Greek reforms: Wealth Economic Update Oct 31, 2016

U.S. and World News

  • greece_52645812_360Eurozone officials have approved a €2.8 billion tranche of financial aid for Greece after the debt-laden country delivered the needed economic reforms to unlock the latest round of cash. The reforms included progress in pension restructuring, bank governance and revenue collection. So far, Greece has received €31.7 billion of its €86 bailout granted in July 2015, its third bailout since 2010.
  • The People’s Bank of China is making changes to its Macro Prudential Assessment risk program to broaden its regulatory oversight to include wealth management products sold by banks and not counted on their balance sheets. The move marks another step in the PBOC’s efforts to control rising leverage in China’s financial system and highlights the worries that many have that unsustainable debt levels could derail an already slowing economy.

Markets

  • This week the S&P 500 dropped 0.67% and closed at 2,126. The Dow Jones rose 0.09% and closed at 18,161. So far in 2016, the S&P is up 5.81% and the Dow is up 6.37%.
  • Interest rates climbed higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.33% and 1.85%, respectively.
  • The spot price of WTI Crude Oil was down 4.35% this week to close at $48.64 per barrel. WTI Crude is up 21.45% in 2016.
  • The spot price of Gold rose 0.71% this week, closing at $1,275.47 per ounce. Year to date, gold prices are up 20.20%.

 Economic Data

  • Initial jobless claims came in at 258,000, a decrease from last week’s reading of 260,000. The Labor Department noted that claims may have been distorted by a bounce back from the effects of Hurricane Matthew which led to closures of filing offices in affected regions in previous weeks. The four week moving average for claims moved up to 253,000.
  • The Case-Shiller home price index showed an increase of 0.2% for August, more than consensus expectations of 0.1%. Of the 20 cities included in the index, 15 showed higher prices in the month. Over the last 12 months, home prices have risen 5.1% as measured by the index.
  • Real Gross Domestic Product rose 2.9% (annualized) during the 3rd quarter, beating expectations of 2.6% growth.
  • The Employment Cost Index (ECI, measure of wage growth) increased by 0.6% in the 3rd quarter, in line with expectations. On a year over year basis, total compensation has risen by 2.2%

Fact of the Week

  • The U.S. economy has been growing for the last 87 months (ie. no recession), an expansion exceeded in length only 3 times since 1900. (Source: National Bureau of Economic 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.

 

Wealth Management Economic Update January 25, 2016

U.S. and World News

  • switzerland_000008031742_320At the World Economic Forum in Davos, Switzerland this week, European Central Bank President Mario Draghi hinted at more stimulus for the Eurozone which has struggled to produce growth and inflation close to their 2% target. This action helped to stabilize global markets that had been in freefall early in the week. Draghi stated, “We have plenty of instruments and especially we have the determination and willingness and capacity of the Governing Council to act and deploy these instruments.”
  • The ECB wasn’t the only central bank suggesting additional easing. China’s Vice President Li Yuanchao signaled that Beijing would keep intervening in its stock market in an attempt to stabilize prices. Additionally, there is wide speculation that the Bank of Japan will opt for extra stimulus at its policy meeting next week.
  • This past summer’s landmark nuclear deal between Iran and six world powers came into effect this week. The result was an end of years of sanctions and the unfreezing of $100 billion of Iranian assets. Secretary of State John Kerry said in Vienna, “Today marks the first day of a safer world. We are really reminded once again of diplomacy’s power to tackle significant challenges.”

Markets

  • Markets rebounded midway through the holiday shortened week. The S&P 500 gained 1.46% and closed at 1,907. Likewise, the Dow Jones rose 0.69% and closed at 16,093. So far in 2016, the S&P is down 6.61% and the Dow is down 7.53%.
  • Interest rates ended the week relatively unchanged from where they began; however, there was plenty of volatility in between. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.48% and 2.05%, respectively.
  • The spot price of WTI Crude Oil began to rally midweek, much like the stock markets, gaining 9.62% to close at $32.25 per barrel. WTI Crude has fallen 12.93% in 2016.
  • The spot price of Gold advanced 0.83% this week, closing at $1097.95 per ounce. Year to date, gold prices are up 3.47%.

Economic Data

  • Initial jobless claims came in at 293,000 which was an increase from last week’s reading of 284,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 285,000.
  • The Consumer Price Index (measure of inflation) declined 0.1% in December, reflecting another 2.4% decline in energy prices. Core CPI (excludes food and energy) increased by 0.1%, below expectations of 0.2%. Over the last 12 months, core CPI has risen 2.1%.
  • Housing starts unexpectedly declined by 2.5% in December, much lower than expectations of a 2.3% gain following an unseasonably warm December. Multi-family starts declined by 1.0% and single-family starts were also soft, falling 3.3%.
  • Existing home sales increased 14.7% in December, beating expectations of 9.2%. The rise follows a 10.5% decline in November. Single family unit sales increased 16.1%, while multi-family unit sales rose 4.9%.

Fact of the Week

  • The U.S. economy has been expanding since July 2009 and the expansion reached 78 months as of the end of 2015. This duration of expansion has been exceeded by just 4 other U.S. expansions since 1854 or 162 years ago. (Source: National Bureau of Economic 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
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 Economic Update December 7, 2015

U.S. and World News

  • European Central Bank President Mario Draghi announced a new stimulus plan this week that included extending the central bank’s €60 billion per month bond buying program to at least March 2017. In addition, the ECB cut its deposit rate further into negative territory, dropping it 0.1% to -0.3%. However, the measures appear to have disappointed the markets as European indices were down significantly following the announcement. ECB action thus far has failed to spur significant economic growth and inflation in the Eurozone.
  • The International Monetary Fund has added the Chinese yuan to its Special Drawing Rights Basket this week in a much anticipated announcement. The addition will be official in October 2016 and will increase China’s economic standing in global finance as it makes the yuan more freely accessible and tradable.
  • truck320The House and Senate have reached an agreement on a five year highway bill that will add $305 billion to infrastructure spending that is sorely needed. The bill also reauthorizes the Export-Import Bank which had its charter expired in June after some Republicans targeted it as a waste of government funds. The bill has now moved to President Obama’s desk where it is expected  to be approved.
  • At its semi-annual meeting in Vienna this week, members of OPEC have decided to maintain the cartel’s production ceiling of 30 million barrels per day even as oil markets remain in a supply glut. It was just over a year ago at the meeting when OPEC made the same call to maintain supply at current levels, sending crude oil prices spiraling lower. Many believe that OPEC’s stance is an attempt to drive out U.S. shale producers that have much higher costs of production.

Markets

  • Markets rose modestly in volatile end of week trade, falling on the ECB’s stimulus measures that were less than expected and then rising on a moderately strong employment report. The S&P 500 gained 0.12% and closed at 2,092. The Dow Jones followed suit by rising 0.36% and closing at 17,848. Year to date, the S&P is up 3.56% and the Dow is up 2.50%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.71% and 2.27%, respectively.
  • The spot price of WTI Crude Oil fell by 3.76% this week, closing at $40.14 per barrel. Year to date, Oil prices are down 33.07%.
  • The spot price of Gold increased by 2.74% this week, closing at $1,086.44 per ounce. Year to date, Gold prices are down 8.24%.

Economic Data

  • Initial jobless claims came in at 269,000 which was an increase from last week’s reading of 260,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 269,000.
  • The November nonfarm payroll report showed the addition of 211,000 during the month, beating expectations of 200,000. Employment growth over the prior two months was revised up by a total of 35,000, bringing the three month average to 220,000 jobs created.
    • The unemployment rate remained unchanged at 5.0%, in line with expectations. The labor force participation rate rose by 0.1% to 62.5%
    • Average hourly earnings increased by 0.2% in November, bring the 12 month increase in wages to 2.3%.

Fact of the Week

  • According to the Government Accountability Office, an estimated 9,300 Americans will turn 65 years old each day in 2016, representing the 6th of 19 years that “Baby Boomers” will turn 65. It’s estimated that by 2029, there will be 11,400 Americans turning 65 each day.

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 Economic Update November 16, 2015

U.S. and World News

  • The President of the European Central Bank hinted this week at the possible need for the Eurozone to expand is QE program. This is based on comments that Mario Draghi made in Brussels in which he said that downside economic risks are clearly visible, which may translate to an increase in the ECB’s monetary policy measures at the next policy meeting in December.
    Embed from Getty Images
  • China has taken another step to boost its yuan currency’s global usage by announcing it will start direct trading with the Swiss franc. The franc marks the 7th major currency outside of the U.S. dollar that can be exchanged directly for the yuan. The announcement comes ahead of an International Monetary Fund meeting this month that will consider the inclusion of the yuan in its Special Drawing Rights Basket, putting it on par with the U.S. dollar, yen, euro and pound sterling in terms of international acceptance.
  • The leaders of the world’s 20 largest economies, known as the G20, are set to meet in Turkey starting on Sunday. Among others, items to be discussed at the global forum include bank regulation, tax cooperation, global growth, the Syrian civil war and the Iranian nuclear deal. G20 countries account for 85% of the world economy, 75% of world trade and 67% of the world’s population.

Markets

  • Equity markets reversed their recent course, heading negative this week. The S&P 500 ended the week down 3.56%, closing at 2,023. Similarly, the Dow Jones decreased 3.64% and closed at 17,245. Year to date, the S&P is up 0.08% and the Dow is down 1.13%.
  • Yields in the Treasury markets moved lower this week after last week’s spike upwards. The 10 year Treasury bond now yields 2.28% while the 5 year Treasury bond now yields 1.67%.
  • The spot price of WTI Crude Oil fell significantly again this week. Prices decreased by 7.97% closing at $40.76 per barrel. In 2015, WTI Oil prices are down 31.44%.
  • The spot price of Gold decreased this week, losing 0.55% and closing at a 52-week low of $1,083.82 per ounce. Year to date, gold prices are down 8.49%.

Economic Data

  • Initial jobless claims came in at 276,000 which was unchanged from the prior week’s figure. 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 268,000.
  • Retail sales in October disappointed against consensus expectations, rising just 0.1%. Core retail sales (excluding auto sales) showed a gain of 0.2% in October, also missing estimates.
  • The University of Michigan’s measure of consumer sentiment was stronger than expected in the preliminary November reading at 93.1, an increase from the 90.0 level seen in October. Both consumers’ assessment of current conditions and household expectations of the future increased during the month.

Fact of the Week

  • A large portion of the Friday the 13th superstition can be traced to the 1907 novel by Thomas Lawson, entitled Friday, the Thirteenth. In it, the antagonist, an evil stock broker takes advantage of the public’s fear of the number 13 to crash the market and cause Wall Street panic on Friday the 13th. Despite the negative connotation, the Dow Jones has been positive 66% of the time on these dates. Although it is a different story when the occurrence is in the month of November; the market has fallen 70% of those November occurrences (including today). (Source: Art Cashin)

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 Economic Update October 27, 2015

U.S. and World News

  • The People’s Bank of China surprised global markets on Friday by cutting its benchmark lending and deposit rates by 0.25%. The measure was taken to try to stimulate borrowing and spending without squeezing banks’ ability to profit from the spread of the two rates. The PBOC also cut banks’ reserve-requirement ratios by 0.5% to further pump liquidity into the economy. The move by the central bank comes after China reported growth of 6.9% in the 3rd quarter, which while beating estimates of 6.8%, was its slowest pace of growth since the global financial crisis.
  • Gaining over 40% of the popular vote, Justin Trudeau of the Liberal Party has been elected the Prime Minister of Canada, ousting Conservative PM Stephen Harper after nine years in power. Trudeau has pledged to run a large budget deficit over the next three years to invest in infrastructure and try to stimulate Canada’s economy that has suffered from the steep decline of oil prices.
  • At a policy meeting in Malta this week, European Central Bank President Mario Draghi signaled his willingness to increase stimulus to try to spur economic growth in the Eurozone but stopped short of announcing any new policy measures. Draghi said, “We are ready to act if needed…and we are open to the full menu of monetary policy.” Global markets reacted positively to the statements which also caused a significant drop in the euro.Embed from Getty Images

Markets

  • Equity markets continued to advance upwards this week. The S&P 500 ended the week up 2.09%, closing at 2,075. Similarly, the Dow Jones increased 2.56% and closed at 17,647. Year to date, the S&P is up 2.45% and the Dow is up 0.93%.
  • Yields in the Treasury markets moved a bit higher this week. The 10 year Treasury bond now yields 2.09% while the 5 year Treasury bond now yields 1.42%.
  • The spot price of WTI Crude Oil declined this week. Prices fell by 6.33% closing at $44.70 per barrel. In 2015, WTI Oil prices are down 24.81%.
  • The spot price of Gold decreased this week, losing 1.09% and closing at $1,164.45 per ounce. Year to date, gold prices are down 1.68%.

Economic Data

  • Initial jobless claims came in at 259,000 which was an increase from the prior week’s figure of 255,000. 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 263,000, which is a new low for this economic cycle.
  • Housing starts increased by 6.5% in September, solidly beating consensus expectations. The gains were largely driven by an 18.3% increase in starts for the more volatile multi-family structures, while single-family starts increased only 0.3%.
  • Existing home sales rose by 4.7% in September, beating consensus expectations. The increase followed a dip in August and was entirely due to purchases of single-family homes, which rose 5.3%. The median price of existing home sales was up 6.6% from a year earlier.

Fact of the Week

  • According to the Bureau of Labor Statistics, the average American worker will hold 9.9 jobs between the ages of 25 and 48, for an average of 2.4 years per job.

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.

*Image of Japanese Prime Minister Shinzo Abe. Author: 多摩に暇人. License: GNU Free Documentation License, also filed under Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license. (See, https://commons.wikimedia.org/wiki/File:Shinzo_Abe.jpg).

SPECIAL: Wealth Management Market Volatility Update August 24, 2015

world_finance_000023933922_320Equity markets worldwide have seen an extreme bout of volatility over the last week and several indices have entered into correction territory. The catalyst for the downside move appears to be two-fold: China’s recent decision to devalue its currency and anticipation for an interest rate hike by the Federal Reserve. China’s call to allow the value of its currency float more freely was a pretty marked shift from its previous position of being pegged to the value of the U.S. dollar. The result was a steep devaluation of the Chinese yuan in relation to other currencies. Many market participants view this as an indication of a rapid slowdown in growth in China. Back home, the minutes from the most recent Federal Reserve meeting indicated that while most voting members need to see more improvement in inflation data to support a rate hike, those conditions are becoming closer and closer to reality. Odds of a September rate hike had been falling in recent weeks with probabilities shifting toward December, however that came into question given the minutes from the meeting.

Those two reasons aside, it is our opinion that the longer term strategic outlook for the markets is largely unchanged despite recent market volatility. Moderate global economic growth and still accommodative monetary policies appear to remain intact, however volatility and downside moves may continue until more clarity is achieved on both fronts. Domestically, the economy appears to be on solid footing as recent employment and housing data remain strong. Additionally, consumers should continue to benefit from lower energy prices, providing a boost to retail activity.

If you have any questions or concerns, please do not hesitate to contact an Investment Officer or your Relationship Manager.

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.

SPECIAL: Wealth Management Greece Update July 6, 2015

ballot_000015289231_320Greek citizens voted ‘No’ in resounding fashion in yesterday’s referendum, rejecting the set of austerity reforms that were put forward by Greece’s creditors in exchange for a bailout. By a vote of 61% ‘No’ to 39% ‘Yes’, the bailout terms were rejected and where the situation goes from here is uncertain. Greek Finance Minister Yanis Varoufakis announced his resignation this morning amid political pressure, so negotiations will now fall on new Finance Minister Euclid Tsakalotos. Emergency meetings with high ranking European officials will be held over the next few days in order to determine if any common ground can be found and a deal can reached. In the meantime, Greece announced that its banks will remain closed through Wednesday and will likely remain closed unless the European Central Bank decides to extend emergency liquidity assistance to the country. While the risks of a Greek exit from the Euro currency have increased with the results of the referendum vote (Standard & Poor’s estimates odds of over 50% for a ‘Grexit’), we continue to believe that the threat of contagion into other parts of the world is relatively contained.

If you have any additional questions or concerns, please do not hesitate to reach out to an Investment Officer or your Relationship Manager.

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.

SPECIAL: Wealth Management Greece Update June 30, 2015

Tsipras_220Over the weekend Greek Prime Minister Alexis Tsipras announced he will hold a referendum on July 5th on whether to accept the terms of a bailout offered by the country’s creditors. While Prime Minister Tsipras is recommending a ‘No’ vote, initial polling indicates that a majority of citizens favoring voting ‘Yes’. Standard & Poor’s predicts a 50% chance of Greece exiting the Eurozone given the political climate in the country.

Greece also announced strict capital controls that include a bank holiday through the July 5th vote in order to stave off a bank run which had begun over the weekend with massive lines of people at banks and ATMs trying to withdraw cash. As a result of the combined news, world markets turned sharply negative yesterday on heightened expectations of a Greek default on their debt obligations and the growing possibility that the country will be forced to leave the Euro currency.

Adding to the uncertainty Greece has a €1.6 billion ($1.7 billion) debt payment to the International Monetary Fund (IMF) due June 30 and Eurozone finance ministers say they will not allow an extension of that deadline through the referendum vote next week.

While news of a Greek default combined with the imposed capital controls would certainly be painful for those in the country, we currently see little evidence that contagion would spread to the rest of the Eurozone. Most of Greece’s debt is owned by the IMF and the European Central Bank (ECB) and not by investors and national governments, so a default is believed to be contained. Lastly, given the size of Greece’s economy compared to the Eurozone as a whole, a Greek exit, or ‘Grexit’, from the Euro would not pose a large threat to accelerating economic growth we are beginning to see in much of Europe.

If you have any additional questions or concerns, please do not hesitate to reach out to an Investment Officer or your Relationship Manager.

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

Wealth Management Economic Update February 24, 2015

U.S. and World News

  • After a full week of contentious negotiations, a tentative agreement has been reached between Greece and Eurozone finance ministers, which would provide for a four month extension of Greece’s bailout program. This would allow Greece to access €10 billion of funding the country desperately needs. New Greek Prime Minister Alex Tsipras had been seeking a six month extension and a roll back of the austerity measures the original bailout had been contingent upon, instead winding up with only four months and no change to austerity. Greece must provide an action plan on Monday outlining steps they will be taking to improve its fiscal situation in order for the deal to be complete.  Additionally, Greece will be subject to reviews by the IMF and the ECB to ensure they are following the terms of the agreement, conditions which the country had been fighting against. Temporarily preventing Greece from exiting the Eurozone, this ‘kick the can down the road’ agreement will likely lead to the situation being revisited in four months.
  • russia_000057310942LargeThe U.S. has accused Russia of violating the ceasefire in Ukraine. This is amid reports that Ukrainian troops are pulling out of the key railroad hub town of Debaltseve after separatist forces fought their way into the key railway junction on Tuesday. Vice President Joe Biden strongly condemned the violence and warned the “costs to Russia will rise if it continues to violate the Minsk agreements.”
  • Minutes from the January Fed meeting showed the committee to be a bit more dovish than consensus believed. There was no clear indication that most participants thought that ‘patience’ should be removed from the upcoming Fed statement as it pertains to when an initial rate hike will come. Many still believe the Fed is on track for a June or September initial hiking of the Fed Funds rate, as long as employment and inflation data continue to improve.

Markets

  • Equity markets continued to rise this week following the four month Greek extension as both the S&P 500 and Dow Jones closed the week at new All-Time Highs. The S&P 500 gained 0.67%, closing at 2,110, while the Dow Jones gained 0.69% and closed at 18,140. Year to date, the S&P and Dow Jones are up 2.80% and 2.17%.
  • Yields in the Treasury markets continued to creep upwards this week. The 10 year Treasury bond now yields 2.12% and the 5 year Treasury bond yields 1.60%.
  • The spot price of WTI Crude Oil fell this week, losing 4.62% and closing at $50.34 per barrel. In 2015, WTI Oil prices have fallen 5.50%.
  • The spot price of Gold fell by 2.23% this week and closed at $1,229.66 per ounce. Year to date, gold prices are up 1.51%.

Economic Data

  • Initial jobless claims decreased from last week, coming in at 283,000 vs. consensus estimates of 290,000. The Labor Department noted that some states had to have their claims estimated due to severe weather. The four week moving average for claims now stands at 283,250.

Fact of the Week

  • Since the beginning of 1986 through close today, the Dow Jones Industrial Average has risen from 1,547 to 18,140, a price increase of 1,072%. Breaking down when these gains occurred results in a pretty interesting finding. The combined gains on the index on Mondays, Tuesdays and Wednesdays comes to 988.46%, while the combined gain of Thursdays and Fridays is just 8.95%. The Dow has been doing its work early in the week and been taking four day weekends for 30 years. (Source: Eddy Elfenbein, Crossing Wall Street)

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® – (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

Wealth Management Economic Update February 2, 2015

U.S. and World News

  • The left-wing, anti-austerity Syriza party won the general election in Greece on Sunday, raising concerns over the country’s future status as member of the European Union. Party leader Alexis Tsipras has already moved to form a coalition that will work to reverse years of austerity measures imposed by the Troika. The Syriza government also came out against increasing sanctions on Russia for escalating violence in Ukraine. This could be very problematic for EU foreign policy, as further sanctions must be unanimously voted upon by all EU nations.
  • Just about a week after President Obama floated the idea of ending the tax advantage of 529 College Savings plans, the administration has decided to scrap the proposal. Amid outrage from a broad range of Americans, Obama has decided that the plan is a “distraction” and will seek to raise revenue in other ways.
  • ruble_320Ratings agency Standard and Poor’s downgraded Russia’s credit rating to junk, due to weak economic growth prospects, low oil prices and sanctions from the West. The move sent the Russian currency, the ruble, plunging to new lows.

Markets

  • Equity markets tumbled this week with the S&P 500 falling 2.75% and closing at 1,995. Likewise, the Dow Jones lost 2.87% and closed at 17,165. Year to date, the S&P and Dow Jones are down 3.00% and 3.58% respectively.
  • Yields in the Treasury markets remained at very low levels this week. The 10 year Treasury bond now yields 1.65% and the 5 year Treasury bond yields 1.17%.
  • The spot price of WTI Crude Oil reversed course after a sharp bounce on Friday, rising 4.89% and closing at $47.82 per barrel. In 2015, WTI Oil prices have fallen 10.95%.
  • The spot price of Gold fell by 0.79% this week and closed at $1,283.92 per ounce. Year to date, gold prices are up 8.41%.

Economic Data

  • Initial jobless claims declined sharply from last week, coming in at 265,000 vs. consensus estimates of 300,000. This was a new low mark for the recovery. While the Labor Department noted no special factors affecting the report, the holiday shortened week (MLK Day) may have skewed the data. The four week moving average for claims now stands at 298,500.
  • The Case-Shiller home price index rose 0.7% in November vs. expectations of 0.6%. This represents the strongest monthly gain since March. Over the last 12 months, home prices as measured by the index have risen 4.3%.
  • The first estimate of GDP showed 2.6% growth vs. expectations of 3%. Growth was aided by a strong 4.3% increase in consumer spending but was suppressed by increasing import activity. Full year 2014 GDP growth now stands at 2.5%, which is a solid gain especially given the -2.1% number posted in the 1st quarter of 2014.

Fact of the Week

  • Apple reported earnings this week, showing that the company has $178 billion in cash reserves on its balance sheet. The size of this cash component alone would rank it 5th in size in the entire S&P 500. This amount of cash would be enough to give each American $556 or purchase every pro sports franchise in the NFL, MLB, NBA and NHL.

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® – (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

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