Interest Rates, Brexit: Wealth Economic Update Mar. 20, 2017

U.S. and World News

  • In a highly anticipated move, the Federal Reserve raised the Fed Funds Rate by 0.25% this week. Despite being the second rate hike in three months, the Committee remained committed to a gradual pace of rate hikes going forward. The Fed projects two more interest rate hikes in 2017, though there are differing views among the members. There was one dissent, Neel Kashkari, who supported not raising at this meeting and taking a wait and see approach. Finally, it was noted by Fed Chair Janet Yellen that the size of the Fed’s balance sheet (which stands at $4.5 trillion) was discussed at the meeting, but no decisions were made in regard to reducing it over time.
  • British Prime Minister Theresa May secured permission to trigger Article 50 which would officially mark the beginning of Brexit negotiations between the nation and its European Union counterparts. Having received the go-ahead from Parliament, May has said that she will invoke Article 50 by the end month. It’s expected that the negotiation process will last at least two years before Britain is officially able to leave the EU.

Markets

  • Markets closed the week moderately higher. The S&P 500 gained 0.28% and closed at 2,378. The Dow Jones followed suit by inching up 0.08% and closing at 20,915. Year to date, the S&P is up 6.71% and the Dow is up 6.45%.
  • Despite a 0.25% rate hike in the Fed Funds Rate, interest rates fell this week as the projected pace of future hikes was not accelerated. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.02% and 2.50%, respectively.
  • The spot price of WTI Crude Oil stabilized this week and gained 0.47% this week, closing at $48.72 per barrel. Year to date, Oil prices have fallen 9.31%.
  • The spot price of Gold increased by 2.04% this week, closing at $1,229.26 per ounce. Year to date, Gold prices are up 7.13%.

Economic Data

  • Initial jobless claims edged 2,000 lower from last week, coming in at 241,000. The Labor Department noted no special factors in the data. The four week moving average for claims remained at 237,000 which is a near a 40-year low.
  • Retail sales increased 0.1% in February, in line with expectations. Sales excluding autos and gasoline increased 0.2%. Delayed tax refunds appeared to bring down several Retail categories.
  • The Consumer Price Index (measure of inflation) increased 0.1% in February, slightly beating expectations for flat prices. Over the last 12 months, CPI has increased 2.7%.
    • Core CPI (excludes food and energy) rose 0.2% for February, in line with expectations. Core prices have risen 2.2% over the last year.
  • Housing starts increased by 3.0% in February, beating expectations of 1.1%. The details of the report were also favorable, as the less volatile single family starts increased by 6.5% to the highest level since October 2007 while multi-family starts decreased 3.7%.

Fact of the Week

  • The S&P 500 has now gone 108 consecutive trading days without suffering at least a 1% decline over any single trading day. That’s the longest stretch that the S&P has gone without a 1% drop since it had a run of 105 trading days without one that ended on December 15, 1995. (Source: By The Numbers 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.

 

SCOTUS, Brexit, Fed: Wealth Economic Update Feb. 6, 2017

U.S. and World News

  • scales-178714734_360President Trump continued to make headlines this week starting with his firing of Attorney General Sally Yates after she ordered DOJ lawyers not to defend the newly enacted travel and immigration restrictions. Dana Boente, U.S. Attorney General for the Eastern District of Virginia, has been named acting Attorney General until Jeff Sessions is confirmed by the Senate. Trump also announced his nomination of Neil Gorsuch, an appointee of President George W. Bush, to the U.S. Supreme Court. Gorsuch is the youngest (49) nominee to the Supreme Court in more than 25 years and will face a difficult confirmation process as Democrats have already come out in opposition of him.
  • After a two day debate, Britain’s departure from the European Union took a step forward this week as the House of Commons voted overwhelmingly in favor of triggering Article 50. Once triggered, it will begin a two year process for Britain to leave the EU. With that obstacle cleared, Prime Minister Theresa May is set to publish a detailed Brexit plan that includes controlling migration, pulling out of the single market and negotiation plans with Britain’s trading partners.
  • The Federal Reserve held a policy meeting this week and elected to keep interest rates unchanged as was the expectation going in. The Committee made few changes to their prior statement saying that the economy was expanding “at a moderate pace” and that job growth was still “solid.” They did make one meaningful upgrade to their assessment of the economy saying “measures of consumer and business sentiment have improved of late.” The Fed will meet again March 14-15 and the market is currently pricing in a 35% probability of a rate hike at that meeting.

Markets

  • Markets traded relatively flat this week. The S&P 500 gained 0.16% and closed at 2,297. The Dow Jones dipped 0.09% and closed at 20,071. Year to date, the S&P is up 2.76% and the Dow is up 1.69%.
  • Interest rates held steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.93% and 2.49%, respectively.
  • The spot price of WTI Crude Oil rose by 1.28% this week, closing at $53.85 per barrel. Year to date, Oil prices are unchanged.
  • The spot price of Gold increased by 2.44% this week, closing at $1,220.30 per ounce. Year to date, Gold prices are up 6.34%.

Economic Data

  • Initial jobless claims fell 14,000 from last week, coming in at 246,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 248,000.
  • The January employment report showed a gain of 227,000 jobs in the month, beating consensus estimates of 180,000. The prior two months were revised down by a combined 39,000 which brings the three month average of job gains to 183,000.
    • Headline unemployment ticked up 0.1% to 4.8% in January. The move up was the result of a 0.2% increase in the labor force participation rate to 62.9%.
    • Average hourly earnings only rose 0.1% in January, lower than expectations of 0.3%. Over the last 12 months, wages have grown 2.5%.
  • The Case-Shiller Home Price Index rose by 0.9% in December, beating forecasts of 0.7%. All 20 cities measured by the index saw increased prices and have now grown 5.3% over the last 12 months.
  • The PCE Index (measure of inflation) rose by 0.2% in December, in line with expectations. Over the last 12 months PCE prices have risen 1.6%.
    • Core PCE (excludes food and energy, preferred measure of inflation by the Fed) rose 0.1% in the month, meeting expectations. Over the last year, Core PCE has risen 1.7%, still short of the Federal Reserve’s 2% target.

Fact of the Week

  • The New York Stock Exchange introduced its opening/closing bell in the 1870’s when continuous trading began and started off as a Chinese gong. In 1903, the NYSE moved to its current building and the gong was replaced by a brass bell. The first guest to ring the opening bell (which has now become a tradition) was Leonard Ross in 1956. Leonard was a 10 year old who had won a TV quiz show answering questions about the stock market to earn that honor. (Source: NYSE.com)

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.

 

Trump, Brexit: Wealth Economic Update Jan. 20, 2017

U.S. and World News

  • president_podiumDonald J. Trump was inaugurated as the 45th President of the United States on Friday morning. His inauguration address stressed the importance of putting America first in all aspects including business and defense. The address was filled with promises of a more prosperous and safer country. While no specifics were given in his speech, President Trump guaranteed that the status quo of Washington D.C. would be shaken up and change was on the horizon.
  • This week British Prime Minister Theresa May laid out more plans for the coming Brexit, saying that the country will not seek a deal that leaves it “half in, half out” of the European Union. This confirmed fears of a “hard Brexit” in which the nation would leave the EU’s single market and regain full control of Britain’s borders. Also, in a speech at the World Economic Forum in Davos, May vowed that, “The U.K. will step up to a new leadership role as the strongest and most forceful advocate for free markets and free trade anywhere in the world.”

Markets

  • This week the S&P 500 dipped modestly by 0.13%, closing at 2,271. The Dow Jones Industrial Average decreased by 0.24% and closed at 19,827.
  • Interest rates rose a bit this week. The 5 year and 10 year U.S. Treasury Notes now yield 1.94% and 2.47%, respectively.
  • The spot price of WTI Crude Oil declined by 0.20% this week and closed at $52.42 per barrel.
  • The spot price of Gold increased by 1.08% this week, closing at $1,210.32 per ounce.

Economic Data

  • Weekly initial jobless claims came in at 235,000, a decrease from last week’s reading of 247,000. The Labor Department noted no major distortions to the data this week. The four week moving average for jobless claims now stands at 247,000 which is the lowest since 1973.
  • The Consumer Price Index (measure of inflation) rose 0.3% in December which was in line with expectations. The headline figure was boosted by a 1.5% rise in energy prices and have now risen 2.1% over the last 12 months.

o   The Core Consumer Price Index (excludes food and energy) rose by 0.2%, also in line with forecasts. Over the last year, core inflation stands at 2.2%.

  • Housing starts increased by 11.3% in December, bouncing back following a large decline in November. The rebound was solely in the multi-family category which increased by 57.3% in the month. Single family starts actually saw another decline in December, falling by 4.0%.

Fact of the Week

  • President Obama leaves office having presided over one of the best stock market return environments in American history. Since his inauguration in January 2009, the S&P 500 gained 182% or an annualized return of 16.3%. Since 1928, those market returns were only surpassed by the presidency of Bill Clinton (15.2% annualized return). (Source: Wall Street Journal)

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.

 

Election: Special Wealth Management Update Nov. 9, 2016

usa_360

U.S. voters have spoken, and despite the popular vote favoring Democratic candidate Hillary Clinton, the Republican nominee Donald Trump secured an unexpected electoral victory reminiscent of the 2000 Presidential Election. While there may not be any “hanging chads” there are sure to be many “hanging pollsters” in the aftermath of this result. Online markets predicted an 85% chance of a Clinton win while Nate Silver’s FiveThirtyEight.com forecast Clinton as a 71% favorite in his final prediction.  As it became apparent that the Republican nominee was going to be competitive through the “rust belt”, uncertainty was introduced to the markets.

Foreign markets began trading on this uncertainty with the Nikkei Index closing down 5.36% and the Hang Seng Index off 2.16%.   Aftermarket traders began moving U.S. futures significantly into the red with the Dow Jones Futures trading down by over 800 points.  As the election results rolled in and electoral votes continued to stack up in favor of Donald Trump, the markets began to more efficiently price the outcome.  With markets stabilizing, European markets were pricing in an increase of 1% for the FTSE index and 1.5% for the DAX and the Dow Jones Futures moving back to pre-election levels.

While the results of the election were certainly a surprise, it was not outside of the scope of possible outcomes.  On the heels of the United Kingdom voting in favor of “Brexit” when polling data pointed toward a “Remain” outcome, the potential for a “Closet Trump Vote” was in the cards.  While the initial surprise rattled market expectations, investors quickly processed the information and markets recovered.

We at Old Second Wealth Management  focus on long term investing, and market volatility predicated from binary events often create opportunity to invest.  Additionally, the changing landscape of Washington may create further opportunities or challenges within the investment markets.  If you have any questions or concerns, please do not hesitate to reach out to you Old Second Relationship Manager or Investment Officer.

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.

 

Hurricane Matthew: Wealth Economic Update Oct 10, 2016

U.S. and World News

  • hurricane_43705814_360Hurricane Matthew has made its way to the United States after inflicting server damage and loss of life in the Caribbean where it has killed at least 339 people in Haiti. A state of emergency and an evacuation mandate has been issued for many areas in the East Coast. While the storm has been downgraded to a Category 3, the National Weather Service has used some of its strongest language since Hurricane Katrina in describing the strength and dangers of the storm.
  • New U.K. Prime Minister Theresa May has provided an updated timeline for Parliament to initiate the “Brexit” process. May stated that the country would invoke Article 50 by the end of next March, which would officially indicate their intent to leave the European Union. Though the vote took place in June, the March timeline for beginning a ‘hard Brexit’ comes earlier than many observers believed would be the case, causing some volatility in the Sterling currency.

Markets

  • This week the S&P 500 dipped 0.60% and closed at 2,154. The Dow Jones fell 0.31% and closed at 18,240. So far in 2016, the S&P is up 7.09% and the Dow is up 6.77%.
  • Interest rates climbed higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.26% and 1.72%, respectively.
  • The spot price of WTI Crude Oil was up 2.88% this week to close at $49.63 per barrel. WTI Crude is up 23.92% in 2016.
  • The spot price of Gold declined 4.50% this week, closing at $1,256.75 per ounce. Year to date, gold prices are up 18.44%.

Economic Data

  • Initial jobless claims came in at 249,000, down from last week’s reading of 255,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 254,000.
  • The monthly employment report showed an increase of 156,000 jobs in September, below expectations of 170,000. The prior two months had their figures revised down a combined 7,000 jobs, bringing the three month average of job gains to 192,000.
    • The headline unemployment rate ticked up 0.1% to 5.0%. This was largely due to a 0.1% increase in the labor force participation rate to 62.9% in September.
    • Average hourly earnings came in a bit below forecast, rising 0.2% in the month compared to the 0.3% being expected. Over the last 12 months, wages have risen 2.6%. 

Fact of the Week

  • The California Public Employees’ Retirement System projected back in 1999 that the investments backing state employees’ pensions would grow from $159.1 billion to $613.5 billion in 2016 due to an assumed 8.25% annual rate of return. In actuality, as a result of market downturns and lower interest rates, the actual fund size in 2016 was just $295.1 billion, representing an annualized 3.70% rate of return. (Source: CalPERS)

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.

 

Post-brexit: Wealth Economic Update Aug 8, 2016

U.S. and World News

  • london_big-ben_49186880_340U.K. Prime Minister Theresa has outlined her plan to reshape the British economy for a post-Brexit world. Her goal is to revive industrial productivity growth in the country by encouraging innovation and focusing on sectors and technologies that will give Britain a competitive advantage. Meanwhile, the Bank of England announced more easing measures in a continued effort to spur growth. Benchmark interest rates were cut and the central bank’s bond buying program was expanded and will now include corporate bonds.
  • Japanese Prime Minister Shinzo Abe announced a fresh stimulus package that ranks among the country’s largest since the global financial crisis. The package totals ¥28 trillion ($274 billion) and was approved in response to growing consensus that monetary policy alone won’t be able to revive Japan’s economy. Included in the package that’s expected to lift GDP 1.4% are childcare benefits, $150 handouts to 22 million low income citizens, a loan of ¥10.7 trillion for infrastructure projects and ¥7.5 trillion for direct fiscal spending.
  • India’s upper house of parliament unanimously approved the creation of a national sales tax, nearly a decade after the move was first proposed. This is considered to be the biggest legislative victory for Prime Minister Narendra Modi since he took office in 2014. The tax bill seeks to streamline the country’s fragmented tax system by imposing a single national tax, something businesses have been lobbying for as it would reduce costs and could boost economic growth by 2%. The bill now must be ratified by at least half of all states in India, a process projected to be concluded before the end of the year.

Markets

  • This week the S&P 500 was up 0.49% and closed at an All-Time High of 2,183. The Dow Jones rose 0.65% and closed at 18,544. So far in 2016, the S&P is up 8.08% and the Dow is up 7.94%.
  • Interest rates popped up this week, particularly following the strong July employment report. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.13% and 1.59%, respectively.
  • The spot price of WTI Crude Oil gained 0.91% this week to close at $41.98 per barrel. WTI Crude is up 4.77% in 2016.
  • The spot price of Gold fell 1.13% this week, closing at $1,336.00 per ounce. Year to date, gold prices are up 25.91%.

Economic Data

  • Initial jobless claims came in at 269,000 which is higher than last week’s reading of 266,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved up to 260,000.
  • The July employment report showed an increase of 255,000 non-farm payrolls, beating expectations of 180,000. The prior two months’ figures were revised up a total of 18,000, bringing the three month average for job gains to 190,000.
    • The headline unemployment rate remained at 4.9%, narrowly missing estimates of 4.8%. The small miss was due to the labor force participation rate rising by 0.1% to 62.8%.
    • Average hourly earnings rose by 0.3% in July, beating expectations of 0.2%. Over the last 12 months, wages are up 2.6%.
  • The PCE Price index (measure of inflation) rose 0.1% in June, lower than expectations of 0.2%. Over the last 12 months, the PCE index is up 0.9%.
    • The Core PCE Price Index (excludes food and energy, the Fed’s preferred measure of inflation) rose 0.1% in June, in line with expectations. Over the last year, core prices are up 1.6%.

Fact of the Week

  • At $25,000, George Washington’s presidential salary represented 2% of the U.S. budget in 1789. If that percentage of pay held today, Barrack Obama would be paid over $67 billion a year. (Source: USA Today)

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.

 

UK & Germany: Wealth Economic Update July 25, 2016

U.S. and World News

  • U.K. Prime Minister Theresa May made it clear that she would attempt to secure a very close economic relationship with Germany post-Brexit, but German Chancellor Angela Merkel refuses to negotiate until the U.K. invokes Article 50. If negotiations were to start early, it would give the British incentives to delay notification (the official start of the 2 year negotiation process), which would give them an advantage and could lead to the negotiations being dragged out indefinitely.  
  • A three-month state of emergency has been declared by Turkey’s President Erdogan Wednesday night in order to “protect democratic values” by stopping parliament from passing new laws against supporters of last Friday’s coup. President Erdogan has also suspended or detained roughly 50,000 police officers, judges, civil servants, and teachers this week which has provided some stability, but some uncertainty still remains. The Turkish equity index regained some of its losses and Turkey’s central bank cut its overnight lending rate 0.25% to 8.75%.

Markets

  • This week the S&P 500 was up 0.64% and closed at 2,175. The Dow Jones gained 0.35% and closed at 18,571. So far in 2016, the S&P is up 7.61% and the Dow is up 8.05%.
  • The 5 year and 10 year U.S. Treasury Notes are now yielding 1.12% and 1.57%, respectively.
  • The spot price of WTI Crude Oil fell 5.21% this week to close at $44.22 per barrel. WTI Crude is up 4.29% in 2016.
  • The spot price of Gold lost 1.11% this week, closing at $1,322.64 per ounce. Year to date, gold prices are up 24.65%. 

Economic Data

  • Initial jobless claims came in at 253,000 which is slightly lower than last week’s reading. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 259,000.
  • Existing home sales were up 1.1% in June reaching a post-crisis high versus expectations of a slight decline. This was led by multi-family home sales and homes in the Midwest region.

Fact of the Week

  • The medium square footage of new single family homes built in the United States in 2015 was 2,467 square feet, an increase of 547 square feet over the last 20 years. That’s equivalent to a 23’ x 23’ addition to new homes today when compared to 1995 home construction. Source: Joint Center for Housing Studies of Harvard University.

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

*Image of Theresa May, Photo credit:UK Home Office, via Wikimedia Commons. License: Creative Commons Attribution 2.0 Generic license.. (See, https://commons.wikimedia.org/wiki/File:Theresa_May_2015_(cropped).jpg).

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

New British PM: Wealth Economic Update July 18, 2016

U.S. and World News

  • Theresa May, British Prime Minister

    Theresa May, British Prime Minister*

    Just three weeks after the U.K. voted in favor of leaving the European Union, Theresa May took over from David Cameron to become the 54th British Prime Minister. Financial markets appeared to approve of the selection although many analysts have said the implications for the U.K. economy could be much bigger due to uncertainty about her policies. May has wasted no time readying her Brexit team as she has appointed a Chancellor, foreign secretary, a Brexit “Tsar” and a trade negotiator.

  • Staying in the U.K., the Bank of England surprised the market by choosing to hold off on any easing action this week. It was believed that BOE Governor Mark Carney would cut rates 25 basis points or increase its bond buying program in the wake of the Brexit vote in order to ward off a possible recession.

Markets

  • This week the S&P 500 was up 1.51% for the week and closed at 2,162. The Dow Jones gained 2.04% and closed at 18,517. So far in 2016, the S&P is up 6.94% and the Dow is up 7.68%.
  • The 5 year and 10 year U.S. Treasury Notes are now yielding 1.11% and 1.56%, respectively.
  • The spot price of WTI Crude Oil gained 1.17% this week to close at $45.94 per barrel. WTI Crude is up 9.69% in 2016.
  • The spot price of Gold lost 2.21% this week, closing at $1,336.15 per ounce. Year to date, gold prices are up 25.92%.

Economic Data

  • Initial jobless claims came in at 254,000 which was unchanged from last week’s reading. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 259,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.2% in June, below estimates of 0.3%. This was boosted by a 1.3% increase in energy prices, although food prices decline -0.1%. Over the last 12 months, headline CPI has risen 1.0%.
    • The Core CPI (excludes food and energy) rose 0.2%, in line with expectations. Rent inflation remained firm, rising 0.3% in the month. Over the last year, core prices have risen 2.3%.
  • Retail sales increased by 0.6% in June, soundly beating estimates of 0.1%. Sales were boosted in part by higher gasoline sales as fuel prices rose.

Fact of the Week

  • As of 6/30/2016, there was $11.7 trillion of sovereign debt that carries a negative interest rate (ie. investors loaned governments money with the guarantee that they would be paid back less if they held the bond to maturity). This represents over 30% of the world’s sovereign debt. Countries issuing negative yield debt include Japan, Germany, Sweden, Denmark and Switzerland. (Source: Fitch Ratings)

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

*Image of Theresa May, Photo credit:UK Home Office, via Wikimedia Commons. License: Creative Commons Attribution 2.0 Generic license.. (See, https://commons.wikimedia.org/wiki/File:Theresa_May_2015_(cropped).jpg).

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Brexit aftermath: Wealth Economic Update July 5, 2016

U.S. and World News

  • pont_fawr_bridge_Wales_84636501_340The U.K. now faces the challenge created by its vote to leave the European Union and Chancellor George Osborne cautioned it would not be “plain sailing” in the days and weeks ahead. In the fallout from the shocking vote, there have been rumblings of a “re-do” vote or a renewed independence vote in Scotland, but neither is likely to gain too much traction. The process for the U.K. to leave is will officially begin when Parliament invokes Article 50, the timing of which has yet to be determined. Candidates for the Prime Minister post that David Cameron resigned from are beginning to emerge, though prominent Brexit figurehead and former London Mayor Boris Johnson has dropped out of the running.
  • Puerto Rico today defaulted on $800 million of debt payments it had constitutionally guaranteed to make to general obligation bond holders. These bond holders were supposed to receive priority before the Puerto Rican government paid out anything to state employees like police and teachers, however Governor Garcia Padilla ruled to continue running essential services on the island. This marks the first time that a U.S. state or territory has failed to pay general obligation bonds since the Great Depression. In response, Washington has pushed through a law signed by President Obama that would create a federal oversight board to oversee the restructuring of Puerto Rico’s over $70 billion of additional debt. The plan involves 1 out of every 3 dollars the island earns in revenue being used to pay off creditors.

Markets

  • After falling dramatically again on Monday, markets roared back the remainder of the week and regained most if not all of the post-Brexit losses. The S&P 500 was up 3.27% for the week and closed at 2,103. The Dow Jones gained 3.18% and closed at 17,949. So far in 2016, the S&P is up 4.00% and the Dow is up 4.37%.
  • Interest rates moved lower again this week despite the rally in the equity markets. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.00% and 1.44%, respectively.
  • The spot price of WTI Crude Oil gained 3.48% this week to close at $49.30 per barrel. WTI Crude is up 17.71% in 2016.
  • The spot price of Gold gained 1.95% this week, closing at $1,341.35 per ounce. Year to date, gold prices are up 26.41%.

Economic Data

  • Initial jobless claims came in at 268,000 which was an increase from last week’s reading of 259,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 266,750.
  • The Case-Shiller home price index rose 0.5% in April, slightly missing expectations of 0.6%. Prices increased in 16 of the 20 cities represented in the index. Over the last 12 months, home prices as measured by the index have risen 5.4%.
  • The headline PCE Index (measure of inflation) rose by 0.2% in May, in line with consensus expectations. The increase was in part due to a 1.4% rise in energy goods and services prices. Over the last 12 months, headline PCE has increased 0.9%.
  • The Core PCE Index (excludes food and energy, preferred measure of inflation by the Federal Reserve) also increased 0.2% in May and was in line with expectations. Over the last 12 month, Core PCE has risen 1.6%, still well short of the Fed’s 2% inflation target.

Fact of the Week

  • According to the Social Security Trustees 2016 report, the trust fund backing the payment of Social Security benefits would be zero in 2035. A zero trust fund does not mean that Social Security payments would also go to zero, but rather would drop to 77% of their originally promised level (or a 23% cut to benefits). In the 2009 report, the projection had been that that the trust fund would hit zero in 2042.

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.

 

UK Vote: Wealth Economic Update June 27, 2016

U.S. and World News

  • london_big-ben_49186880_340The United Kingdom has voted to Leave the European Union in the historic Brexit vote held on Thursday. For more information on this event, please see the special Brexit update here.
  • Acting Brazilian President Michel Temer has authorized a payment of $850 million from the federal government to the state of Rio de Janeiro, which is struggling with a fiscal crisis less than two months before the Olympic Games are slated to begin. This is in addition to fears about the Zika virus and other major public health concerns leading up to the Olympics. Rio declared a state of financial emergency last week as a result of deteriorating finances, which have forced deep cuts to services like education, healthcare and policing.
  • Just a week before $2 billion in bond payments come due, Puerto Rico’s governor Alejandro Garcia Padilla reiterated that the island will default on its general obligations even if services are cut off. Padilla is currently in Washington lobbying for Congressional approval of a bill that would establish the framework for Puerto Rico to restructure its $70 billion in debt.

Markets

  • Equity markets rallied early in the week before dropping dramatically after the results of the Brexit Referendum. The S&P 500 was down -1.62% for the week and closed at 2037. The Dow Jones dropped 1.55% and closed at 17,400. So far in 2016, the S&P is up 0.74% and the Dow is up 1.18%.
  • Interest rates moved lower again this week following the Brexit vote. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.07% and 1.56%, respectively.
  • The spot price of WTI Crude Oil lost 2.04% this week to close at $47.57 per barrel. WTI Crude is up 13.59% in 2016.
  • The spot price of Gold gained 1.32% this week, closing at $1,315.75 per ounce. Year to date, gold prices are up 24.00%.

Economic Data

  • Initial jobless claims came in at 259,000 which was a decrease from last week’s reading of 277,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 267,000.
  • Existing home sales increased by 1.8% in May, which was in line with consensus and reached a new post-crisis high. Single family home sales rose 1.9% in the month, while multi-family sales increased 1.6%. By region, existing home sales rose in the Northeast (+4.1%), South (+4.6%) and West (+5.4%), but fell in the Midwest (-6.5%).

Fact of the Week

  • During the 25 years from 1991 to 2015, the average interest rate on a 10 year US Treasury note was 4.7%. As of close on Friday June 24th, the 10 year US Treasury note had a yield of 1.56%. (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.