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.

 

Obamacare, Cuba: Wealth Economic Update Jan. 13, 2017

U.S. and World News

  • medical-522306108_360Following a seven hour debate, the Senate narrowly passed a budget resolution this week, clearing the first major hurdle in the Republican effort to repeal Obamacare. House leaders have now taken on the resolution amid pressure from President-elect Donald Trump who has said that a repeal and replacement of Obamacare should happen essentially simultaneously.
  • A week before leaving office, President Obama announced an end to the “wet foot, dry foot” policy that allowed Cubans who arrived in the United States without visas to pursue residency after one year. This will likely mark his last major change that his administration will make to U.S.-Cuba relations after he previously lifted the long standing embargo with the country and cleared the way for travel to the island nation.

Markets

  • This week the S&P 500 dipped modestly by 0.10%, closing at 2,275. The Dow Jones Industrial Average decreased by 0.39% and closed at 19,886.
  • Interest rates continued to retreat a bit from their recent highs. The 5 year and 10 year U.S. Treasury Notes now yield 1.90% and 2.40%, respectively.
  • The spot price of WTI Crude Oil declined by 2.72% this week and closed at $52.52 per barrel.
  • The spot price of Gold increased by 2.11% this week, closing at $1,197.34 per ounce.

Economic Data

  • Weekly initial jobless claims came in at 247,000, an increase from last week’s reading of 235,000. The Labor Department noted no major distortions to the data this week. The four week moving average for jobless claims now stands at 257,000.
  • Headline retail sales for the month of December grew 0.6%, slightly below expectations of 0.7%. The headline number was aided by gains in gas prices and vehicle sales. Core retail sales (excludes autos, gas stations, building materials) was up only 0.2%, below expectations of 0.4%. The report showed non-store retail (includes online shopping) improving by 1.3% during the month but sales for department stores, electronics stores and restaurants declining.
  • The University of Michigan consumer sentiment index was approximately unchanged at 98.1 in the preliminary January report, following a sizable increase in December. The measure of current conditions increased, while the survey’s expectations of the future decreased a bit.

Fact of the Week

  • According to the American Society of Civil Engineers, the United States will need to spend $3.32 trillion over the next decade to fix our nation’s infrastructure, including $2.04 trillion on roads and bridges.

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.

 

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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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

 

Russia-Election, Turkey: Wealth Economic Update Dec. 30, 2016

U.S. and World News

  • In response to its alleged hacking and interference in the 2016 presidential election, the Obama administration announced new sanctions against Russia this week, including expelling 35 Russian diplomats and closing two Russian compounds in the U.S. The White House stated, “Russia’s cyber activities were intended to influence the election, erode faith in U.S. democratic institutions, sow doubt about the integrity of our electoral process, and undermine confidence in the institutions of the U.S. government.” Russian President Vladimir Putin has announced that Moscow will not retaliate in-kind and will refrain from expelling U.S. diplomats from the country, a decision that was praised by President-Elect Donald Trump in a Friday afternoon tweet.
    Embed from Getty Images
  • Expanding on the truce that was established in Aleppo earlier this month, Russia and Turkey have brokered a nationwide ceasefire in Syria. The agreement would come into force in all regions where fighting between pro-government forces and opposition groups is taking place. The accord is already off to a shaky start as just after the ceasefire was set to take effect, it was reported that clashes between insurgents and government forces took place in several locations.

Markets

  • This week the S&P 500 fell by 1.07% and closed at 2,239. The Dow Jones Industrial Average decreased by 0.46% and closed the year at 19,763 and was unable to reach the 20,000 milestone in 2016. For the year, the S&P rose 11.77% and the Dow climbed 16.16%.
  • Interest rates continued to retreat from their recent highs this week. The 5 year and 10 year U.S. Treasury Notes now yield 1.93% and 2.45%, respectively.
  • The spot price of WTI Crude Oil rose by 1.49% this week and closed 2016 at $53.83 per barrel. WTI Crude was up 34.40% in 2016.
  • The spot price of Gold increased by 1.59% this week, ending the year at $1,151.35 per ounce. In 2016, gold prices rose 8.50%.

Economic Data

  • Weekly initial jobless claims came in at 265,000, a decrease from last week’s reading of 275,000. The Labor Department noted not major distortions to the data this week. The four week moving average for jobless claims now stands at 263,000.
  • The Case-Shiller home price index rose by 0.6% in October, beating expectations of 0.5%. Prices rose in all 20 cities measured by the index and have now risen 5.1% over the last 12 months.
  • Pending home sales fell 2.5% in November to a 10-month low. Pending sales fell in the West (-6.7%), Midwest (-2.5%) and South (-1.2%) but rose in the Northeast (+0.6%). The weak report may be an indication that higher mortgage rates are beginning to affect demand.

Fact of the Week

  • The number of electronic devices that are connected to the internet (ie. laptops, phones, care, appliances etc.) surpassed the world’s population in 2010. By 2020, the number of connected devices will reach 50 billion, or almost 7 times the world’s population of 7.3 billion. (Source: Federal Trade Commission)

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.

 

Presidential Transition: Wealth Economic Update Nov. 21, 2016

U.S. and World News

  • washington_dc-486225108_360President-elect Donald Trump has offered retired Lt. Gen. Michael Flynn the National Security Advisor role. Lt. Gen. Michael Flynn is the former head of the Defense Intelligence Agency and was Trump’s top national security advisor during his campaign. Donald Trump also agreed to cooperate with Vladimir Putin to “tackle international terrorism” after the two discussed the matters by telephone on Monday. An unexpected meeting between Mitt Romney and Donald Trump will take place this weekend regarding the Secretary of State position. SEC Chairman Mary Jo White plans to step down at the end of President Obama’s term and a Republican-appointed leader will assume the role which is expected to result in less regulation on Wall Street.
  • Fed Chair Janet Yellen hinted that the FOMC is on course to raise rates in December and that uncertainty related to the election would not influence the decision. Janet Yellen stated that a rate increase “could well become appropriate relatively soon” and that recent economic data has shown that the economy is “making very good progress”.

Markets

  • This week the S&P 500 increased 0.89% and closed at 2,182. The Dow Jones rose 0.26% and closed at 18,868. So far in 2016, the S&P is up 8.74% and the Dow is up 9.10%.
  • Interest rates increased significantly higher once again this week as investors foresee higher inflation in the future as a result of a Trump presidency. The Dollar index hit 100 for the first time in almost a year after it rose by more than 1% this week. The 5 year and 10 year U.S. Treasury Notes now yield 1.79% and 2.35%, respectively.
  • The spot price of WTI Crude Oil increased by 4.98% this week to close at $45.57 per barrel. WTI Crude is up 3.97% in 2016.
  • The spot price of Gold fell 1.55% this week, closing at $1,208.64 per ounce. Year to date, gold prices are up 13.90%. 

Economic Data

  • Initial jobless claims came in at 235,000, a decrease from last week’s reading of 254,000 and the lowest level since the early 1970’s. The largest declines were in California, Missouri, and Illinois. The four week moving average for claims moved down to 253,000.
  • Housing starts rose 25.5% in October, which was the largest increase since July of 1982 and significantly higher than expectations of a 10.4% increase. The multifamily home starts increased by 68.8% and single family starts increased by 10.7%.
  • Retail sales increased by 0.8% in October which was above consensus expectations of a 0.5% gain. Core retail sales (excluding autos, gas, and building materials) was also up 0.8% versus consensus expectations of a 0.4% increase.
  • The consumer price index (CPI) gained 0.4% in October and 1.6% from one year ago, which was in line with expectations, and heightened by higher energy prices. The core CPI (excluding food and energy) rose by 0.15% in October versus expectations of 0.2% and increased 2.17% from one year ago. 

Fact of the Week

  • A child born in 2016 that begins kindergarten in the fall of 2021 would attend college between the years of 2034 and 2038. If that child attended an average private 4-year college and if the annual price increases for private colleges experienced over the last 30 years (+5.2% per year) continued into the future, the aggregate 4-year cost of the child’s college education (including tuition, fees, room & board) would total $490,502 or $122,625 per year (source: College Board).

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 2016: Wealth Economic Update Nov. 13, 2016

U.S. and World News

  • 2016election_360Donald Trump has been elected the 45th president of the United States, defeating Democratic nominee Hillary Clinton. Markets initially reacted in an extreme manner to the downside in the premarket session as this result was not expected or priced in. The downturn was short-lived however, as markets turned solidly green the day following the election and continued its upward momentum through the end of the week.
  • In addition to Trump’s victory, the Republican Party was able to secure majorities in both the House and Senate. This will mark the first time that the Republican Party has held the Presidency and both houses of Congress since George W. Bush took office in 2001. Control of both the House and Senate will give the Republican Party greater freedom to implement its policy platform which stands for less regulation of banks and a repeal of Obamacare.
  • Potential scandal has returned to Brazil after evidence surfaced that new president Michel Temer may have accepted bribes from a construction company. This comes shortly after the impeachment of former president Dilma Rousseff for her role in using illegal loans from state banks to hide the fragile state of Brazil’s finances during her re-election bid in 2014. If the court rules that Temer did accept bribes, he could be removed from office.

Markets

  • This week the S&P 500 rallied 3.87% and closed at 2,164. The Dow Jones rose 5.51% to close at an ALL-TIME HIGH of 18,848. So far in 2016, the S&P is up 7.80% and the Dow is up 10.50%.
  • Interest rates surged higher this week following the results of the U.S. Presidential Election. The 5 year and 10 year U.S. Treasury Notes now yield 1.56% and 2.15%, respectively.
  • The spot price of WTI Crude Oil was down 1.95% this week to close at $43.21 per barrel. WTI Crude is up 7.89% in 2016.
  • The spot price of Gold fell 6.07% this week, closing at $1,225.90 per ounce. Year to date, gold prices are up 15.53%.

Economic Data

  • Initial jobless claims came in at 254,000, a decrease from last week’s reading of 265,000. The Labor Department noted no distortions to the data this week. The four week moving average for claims moved up to 260,000.
  • The University of Michigan consumer sentiment index rose to 91.6 in the November estimate, better than consensus expectations. Both consumers’ future expectations and their assessment of current economic conditions rose during the period. All of the data collected was prior to the U.S. Presidential Election.

Fact of the Week

  • The S&P 500 has now correctly predicted 20 of the past 23 presidential election winners going back to 1928 and every election since 1984. This is based on the three month returns for stocks leading up to the election. If the stock market index is higher in the three month period before the election, it’s a predictor that the incumbent party (in this case Democratic) wins the Presidency and vice versa. The S&P 500 fell -1.9% in the three months leading up to Tuesday’s election, thus continuing the trend as the incumbent party was defeated. (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
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.