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

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.

Wealth Management Economic Update December 21, 2015

U.S. and World News

  • The highly anticipated Fed decision on monetary policy was made on Wednesday when all members of the FOMC voted unanimously to raise the fed funds rate to a 0.25%-0.5% range. This marks the 7th anniversary since the Fed decided to reduce the Fed Funds Rate to 0%, and the first Fed Funds Rate increase since 2006. The FOMC mentioned that the path for rate increases going forward will be gradual and that they will carefully monitor inflation as it has not yet reached their 2% target.
  • An agreement has been made on an omnibus spending bill that would repeal the oil export ban which has been in place for four decades. This is considered a win for Republicans who have been pushing for the ban to be lifted so that American oil producers could take advantage of low oil prices by gaining access to the international market. Also, the production tax credit for wind power installations and the investment tax credit for solar installations would be extended for several years.
  • For the first time ever, a deal on climate change was signed in Paris over the weekend. The deal, in which participation is voluntary, is designed to limit the rise of average global temperatures to within two degrees of where they were before industrial times.

Markets

  • Markets dropped slightly after a very volatile week. The S&P 500 lost 0.34% and closed at 2,005. The Dow Jones fell 0.79% closing at 17,128. Year to date, the S&P is down 2.59% and the Dow is down 3.90%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.67% and 2.20%, respectively.
  • The spot price of WTI Crude Oil dropped again by 3.00% this week, closing at $34.55 per barrel. Year to date, Oil prices are down 42.39%.
  • The spot price of Gold decreased by 0.78% this week, closing at $1066.40 per ounce. Year to date, Gold prices are down 9.98%.

Economic Data

  • The Consumer Price Index (CPI) was unchanged in November (mom), as a result of declines in food and energy; however, core consumer prices (Core CPI, excluding food and energy) rose last month by 0.18% with help from medical care services, education, and transportation services.
  • Initial jobless claims came in at 271k for the week which was a decrease from last week’s increase to 282k. The four week moving average for jobless claims is 270,500.
  • Housing starts increased by 10.5% (mom) in November which was higher than expectations. Multi-family starts increased by 16.4% and single-family starts rose by 7.6% which is a new post-crisis high.

Fact of the Week

  • Only 53% of the nearly 3 million Americans that enrolled for college in the fall of 2009 had earned a bachelor’s or an associate degree by the summer of 2015 (source: National Student Clearinghouse Research Center).

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
Tamara Wiley, CFP® – (630) 844-3222 twiley@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.