • The April jobs report showed an increase of 211,000 jobs during the month, beating consensus expectations of 190,000. This was a large improvement from the March report that showed only 79,000 jobs being created. The prior two months’ figures were revised down a combined 6,000 jobs, bringing the three month average job gains to 174,000 per month.
    • The headline unemployment rate moved down to 4.4% in the report, beating expectations of 4.6% and matching the lows achieved during the previous cycle (2006-2007). The labor force participation rate did fall -0.1% to 62.9%.
    • Average hourly earnings rose by 0.3% in April, in line with expectations. Over the last year, wages have increased by 2.5%.

Fact of the Week

  • Sell in May? – In analyzing the returns of the S&P 500 since 1990, the six month period from November through April has beaten the six month period from May through October in 18 of 27 years. The November through April periods have seen a total return of 636% in the S&P during that time vs. a 73% gain for the May through October periods. (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
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.

French Election, Taxes, N Korea: Wealth Economic Update Apr. 28, 2017

U.S. and World News

  • iStock-534000920_400Results from the first round of the French Presidential Election showed Emmanuel Macron and Marine Le Pen advancing to a presidential runoff as voters turned their backs on the political establishment. Macron, the independent centrist won 23.75% of the vote, while Le Pen, the National Front leader, garnered 21.53%. Trying to broaden her appeal, Le Pen is taking a leave of absence from her leadership position of the National Front party, whose platform is slashing immigration, clamping down on trade and removing France from the European Union. The runoff vote is scheduled for May 7th, in which current polls show Macron holding the advantage.
  • President Trump unveiled the outline for his proposed tax reform this week. While details remain to be filled in, the plan is highlighted by a series of broad tax cuts. It included a reduction of the corporate tax rate from 35% to 15%, lower individual tax rates along with simplified brackets, a bigger standard deduction, and a repeal of the estate and alternative minimum taxes. This one page proposal did not include the controversial border-adjustment tax on imports.
  • Tensions continue to rise in Korea as the North detained another U.S. citizen and staged a massive live fire-drill to commemorate the 85th anniversary of its military. In response to this escalation, the U.S. military has started moving key parts of its controversial THAAD anti-missile defense system to a deployment site in South Korea. This move, which has angered North Korea, China and Russia, prompted protests by local residents and was denounced by the frontrunner in South Korea’s presidential election.

Markets

  • Markets bounced higher following the results of the first round of the French Election. The S&P 500 rose 1.53% and closed at 2,384. The Dow Jones gained 1.91% for the week and closed at 20,941. Year to date, the S&P is up 7.14% and the Dow is up 6.69%.
  • Interest rates moved modestly higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.82% and 2.29%, respectively.
  • The spot price of WTI Crude Oil dipped 0.87% this week, closing at $49.19 per barrel. Year to date, Oil prices have fallen 8.43%.
  • The spot price of Gold declined 1.26% this week, closing at $1,268.21 per ounce. Year to date, Gold prices are up 10.52%.

 Economic Data

  • Initial jobless claims rose by 14,000 from last week, coming in at 257,000. The numbers may have been elevated this week due to seasonal adjustments surrounding Easter and spring break holidays. The four week moving average for claims dropped to 242,000.
  • The Case-Shiller home price index rose by 0.7% in March, in line with expectations. Prices rose in all 20 cities measured, with Seattle (1.9%), Dallas (1.2%) and San Francisco (1.0%) seeing the largest increases. Home prices as measured by the index have now risen 5.9% over the last 12 months.
  • The first estimate of 1st Quarter GDP showed growth of only 0.7% vs. expectations of 1.0%. The slowdown in consumer spending was a significant drag on the headline number.
  • The Employment Cost Index (ECI) rose by 0.8% in the 1st quarter, beating expectations of 0.6%. With the strong quarter, total compensation has now increased 2.4% over the last year.

Fact of the Week

  • 41% of homeowners between the ages of 65-74 and 63% of homeowners over age 75 own their home free and clear of any debt. (Source: Center for Retirement Research at Boston College)

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
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.

French Election, Brexit: Wealth Economic Update Apr. 21, 2017

U.S. and World News

  • france360France will be holding what is presumed to be the 1st round of its Presidential Election on Sunday. The current four top candidates in the polling are only separated by 4% points, making the race extremely tight. Under French election rules, if no candidate secures a majority (which seems all but a certainty), the two highest vote-getters will square off in a run-off election scheduled for May 7th. The four candidates include two broadly pro-market, liberal reformers (Emmanuel Macron and Francois Fillon) and two populist eurosceptics who promise labor market and trade protectionism (Marine Le Pen and Jean-Luc Melenchon). Macron and Fillon have put greater focus on domestic issues like tax reform, unemployment and the national debt. Meanwhile, both Le Pen and Melenchon focused on immigration control and have proposed taking France out of the European Union with Le Pen being more staunchly opposed to France remaining in the euro. Global markets will be watching the results of this election closely.
  • British Prime Minister Theresa May has called a snap general election in the U.K., with the vote to be held on June 8th. With her Conservative party holding a sizeable lead in polls, May is taking the opportunity to try to gain a significant majority as Brexit negotiations get underway. May said that the vote was necessary to secure a mandate going into a “moment of enormous national significance”, also stating that Westminster was currently too dividend to take on this task.

Markets

  • Markets rebounded a bit this week. The S&P 500 rose 0.87% and closed at 2,349. The Dow Jones gained 0.51% for the week and closed at 20,548. Year to date, the S&P is up 5.54% and the Dow is up 4.71%.
  • Interest rates ended the week where they began and remain at low levels. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.77% and 2.24%, respectively.
  • The spot price of WTI Crude Oil dropped 6.86% this week, closing at $49.58 per barrel. Year to date, Oil prices have fallen 7.80%.
  • The spot price of Gold was little changed this week, closing at $1,284.72 per ounce. Year to date, Gold prices are up 11.96%.

 Economic Data

  • Initial jobless claims rose by 10,000 from last week, coming in at 244,000. The Labor Department noted no special factors affecting the data this week. The four week moving average for claims dropped to 243,000.
  • Housing starts declined -6.8% in March which was a larger drop than the expected -3.0%. The report was broadly weak with both the single-family category (-6.2%) and the multi-family category (-7.9%) seeing declines.
  • Existing home sales rebounded in March, increasing 4.4% vs. forecasts of 2.2%. This marks a full retracement of February’s -3.9% drop. Both sales of existing single family units (4.3%) and condos/co-ops (5.0%) rose during the month. On a regional level, existing home sales increased in the Northeast (10.1%), Midwest (9.2%) and South (3.4%) but declined in the West (-1.6%).

Fact of the Week

  • Of U.S. metropolitan areas with populations of at least 1 million, Salt Lake City has the lowest unemployment rate at 3.0% and Cleveland has the highest at 6.6%. The nationwide unemployment rate current stands at 4.5%. (Source: Department of Labor)

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
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.

Trump, China, NATO: Wealth Economic Update Apr. 14, 2017

U.S. and World News

  • Investors were forced to recalibrate their expectations this week as President Trump reversed several of his positions that he held during the campaign. Trump began by telling the Wall Street Journal that China is no longer a currency manipulator, a claim he had made many times throughout the campaign trail. He then went on to say that he respects Fed Chair Janet Yellen, leaving the door open for her to be reappointed when her term expires, despite Trump previously saying that she should be “ashamed of what she’s doing to the country.” Trump also reversed course on the Export-Import Bank, now supporting it for the backing that it lends to small companies. Finally, Trump said that NATO was no longer obsolete since it is fighting terrorism.

Markets

  • Interest rates continued their recent downward trend this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.77% and 2.24%, respectively.
  • The spot price of WTI Crude Oil rose 1.80% this week, closing at $53.18 per barrel. Year to date, Oil prices have fallen 1.01%.
  • The spot price of Gold increased by 2.47% this week, closing at $1,285.50 per ounce. Year to date, Gold prices are up 12.02%.

 Economic Data

  • Initial jobless claims declined by 1,000 from last week, coming in at 234,000. The Labor Department noted no special factors affecting the data this week. The four week moving average for claims dropped to 247,000.
  • The University of Michigan consumer sentiment index rose 1.1 point to 98.0 in the preliminary April report. This is approaching the cycle high of 98.5 reached in January. Both consumers’ assessment of current conditions and expectations for the future improved in the report.
  • Retail Sales decreased -0.2% in March, in line with expectations. The headline retail sales figure was weighed down by lower motor vehicle & parts (-1.2%) and gasoline (-1.0%) sales. Core retail sales (excludes autos, gas, and building materials) saw a better than expected 0.5% increase.
  • The Consumer Price Index (measure of inflation) declined -0.3% in March vs. forecasts of a flat CPI. The decline was due to a -3.2% drop in energy prices during the month. Over the last 12 months, headline CPI has increased 2.4%.
    • Core CPI (excludes food and energy prices) declined -0.1% in March vs. expectations of a 0.2% increase. The decline was led by lower communications, apparel and lodging prices. This was the first outright decline in Core inflation since 2010. The 12 month increase in Core CPI declined to 2.0% as a result.

Fact of the Week

  • Net interest costs of the federal government make up 7% of total federal outlays in 2017. It is estimated that with higher interest rates in the future and rising federal debt levels, net interest costs will be pushed to 21% of total federal spending by the year 2047. (Source: Congressional Budget Office)

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
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.

 

Syria, Gorsuch: Wealth Economic Update Apr. 7, 2017

U.S. and World News

  • Following a poison gas attack against a rebel-held area of Syria which included use of the banned nerve agent sarin, President Trump was forced to pivot from his prior stance on Syria and its President Bashar al-Assad. Trump said that the attack, which included children among its victims, crossed “many, many lines” and that his “attitude toward Syria and Assad has changed very much.” In what was seen as a direct response, the U.S. launched 59 Tomahawk missiles against an airbase in Syria. This sets up further potential conflict with Russia, Assad’s primary backer, as the Kremlin has already stated the missile launch will deal a “significant blow to Russian-U.S. relations” and represented an “act of aggression” against a sovereign state.
  • Facing significant Democratic opposition, Republicans voted to enact the “nuclear option”, which reduces the threshold for Supreme Court nominations in the Senate from 60 to a simple majority. Having done that, the path was cleared for Neil Gorsuch to be confirmed to the Supreme Court by the Senate on Friday. With the Republicans choosing to lower this threshold, future presidents will have a much easier time getting their Supreme Court nominees confirmed, potentially changing whom they decide to appoint.
  • Minutes from the March Federal Reserve meeting were released this week and contained a relatively upbeat assessment of economic conditions and references to the potential upside from fiscal policy measures. The minutes also showed discussion regarding allowing the Fed’s balance sheet to ‘run-off’ at some point in the future. Additionally, some participants characterized stock market valuations as ‘quite high’ in light of the run-up in indices in recent months. The market is currently pricing in a 13% probability of a rate hike at the Fed’s May meeting and a 62% probability of a rate hike by their June meeting.

Markets

  • Markets were relatively flat this week. The S&P 500 fell 0.24% and closed at 2,356. The Dow Jones was flat for the week and closed at 20,656. Year to date, the S&P is up 5.80% and the Dow is up 5.20%.
  • Interest rates bounced around this week but ended close to where they began. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.92% and 2.38%, respectively.
  • The spot price of WTI Crude Oil rose 3.18% this week, closing at $52.21 per barrel. Year to date, Oil prices have fallen 2.81%.
  • The spot price of Gold increased by 0.48% this week, closing at $1,255.21 per ounce. Year to date, Gold prices are up 9.39%.

Economic Data

  • Initial jobless claims declined by 25,000 from last week, coming in at 234,000. Most of the improvement came from the Midwest and Mid-Atlantic regions, where claims in recent weeks were elevated due to Winter Storm Stella. The four week moving average for claims dropped to 250,000.
  • The March employment report showed a gain of 98,000 jobs in the month, well below expectations of 180,000. Additionally, the prior two months’ figures were revised down a combined 38,000. The retail sector disappointed again, losing 30,000 jobs in the month however the overall report may have been negatively affected by severe weather. Over the last three months, job gains have averaged 178,000 per month.
    • The headline unemployment rate moved down 0.2% to 4.5%, which was better than expected. The labor force participation rate held steady at 63.0%.
    • Average hourly earnings rose by 0.2%, which was in line with forecasts. Over the last year, wages have grown 2.7%.

Fact of the Week

  • The IRS audited just 0.7% of individuals’ tax returns in 2016. The number of people audited in 2016 (just over 1 million) dropped for the 5th consecutive year. The IRS claims that for every $1 spent conducting an audit, they are able to recuperate $4 in previously unpaid taxes. (Source: IRS)

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
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.