EU tariffs, Iran, Greek fire: Wealth Economic Update July 30, 2018

U.S. and World News

  • soybeans-802349002_370The United States and the European Union have agreed to work towards “zero tariffs, zero non-tariff barriers and zero subsidies for the non-auto industrial goods.” Additionally, the European Union will import more soybeans and liquefied natural gas from the United States. Earlier in June, a 25% tariff on steel and a 10% tariff on aluminum imported from the European Union was put in place by the United States, and soon after, the European Union imposed retaliatory tariffs on the United States. The planned 20% tariff on cars imported from Europe was put on hold this week as the two sides work towards zero tariffs.
  • Tensions with Iran continue to rise as Iran struggles with sanctions imposed by the United States. The United States will sanction any country that purchases Persian crude oil. Iran has threatened to halt all oil shipments through the Strait of Hormuz if the United States continues to pressure its oil exports. The Strait of Hormuz is an area where 30% of all seaborne-traded crude oil is carried and blocking it could send oil prices up near $90 per barrel.
  • In a city just northeast of Athens, Greece, a fire broke out that has killed at least 82 people and is said to be the worst in decades for the country. Public Order Minister Nikos Toskas stated “We have serious indications and significant findings of criminal activity concerning arson.” Satellite image analysis indicated that the fire broke out in multiple places within a short time frame. The fire tore through seaside resorts and vacation residences in an area popular for tourism.


Markets

  • Stocks rose higher this week. The S&P 500 increased by 0.61% and closed at 2,819. The Dow Jones rose 1.57% and closed at 25,451. Year to date, the S&P is up 6.51% and the Dow Jones is up 4.20%.
  • Yields also spiked this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.84% and 2.96%, respectively.
  • The spot price of WTI Crude Oil rose this week amidst higher tensions in the Mideast, gaining 1.07% and closing at $68.99 per barrel. Year to date, Oil prices are up 14.77%.
  • The spot price of Gold decreased 0.51% this week, closing at $1,223.24 per ounce. Year to date, Gold prices are down 6.11%.

Economic Data

  • Initial jobless claims rose by 9,000 to 217,000 this week. The four-week moving average of claims moved down by 3,000 to 218,000. Jobless claims rose by 4,000 in Kentucky, and 3,000 in Michigan.
  • Durable goods orders increased by 1.0% in June versus consensus expectations of a 3.0% increase, reflecting a decline in defense orders.
    • Durable goods ex-transports rose 0.4% in June versus expectations of a 0.5% increase.
  • Wholesale inventories were flat in June versus expectations of a 0.3% increase.
  • Existing home sales fell 0.6% month-over-month in June to a seasonally adjusted rate of 5.38 million units. Expectations were for a 0.2% increase.
  • Sales of new single-family homes fell 5.3% in June to a seasonally adjusted rate of 631k units, below expectations of 668k units. The decline was led by the Midwest region.
  • Real GDP rose by 4.1% in the second quarter, the fastest pace since 2014. Consensus expectations were for 4.2%. The strong quarter was led by stronger-than-expected growth in consumption and business investment.
    • Q1 GDP was revised up by 0.2% to 2.2%
  • The University of Michigan’s index of consumer sentiment increased by 0.8 points to 97.9 in July against expectations of a flat reading.


Fact of the Week

  • In a recently conducted British survey, 42% of respondents admit that they are not sure whether you can put an electric car through a car wash. (Source: Go Ultra Low)

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
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com

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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

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Wealth Management Economic Update December 28, 2015

U.S. and World News

  • Greek Prime Minister Alexis Tsipras is pushing for the International Monetary Fund to remove itself from the country’s €86 billion bailout. This would leave the Eurozone to take full responsibility for supervising the economic reforms in Greece that the country’s third bailout depends on. The request by Greece risks alienating the IMF, which has in the past been a strong proponent of debt relief for the beleaguered nation. The IMF will likely decide whether to stay involved in the bailout shortly after the start of the new year.
    Embed from Getty Images
  • The Obama administration has imposed fresh sanctions against Russian business leaders and other entities with close ties to Vladimir Putin. Targets of the new sanctions included state banks and a defense company. The penalties are an effort to force Russia to stabilize Ukraine, though they come at a time of perceived cooperation between the U.S. and Russia in the effort to end the Syrian civil war and fighting ISIS.
  • OPEC published its highly anticipated annual World Oil Outlook this week with observers hoping to gain insight into the cartel’s future plans. The group anticipates the price of crude oil to rise to $70/barrel by 2020 and $95/barrel by 2040. The forecast also called for demand to reach 30.7 million barrels per day in 2020, a 6% increase in the forecast from a year ago.

Markets

  • Markets rallied in a holiday shortened week. The S&P 500 gained 2.79% and closed at 2,061. Likewise, the Dow Jones rose 2.47% closing at 17,552. Year to date, the S&P is up 2.20% and the Dow is up 0.95%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.72% and 2.25%, respectively.
  • The spot price of WTI Crude Oil gained 5.49% this week, closing at $38.04 per barrel. Year to date, Oil prices are down 37.10%.
  • The spot price of Gold increased by 0.98% this week, closing at $1076.72 per ounce. Year to date, Gold prices are down 9.09%.

Economic Data

  • Initial jobless claims came in at 267,000 which was a decrease from last week’s reading of 271,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 273,000.
  • The core PCE inflation index (the Fed’s preferred inflation measure, excludes food and energy) rose by 0.1% in November. Over the last 12 months, Core PCE has risen by 1.3%, moving no closer to the Fed’s 2% inflation target.
  • New home sales increased by a higher than expected 4.3% in November, though the report showed mixed results. New home sales increased in the South and West regions but declined in the Northeast and Midwest regions.
  • Existing home sales fell by a sharp 10.5% in November, more than expected. The headline number reflected weakness across all regions, with the Midwest (-15.4%) and West (-13.9%) experiencing the largest declines.

Fact of the Week

  • 45% of all global financial business is transacted in U.S. dollars, including all oil and natural gas trading worldwide. (Source: Society for Worldwide Interbank Financial Telecommunication)

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

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Wealth Management Economic Update November 9, 2015

U.S. and World News

  • taiwan_000050798696_320Marking the first talks between the neighbor nations in almost 70 years, the presidents of China (Xi Jinping) and Taiwan (Ma Ying-jeou) will meet in Singapore this weekend. This historic meeting between the two nations is viewed as a breakthrough in the relationship that has been tense since the end of the Chinese civil war in 1949. The two leaders are set to discuss topics such as the Taiwan presidential elections and potential unification.
  • China announced it will lift a four month ban on new stock listings after it has improved relevant policies aimed on making their equity markets operate more efficiently. The ban on IPOs had been imposed in early July following a dramatic decline in the country’s stock market.
  • Greece’s parliament has approved a bill containing the reforms that had been prescribed by the country’s international creditors. This comes ahead of a meeting of Eurozone finance ministers at which they will decide if Greece qualifies for new bailout funds. This was a crucial step for the country towards receiving those funds; however there are still issues that could hold up unlocking them.

Markets

  • Equity markets continued to advance upwards this week. The S&P 500 ended the week up 1.01%, closing at 2,099. Similarly, the Dow Jones increased 1.47% and closed at 17,910. Year to date, the S&P is up 3.74% and the Dow has gained 2.53%.
  • Yields in the Treasury markets moved substantially higher following the much better than expected jobs report that seems to have increased the probability of a December rate increase by the Federal Reserve. The 10 year Treasury bond now yields 2.33% while the 5 year Treasury bond now yields 1.74%.
  • The spot price of WTI Crude Oil fell this week. Prices decreased by 4.44% closing at $44.52 per barrel. In 2015, WTI Oil prices are down 25.11%.
  • The spot price of Gold decreased this week, losing 4.58% and closing at $1,089.80 per ounce. Year to date, gold prices are down 7.98%.

Economic Data

  • Initial jobless claims came in at 276,000 which was an increase from the prior week’s figure of 260,000. 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.
  • The October employment report was better than expected, showing nonfarm payrolls growing by 271,000 which was significantly better than the consensus expectation of 185,000. August and September’s figures were revised up by a total of 12,000 jobs, bringing the three month average of job gains to 187,000.
    • The headline unemployment rate fell from 5.1% to 5.0%, in-line with forecasts. The labor force participation rate was unchanged in October at 62.4%.
    • Average hourly earnings surprised to the upside, showing an increase of 0.4% in October, bringing the year over year growth to 2.5%.

Fact of the Week

  • According to the Boston College Center on Wealth and Philanthropy, heirs of decedents are projected to inherit $36 trillion (after the payment of estate taxes) through the year 2061.

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

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Wealth Management Economic Update September 28, 2015

U.S. and World News

      • Speaker of the House John Boehner announced that he will resign from Congress at the end of October. Boehner faces the choice between avoiding a government shutdown by partnering with Democrats to pass a budget, which reportedly would lead to disgruntled Republicans bringing up a vote for his removal, or repeat 2013 by allowing a shutdown to take place with the hope of a quick resolution. With the first option apparently being the preferred route, Boehner chose to preemptively announce his resignation instead of risking a divisive vote on his fate. It’s widely believed that Boehner’s resignation significantly reduces the odds of a shutdown next week and that House Majority Leader Kevin McCarthy will become the new Speaker of the House.
        Embed from Getty Images
      • Chinese President Xi Jinping made a historic trip to the United States this week, meeting with President Obama and other senior officials to discuss a number of matters affecting the two nations. Chief among them, it was announced that both leaders have reached a ‘common understanding’ on steps to end cyber spying and attacks between the two countries. Jinping and Obama also unveiled a deal to build on an emissions agreement struck last year which outlined new steps China will take to slash their greenhouse gas emissions.
      • Greek voters re-elected Prime Minister Alexis Tsipras and his left-wing Syriza party despite many citizens being enraged about Tsipras breaking an election pledge and ignoring the outcome of a referendum. Tsipras received 35% of the vote, while the New Democracy party’s Vangelis Meimarakis got 28%.

Markets

      • Equity markets were volatile yet again this week, posting losses across most indices. The S&P 500 ended the week down 1.35%, closing at 1931. Similarly, the Dow Jones declined 0.43% and closed at 16,315. Year to date, the S&P is down 4.77% and the Dow is down 6.79%.
      • Yields in the Treasury markets rose modestly this week. The 10 year Treasury bond now yields 2.17% while the 5 year Treasury bond now yields 1.48%.
      • The spot price of WTI Crude Oil increased slightly in another volatile week. Prices rose by 1.00%, closing at $45.47 per barrel. In 2015, WTI Oil prices are down 22.66%.
      • The spot price of Gold increased this week, rising 0.56% and closing at $1,145.65 per ounce. Year to date, gold prices are down 3.27%.

Economic Data

      • Initial jobless claims came in at 267,000 which was a slight increase from the prior week’s figure of 264,000. 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 271,750.
      • New home sales increased by 5.7% month over month in August. This follows a revised up gain of 12.0% in July. New home sales have reached the highest level since February 2008. Three of the report’s four regions showed home sales increasing with the exception being the Midwest.
      • Existing home sales declined 4.8% in August, disappointing against consensus estimates of -1.6%. Sales of both single-family homes (-5.3%) and condos/co-ops (-1.6%) showed declines.

Fact of the Week

      • A survey conducted by Pew Research Center in 2014 found that 85% of Americans believe they are in the ‘middle class’ as opposed to being in the ‘lower class’ or ‘upper class’.

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

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*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).

Wealth Management Economic Update August 24, 2015

U.S. and World News

  • After the Chinese Yuan fell 3.6% last week, Chinese markets continued their decline this week. The Hang Seng officially entered the bear market territory as it has plummeted over 20% from its high in April. The IMF has given a sign that it will be at least another year until the Chinese currency will be added to its basket of reserve currencies. Concerns about China’s economy has rattled markets globally this week and has been blamed for the sharp decline of the S&P 500 which is down over 6% from its high in May.
  • Germany has voted in favor of the bailout package for Greece by a large margin, putting an end to negotiations lasting months. The first disbursement of €13B of funds from the bailout package was received by Greece just in time to make a €3.2B payment due to the ECB. €12B of this amount will be used to pay down debt. Greek Prime Minister Alexis Tsipras announced his resignation shortly after receiving the first disbursement of the €86B bailout deal.
  • oil_drill_320For the first time ever, the U.S. will allow limited sales of crude oil to Mexico. The oil that will be exported is expected to be high-quality shale which will help Mexico produce premium fuel. The U.S. will continue to receive the heavy oil coming from Mexico which is better for U.S refiners than the light oil they receive from Texas and North Dakota. WTI crude declined for the eighth straight week after the U.S revealed a large supply of 2.6M barrels.

Markets

  • Equity markets plunged this week amid global worries. The S&P 500 lost 5.77%, closing at 1,971. Similarly, the Dow Jones fell 5.82% and closed at 16,460. Year to date, the S&P is down 4.27% and the Dow is down 7.65%.
  • Yields in the Treasury markets fell this week. The 10 year Treasury bond now yields 2.05% while the 5 year Treasury bond now yields 1.43%.
  • The spot price of WTI Crude Oil continued its decline, and dropped by 6.73% closing at $40.21 per barrel. In 2015, WTI Oil prices are down 30.81%.
  • The spot price of Gold continued its weekly increase and gained 4.00% closing at $1,159.70 per ounce. Year to date, gold prices are down 2.09%.

Economic Data

  • Initial jobless claims came in at 277,000 which was an increase from the prior week’s figure of 273,000. 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 271,500.
  • Existing home sales rose 2.0% in July vs. consensus of -1.1% to a high of 5.59 million. Single family homes sales are up 2.7% and condo and co-op sales fell -3.1%.
  • Housing starts were up 0.2% month-over-month in July, slightly higher than consensus forecasts.
  • The Consumer Price Index (CPI) increased 0.1% month-over-month in July, slightly lower than expected.

Fact of the Week

  • 64% of Millennials (ages 18-34 in 2015) believe they have a greater chance of winning the lottery than ever receiving a penny from Social Security once they retire. (T. Rowe Price)

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 August 10, 2015

U.S. and World News

  • greece_000044812184_320The Athens Stock Exchange reopened on Monday after being closed for more than a month during the most recent Greek debt crisis. The benchmark index in Greece saw significant losses, falling by as much as 30% in its first day of resumed trading. Volatility has subsided somewhat after Greece and its lenders stated they were optimistic they could broker the final details of a bailout within days. A funding deal worth up to €86 billion must be settled by August 20th so that Greece can pay off €3.5 billion in debt it owes to the European Central Bank.
  • Puerto Rico announced that over the weekend it failed to make a debt payment, placing the U.S. commonwealth into default for the first time in its history. What happens next is unclear. Congress may assist the territory by passing a bankruptcy bill, allowing Puerto Rico to restructure its debts; however that effort has faced opposition. Another option may be for the Treasury Department to guarantee Puerto Rico’s debt when it seeks to borrow from the market again, significantly lowering the country’s future borrowing costs.
  • The Federal Reserve meeting this month produced little insight into when the Committee plans on raising the Federal Funds Rate. Policymakers continued to see an improving economy and labor situation but said that it requires additional improvement in labor market conditions before ‘liftoff’. The Committee also noted concerns about ‘international developments’, most likely referencing the summer’s Greek drama and the volatility in China’s stock markets.

Markets

  • Equity markets dwindled this week. The S&P 500 lost 1.25%, closing at 2,078. Similarly, the Dow Jones fell 1.79% and closed at 17,374. Year to date, the S&P is up 0.91% and the Dow is down 2.52%.
  • Yields in the Treasury markets went in opposite directions this week. The 10 year Treasury bond fell and now yields 2.16%. On the other hand, the 5 year Treasury bond rose and now yields 1.57%.
  • The spot price of WTI Crude Oil plummeted this week, dropping 6.98% and closed at $43.83 per barrel. In 2015, WTI Oil prices are down 23.77%.
  • The spot price of Gold continued its decline, dropping 0.13% and closing at $1,094.35 per ounce. Year to date, gold prices are down 7.60%.

Economic Data

  • Initial jobless claims came in at 270,000 which was an increase from the prior week’s figure of 267,000. 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 268,250.
  • The July jobs report showed a gain of 215,000 nonfarm payrolls, lower than expectations of 225,000. The figures were revised up by 14,000 to prior months.
    • The headline unemployment rate remained unchanged at 5.30%. The labor force participation rate also remained unchanged at 62.60%.
    • Average hourly earnings rose by 0.20% vs. consensus estimates of 0.20%.

Fact of the Week

  • Approximately 21% of 401(k) plan participants who are eligible to borrow from their balances have outstanding loans. Additionally, participants in the U.S. left $24 billion in company matching funds unused because they didn’t save enough to claim the full match. (Source: ThinkAdvisor)

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 August 3, 2015

U.S. and World News

  • SHANGHaiHeightened volatility continued in Chinese equity markets this week as government intervention was unable to prevent the Shanghai Composite from posting its worst month in six years as the index fell 14%. Chinese regulators said they were prepared to lend further support to markets, while the central bank injected cash into the money markets and hinted at further easing. In addition, China’s securities regulators said it has launched a probe into automated trading, restricting accounts suspected of “influencing securities trading prices.”
  • Greece’s financial markets are finally set to reopen on Monday August 3rd after being closed since June 28th. Already dealing with dissention in his own Syriza party, Prime Minister Alexis Tsipras was informed on Friday by the International Monetary Fund that Greece’s high debt levels and current record of implementing reforms disqualify it from a third bailout. The IMF will still take part in the bailout negotiations that are underway, but will not decide whether to agree to a new program for a few months.
  • The Federal Reserve meeting this month produced little insight into when the Committee plans on raising the Federal Funds Rate. Policymakers continued to see an improving economy and labor situation but said that it requires additional improvement in labor market conditions before ‘liftoff’. The Committee also noted concerns about ‘international developments’, most likely referencing the summer’s Greek drama and the volatility in China’s stock markets.

Markets

  • Equity markets rose moderately this week. The S&P 500 gained 1.18%, closing at 2,104. Likewise, the Dow Jones rose 0.69% and closed at 17,689. Year to date, the S&P is up 3.35% and the Dow is up 0.56%.
  • Yields in the Treasury markets dipped this week. The 10 year Treasury bond now yields 2.19% and the 5 year Treasury bond yields 1.54%.
  • The spot price of WTI Crude Oil fell again this week, dropping 2.72% and closed at a 52-week low of $46.83 per barrel. In 2015, WTI Oil prices are down 18.56%.
  • Once again, the spot price of Gold fell, decreasing by 0.30% and closing at $1,095.80 per ounce. Year to date, gold prices are down 7.48%. 

Economic Data

  • Initial jobless claims came in at 267,000 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 275,000.
  • Real Gross Domestic Product increased by 2.3% (quarter over quarter) in the 2nd quarter, boosted by a solid increase of 2.9% in consumer spending. The figure for the 1st quarter GDP was revised upwards from -0.2% to +0.6%.
  • The Case-Shiller home price index declined 0.2% in May, disappointing against consensus estimates of a gain of 0.3%. Half of the 20 cities in the index showed price gains. Over the last 12 months, home prices in the index have risen 4.9%.
  • The Employment Cost Index (measure of wage growth) rose just 0.2% in the 2nd quarter which was below consensus expectations. With the Federal Reserve signaling that more improvement in inflation data is necessary for a September increase in the Fed Funds Rate, many analysts believe that this data point bring down the odds of that occurring, pushing the most likely ‘liftoff’ date to December.

Fact of the Week

  • The United States’ total outstanding debt has increased 91% over the last 7 years, an increase of 9.7% per year. The national debt has risen from $9.49 trillion on June 30, 2008 to $18.15 trillion as of June 30, 2015. (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
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 July 27, 2015

U.S. and World News

  • Greek banks finally reopened this week following the country’s deal with the European Central Bank and International Monetary Fund, although extensive capital controls still remain in place. Prime Minister Alexis Tsipras has successfully passed two reform packages through a combative parliament that were necessary in order for the bailout deal to commence. Meanwhile, ratings agency Standard and Poor’s lifted its credit rating on Greece from CCC- to CCC+.
  • cuba_000022365758_320The U.S. and Cuba have formally restored diplomatic relations that have been severed for more than five decades by re-establishing embassies in each other’s capitals. While many European officials have been visiting Cuba seeking business deals, American companies are still prohibited from conducting trade with the country and travelling there from the U.S. as a tourist remains illegal.

Markets

  • Opposite of last week, equity markets tumbled this week. The S&P 500 fell 2.21%, closing at 2,080. Likewise, the Dow Jones dropped 2.86% and closed at 17,569. Year to date, the S&P is up 1.01% and the Dow is down 1.43%.
  • Yields in the Treasury markets dipped a little this week. The 10 year Treasury bond now yields 2.26% and the 5 year Treasury bond yields 1.62%.
  • The spot price of WTI Crude Oil plummeted this week. Prices were down 6.13% and closed at $48.07 per barrel. In 2015, WTI Oil prices are down 16.40%.
  • Once again, the spot price of Gold fell decreasing by 3.09% and closing at $1,099.11 per ounce. Year to date, gold prices are down 7.20%.

Economic Data

  • Initial jobless claims showed a steep decline to 255,000 which was a decrease from the prior week’s figure of 281,000. This is the lowest level of jobless claims since November 1973. However, the Labor Department noted that there may be seasonal factors such as summer auto plant shutdowns that may have affected the claims figure. The four week moving average for claims now stands at 279,000.
  • Existing home sales rose 3.2% in June, beating expectations of 0.9%. Both single-family (+2.8%) and condo/co-op (+6.6%) sales increased. Geographically, sales increased in all four regions of the country.

Fact of the Week

  • The United States’ debt service ratio (debt payments and financial obligations as a percentage of disposable personal income) was 9.92% in the 1st quarter of 2015, down from 13.17% in the 4th quarter of 2007. This statistic has been tracked since 1980 and until the 4th quarter of 2012, the ratio had never been reported under 10%. (Source: Federal Reserve).

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.