Hurricane Irma, Debt Ceiling, DACA: Wealth Economic Update Sept. 8, 2017

U.S. and World News

  • hurricane-499087970_360As Texas gets the cleanup and reconstruction process underway following Hurricane Harvey, Florida is bracing for Hurricane Irma which is expected to hit the U.S. mainland on Sunday. Irma, which has developed into one of the most powerful storms ever recorded in the Atlantic Ocean, has already decimated many islands in the Caribbean, including Puerto Rico, on its way to East Coast.
  • A short term deal regarding the debt ceiling is close to completion, pushing the deadline back 3 months to March 2018. The temporary fix will be coupled with more than $15 billion in aid funding for Hurricanes Harvey and Irma. Some economists see this as a potential negative for tax reform prospects as the debt ceiling will now be breached sometime in the 1st quarter of 2018, right when it’s expected that tax legislation would be unveiled which may complicate matters further.
  • President Trump has decided to revoke the DACA program that shields young unauthorized immigrants from deportation. Trump announced that no action will be taken on those in the ‘Dreamers’ program for six months, giving Congress time to craft a solution. Absent action from Congress in that time frame, Trump said that he will “revisit the issue” when that deadline hits. Presumably, if a resolution isn’t found, over 800,000 young adults brought into the country illegally would become eligible for deportation.

Markets

  • Markets dipped this week. The S&P 500 fell 0.58% and closed at 2,461. The Dow Jones dropped 0.82% for the week and closed at 21,798. Year to date, the S&P is up 11.45% and the Dow is up 12.20%.
  • Interest rates fell quite substantially this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.64% and 2.05%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.57% this week, closing at $47.56 per barrel. Year to date, Oil prices have fallen 12.52%.
  • The spot price of Gold ended the week higher by 1.63%, closing at $1,346.78 per ounce. Year to date, Gold prices are up 17.37%.

 Economic Data

  • Initial jobless claims rose by 62,000 from last week, coming in at 298,000. This is the highest level of claims in more than two years; however, this mostly reflects a large jump (52,000) of jobless claims in Texas associated with Hurricane Harvey. The four week moving average for claims rose to 250,000.

Fact of the Week

  • According to the Census Bureau, 53% of the owner-occupied homes in the U.S. are owned by people who are age 55 or older. Ten years prior, the proportion of age 55+ homeowners was just 43%.

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 November 2, 2015

U.S. and World News

  • The Federal Reserve chose to take no action on raising interest rates at its October meeting this week. This was the consensus expectation going into this meeting and the focus now shifts to the December meeting for possible ‘liftoff’. The statement following this month’s meeting showed reduced concern about international and stock market developments. It also expressly stated that Fed officials will be considering raising interest rates at the December meeting.
  • The House and Senate have passed a budget deal that would prevent the U.S. from breaching the debt ceiling next week and help avoid a government shutdown in December. The agreement will increase spending by $80 billion above the sequestration caps for military and domestic programs. Those increases would be offset by cuts in spending on Medicare and Social Security. The deal also lifts the debt ceiling through March 2017. The deal will now go to President Obama for final approval.
  • chinese_baby_320In a move aimed at improving growth, China has announced that it will abandon its one-child policy and allow Chinese couples to have two children. The country experienced significant social and demographic issues relating to the 35 year old policy, as China faces an aging population that doesn’t have the workers it needs for its large economy.
  • Despite rising expectations of an increase in stimulus, the Bank of Japan has kept its monetary policy on hold, holding asset purchases steady at ¥80 trillion. The decision comes amidst an output slowdown and declining consumer prices that threaten to push Japan back into deflation, something the BOJ has been fighting for two decades. BOJ Governor Hiroki Kuroda has insisted that Japan’s economy is in the middle of a moderate recovery and that the central bank has done all it can to boost growth.

Markets

  • Equity markets continued to advance upwards this week. The S&P 500 ended the week up 0.22%, closing at 2,079. Similarly, the Dow Jones increased 0.10% and closed at 17,663. Year to date, the S&P is up 2.71% and the Dow has gained 1.05%.
  • Yields in the Treasury markets moved higher this week. The 10 year Treasury bond now yields 2.15% while the 5 year Treasury bond now yields 1.52%.
  • The spot price of WTI Crude Oil rose this week. Prices increased by 4.00% closing at $46.38 per barrel. In 2015, WTI Oil prices are down 21.98%.
  • The spot price of Gold decreased this week, losing 1.92% and closing at $1,142.11 per ounce. Year to date, gold prices are down 3.57%.

Economic Data

  • Initial jobless claims came in at 260,000 which was an increase from the prior week’s figure of 259,000. The Labor Department noted that there were no special factors that affected the claims figure. The four week moving average for claims now stands at 259,000, which is a new low for this economic cycle.
  • The price index for personal consumption expenditures (PCE, measure of inflation) declined by 0.1% in September as was expected given the further drop in energy prices. The Core PCE measure (excluding food and energy) rose 0.15% during the month, bringing the one-year figure to 1.3%, well short of the Federal Reserve’s 2% target.
  • The Employment Cost Index (ECI, measure of wage inflation) increased by 0.6% during the 3rd quarter, in line with expectations. Over the past 12 months, compensation has increased by 2.0%.
  • The first estimate of 3rd quarter GDP showed growth of 1.5%, according to the Commerce Department’s report. The figure reflects solid growth in consumer spending with an offsetting drag from slow inventory accumulation.

Fact of the Week

  • According to the Federal Reserve, as of August 31st the total outstanding credit card debt in the U.S. was $918.5 billion. This translates to an average of $8,004 of credit card debt for every household in the country.

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.

Wealth Management Weekly Update February 17, 2014

U.S. and World News

  • Both the House and Senate passed through a one year extension of the U.S. debt ceiling that will extend the government’s borrowing authority until March 16, 2015. The measure was passed without any additional conditions, although there had been plans by the Republicans to link a debt ceiling extension to restoring cuts to military pensions. The legislation is now due to be sent to President Obama for his approval.
  • The government has announced yet another delay to an important part of Obamacare, saying that businesses with between 50 to 99 full-time workers won’t be mandated to provide health insurance to their workers until 2016. Larger companies will have to cover at least 70% of employees by 2015 and 95% by 2016. The original plan was for companies to offer coverage this year, but in July, that was delayed until 2015.
  • According to a Wall Street Journal study, there are around 4.8 million people aged 18-64 that get no government help to buy medical insurance because they earn too little to qualify for federal subsidies. However, they earn too much to receive benefits under state programs. The gap is the result of 24 states (Illinois is not one of them) deciding not to expand Medicaid coverage under the Affordable Care Act. Some states are revisiting their policies in order to cover the gap.
  • New Fed Chair Janet Yellen, had her first congressional testimony in her new position this week and reiterated the Central Bank’s pledge to retain super easy monetary policies and reiterated that any action the Fed will take is data dependent. The Fed will have their next policy meeting in March, so there will be plenty of economic data, including another jobs report, which will be released before a decision needs to be made on continuing the path of tapering asset purchases.

Marketsfinance_chart_250px

  • Stock markets climbed higher this week as the S&P 500 ended up 2.38%, closing at 1,839 and the Dow Jones rose by 2.45%, closing at 16,154. So far in 2014, the S&P and Dow are down 0.53% and 2.55% respectively.
  • Treasury yields started to rise again this week with the 5 year and 10 year treasury now yielding 1.53% and 2.75% respectively.
  • The spot price of WTI Crude Oil increased this week by 0.45%, closing at $100.33 per barrel. Oil prices are now up 1.81% in 2014.
  • The spot price of Gold rallied again this week, gaining 4.06% and closing at $1,318.69 per ounce. Year to date, Gold prices are up 9.74%.

Economic Data

  • Initial jobless claims rose by 8,000 from last week, coming in at 339,000 vs. consensus estimates of 330,000. The four week moving average for claims rose to 336,750. The Labor Department noted that there were no special factors affecting last week’s claims.
  • January retail sales were a significant disappointment, declining by 0.4% vs. expectations that they would be flat for the month. Adverse weather conditions certainly played a role, with weakness seen at department stores as well as restaurants and bars. However, non-weather sensitive categories, such as online sales, also showed weakness and declined 0.6% for the month.

Fact of the Week

  • The total number of listed stocks on public exchanges reached an all-time high of 8,823 in 1997. At the end of 2013, this number had fallen to a mere 5,008 companies, a 43% decline in the number of listings. The bursting of the Tech Bubble from 2000-2002, increased costs associated with being a public company after the Sarbanes-Oxley Act was passed and the rapid rise of the private equity industry are likely some factors reducing the number of listings. This phenomenon, combined with the decline in shares outstanding of companies that have remained public (through share buybacks), have contributed to reduce the total investment options available in the market and may be a significant factor in the rapid rise in stock prices since 2009.

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 – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update February 10, 2014

U.S. and World News

    • The suspension of the U.S. debt limit ended this week, leaving the Treasury a couple week window in which they can take measures to avoid a default. In the past, the debate over the debt ceiling has been extremely contentious, but at this time there seems to be little stomach for a new fight, so it is expected that Congress will increase the cap without too much theatrics.

Architecture in San Juan Old City

  • Rating agency S&P has cut Puerto Rico’s credit rating to BB+, or junk status, and maintained a negative outlook for the debt-laden commonwealth. They cited a reduced capacity to access to capital to fund its operating deficit as a reason for the negative outlook. Moody’s and Fitch, other rating agencies, are also contemplating dropping Puerto Rico to junk status as well.
  • A bipartisan group of Senate and House members has stepped up pressure on the White House to approve the controversial Keystone XL oil pipeline that would extend from Canada to the Gulf Coast. This follows an extensive State Department report filed last week that found that the proposed pipeline would have little to no negative environmental impact, which has been one of the primary concerns holding up approval.

Markets

  • Stock markets climbed higher this week as the S&P 500 ended up 0.90%, closing at 1,797 and the Dow Jones rose by 0.69%, closing at 15,794. So far in 2014, the S&P and Dow are down 2.78% and 4.72% respectively.
  • Treasury yields were largely flat this week with the 5 year and 10 year treasury now yielding 1.47% and 2.68% respectively.
  • The spot price of WTI Crude Oil increased this week by 2.64%, closing at $100.06 per barrel. Oil prices are now up 1.53% in 2014.
  • The spot price of Gold rose again this week, gaining 1.82% and closing at $1,267.17 per ounce. Year to date, Gold prices are up 5.45%.

Economic Data

  • Initial jobless claims fell 17,000 from last week, coming in at 331,000 vs. consensus estimates of 335,000. The four week moving average for claims rose to 334,000. The Labor Department noted that there were no special factors affecting last week’s claims.
  • The January employment report contained a confusing set of data, as payroll job growth significantly disappointed, but the unemployment rate fell by one tenth. Nonfarm payrolls rose by 113,000 vs. expectations of 180,000. Weather surprisingly didn’t appear to play too much of a role in this month’s numbers. The unemployment rate fell 0.1% to 6.6%. Labor force participation rate actually rose by 0.2% to 63.0% despite the expiration of Emergency Unemployment Compensation benefits which many believed would lead some unemployed workers to stop reporting that they were actively seeking employment.
  • The ISM manufacturing index was much weaker than expected in January with a reading of 51.3 vs. expectations of 56.0 and was a fall from 56.5 in December. Comments from several of the survey respondents pointed to poor weather as a reason for the weakness in January.

Fact of the Week

  • According to a Wall Street Journal report, 1 in 6 men in their prime working years of 25-54 don’t have jobs. The proportion is around 17%, or 10 million people, which compares with 6% in the early 70’s and 13% in 2007. Reasons cited by economists include the slow recovery from the recession and that many people are unable to keep up with the way that technology and globalization are changing the labor market.

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 – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management