Brexit, Healthcare: Wealth Economic Update June 23, 2017

U.S. and World News

  • brexit-540371754_360A year after the vote for Britain to leave the European Union, Brexit talks have finally begun in Brussels. EU chief negotiator Michel Barnier will be sitting down with U.K. Brexit Secretary David Davis to work through the details of the anticipated two year separation process. Additionally, Prime Minister Theresa May unveiled an offer to allow at least 3 million EU citizens living in the U.K. to stay after Brexit, an offer that was welcomed by other European heads of state, including German Chancellor Angela Merkel.
  • Senate Republicans released their version of the healthcare reform legislation this week, giving the public their first chance to see what their iteration looks like. The Senate version is similar to the House bill in that both would radically overhaul Medicaid, remove the individual and employer mandates as well as eliminate taxes tied to Obamacare. There are also some differences, for instance, the Senate version would provide subsidies based on income, cost of coverage and age, as opposed to just age as was in the House bill. The nonpartisan Congressional Budget Office is expected to issue its analysis of the bill early next week.

Markets

  • Markets ended the week slightly higher. The S&P 500 rose by 0.22% and closed at 2,438. The Dow Jones increased by 0.05% for the week and closed at 21,395. Year to date, the S&P is up 9.98% and the Dow is up 9.52%.
  • Interest rates held steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.76% and 2.14%, respectively.
  • The spot price of WTI Crude Oil slid 3.78% this week, closing at $43.11 per barrel. Year to date, Oil prices have fallen 19.75%.
  • The spot price of Gold ended the week modestly higher, closing at $1,256.67 per ounce. Year to date, Gold prices are up 9.51%.

 Economic Data

  • Initial jobless claims increased by 3,000 from last week, coming in at 241,000. The Labor Department noted no unusual factors affecting the data this week. The four week moving average for claims moved up to 245,000.
  • Existing home sales rose 1.1% in May, beating consensus expectations of a -0.4% decline in sales. Sales of single family units rose 1.0%, while sales of multi-family unites increased by 1.6%. By region, existing home sales increased in the Northeast (+6.8%), West (+3.4%), and South (+2.2%), but declined in the Midwest (-5.9%).
    • New home sales increased by 2.9% in May, following a -7.9% decline in April. The result was better than consensus expectations, New home sales increased in the South (+21k), and West (+19k), but declined in the Northeast (-4k) and Midwest (-19k) regions.

Fact of the Week

  • Today (6/23) marks the 1 year anniversary of the historic Brexit vote where U.K. citizens elected to leave the European Union. Markets initially moved to the downside following the surprising result, but quickly rebounded. In the one year since the vote, the United Kingdom’s stock market (FTSE 100) has gained 21.8%, outpacing the overall MSCI European Index (+14.2%) and the S&P 500 (+17.7%). (Returns are stated in local currency)

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

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

Visit Old Second Wealth Management

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French Election, AHCA, Fed: Wealth Economic Update May 5, 2017

U.S. and World News

  • Voters in France will head to the polls on Sunday to elect a new President, selecting either Emmanuel Macron or Marine Le Pen. The two candidates have been campaigning tirelessly since the first round of the election led to their selection in the run-off. In order to try to gain more broad appeal, the typically anti-EU Le Pen has eased off of her stance that if elected she would push for France’s exit from the European Union. Despite these efforts, Macron currently holds a sizable lead in the polling figures and is viewed as the more ‘status-quo’ candidate.
  • medical_360The U.S. House of Representatives passed the American Health Care Act by a slim 217-213 margin this week. “Make no mistake: This is a repeal and replace of Obamacare,” President Trump said after the bill’s passage. The legislation now faces an uphill battle in the Senate, where several Republican members have already signaled it could see major revisions. Reports also suggest that the Senate may write its own version of a bill.
  • The Federal Reserve held a policy meeting this week and held interest rates at their current levels as was the expectation in the market. The post-meeting statement acknowledged but downplayed the weak 1st quarter GDP growth, stating that it was likely ‘transitory,’ maintaining expectations of a June rate hike. The market is currently pricing in a nearly 100% probability that the Fed Funds Rate will be increased at the next meeting.

Markets

  • Markets continued to climb higher this week as economic data came in strong and international risks appeared to ease. The S&P 500 rose 0.66% and closed at a New All-Time High of 2,399. The Dow Jones gained 0.33% for the week and closed at 21,007. Year to date, the S&P is up 7.84% and the Dow is up 7.04%.
  • Interest rates moved modestly higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.88% and 2.35%, respectively.
  • The spot price of WTI Crude Oil dropped 5.68% this week, closing at $46.53 per barrel. Year to date, Oil prices have fallen 13.38%.
  • The spot price of Gold declined 3.12% this week, closing at $1,228.70 per ounce. Year to date, Gold prices are up 7.08%.

 Economic Data

  • Initial jobless claims fell by 19,000 from last week, coming in at 238,000. The drop appears to be a reversal from the effects of the Easter and spring break holidays that elevated the figures last week. The four week moving average for claims ticked up to 243,000.
  • The April jobs report showed an increase of 211,000 jobs during the month, beating consensus expectations of 190,000. This was a large improvement from the March report that showed only 79,000 jobs being created. The prior two months’ figures were revised down a combined 6,000 jobs, bringing the three month average job gains to 174,000 per month.
    • The headline unemployment rate moved down to 4.4% in the report, beating expectations of 4.6% and matching the lows achieved during the previous cycle (2006-2007). The labor force participation rate did fall -0.1% to 62.9%.
    • Average hourly earnings rose by 0.3% in April, in line with expectations. Over the last year, wages have increased by 2.5%.

Fact of the Week

  • Sell in May? – In analyzing the returns of the S&P 500 since 1990, the six month period from November through April has beaten the six month period from May through October in 18 of 27 years. The November through April periods have seen a total return of 636% in the S&P during that time vs. a 73% gain for the May through October periods. (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
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

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Syria, Gorsuch: Wealth Economic Update Apr. 7, 2017

U.S. and World News

  • Following a poison gas attack against a rebel-held area of Syria which included use of the banned nerve agent sarin, President Trump was forced to pivot from his prior stance on Syria and its President Bashar al-Assad. Trump said that the attack, which included children among its victims, crossed “many, many lines” and that his “attitude toward Syria and Assad has changed very much.” In what was seen as a direct response, the U.S. launched 59 Tomahawk missiles against an airbase in Syria. This sets up further potential conflict with Russia, Assad’s primary backer, as the Kremlin has already stated the missile launch will deal a “significant blow to Russian-U.S. relations” and represented an “act of aggression” against a sovereign state.
  • Facing significant Democratic opposition, Republicans voted to enact the “nuclear option”, which reduces the threshold for Supreme Court nominations in the Senate from 60 to a simple majority. Having done that, the path was cleared for Neil Gorsuch to be confirmed to the Supreme Court by the Senate on Friday. With the Republicans choosing to lower this threshold, future presidents will have a much easier time getting their Supreme Court nominees confirmed, potentially changing whom they decide to appoint.
  • Minutes from the March Federal Reserve meeting were released this week and contained a relatively upbeat assessment of economic conditions and references to the potential upside from fiscal policy measures. The minutes also showed discussion regarding allowing the Fed’s balance sheet to ‘run-off’ at some point in the future. Additionally, some participants characterized stock market valuations as ‘quite high’ in light of the run-up in indices in recent months. The market is currently pricing in a 13% probability of a rate hike at the Fed’s May meeting and a 62% probability of a rate hike by their June meeting.

Markets

  • Markets were relatively flat this week. The S&P 500 fell 0.24% and closed at 2,356. The Dow Jones was flat for the week and closed at 20,656. Year to date, the S&P is up 5.80% and the Dow is up 5.20%.
  • Interest rates bounced around this week but ended close to where they began. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.92% and 2.38%, respectively.
  • The spot price of WTI Crude Oil rose 3.18% this week, closing at $52.21 per barrel. Year to date, Oil prices have fallen 2.81%.
  • The spot price of Gold increased by 0.48% this week, closing at $1,255.21 per ounce. Year to date, Gold prices are up 9.39%.

Economic Data

  • Initial jobless claims declined by 25,000 from last week, coming in at 234,000. Most of the improvement came from the Midwest and Mid-Atlantic regions, where claims in recent weeks were elevated due to Winter Storm Stella. The four week moving average for claims dropped to 250,000.
  • The March employment report showed a gain of 98,000 jobs in the month, well below expectations of 180,000. Additionally, the prior two months’ figures were revised down a combined 38,000. The retail sector disappointed again, losing 30,000 jobs in the month however the overall report may have been negatively affected by severe weather. Over the last three months, job gains have averaged 178,000 per month.
    • The headline unemployment rate moved down 0.2% to 4.5%, which was better than expected. The labor force participation rate held steady at 63.0%.
    • Average hourly earnings rose by 0.2%, which was in line with forecasts. Over the last year, wages have grown 2.7%.

Fact of the Week

  • The IRS audited just 0.7% of individuals’ tax returns in 2016. The number of people audited in 2016 (just over 1 million) dropped for the 5th consecutive year. The IRS claims that for every $1 spent conducting an audit, they are able to recuperate $4 in previously unpaid taxes. (Source: IRS)

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

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

Visit Old Second Wealth Management

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Brexit: Wealth Economic Update Mar. 31, 2017

U.S. and World News

  • london360The Brexit process has officially begun as British Prime Minister Theresa May has invoked Article 50 of the Lisbon Treaty, formally informing the European Union of its exit from the bloc. The letter of declaration was hand-delivered to EU President Donald Tusk Wednesday and now begins what is estimated to be a two year negotiation process between the UK and all of the remaining 27 European Union member states. This is anticipated to be a difficult and lengthy procedure as agreements must be reached on tough issues such as trade and immigration.
  • Complicating matters in the United Kingdom is the fact that Scottish lawmakers voted 69-59 this week to seek a new referendum on independence within the next two years. This certainly comes as an unwelcome distraction from the Brexit proceedings for British leaders. First Minister of Scotland Nicola Sturgeon declared, “The mandate for a referendum is beyond question, and it would be democratically indefensible – and utterly unsustainable – to attempt to stand in the way of it.”

Markets

  • Markets closed the 1st quarter of 2017 on an up note. The S&P 500 gained 0.82% and closed at 2,363. The Dow Jones was also positive for the week rising 0.32% and closing at 20,597. Year to date, the S&P is up 6.06% and the Dow is up 5.18%.
  • Interest rates continued to decline a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.92% and 2.39%, respectively.
  • The spot price of WTI Crude Oil rose 5.82% this week, closing at $50.76 per barrel. Year to date, Oil prices have fallen 5.51%.
  • The spot price of Gold increased by 0.38% this week, closing at $1,248.24 per ounce. Year to date, Gold prices are up 8.77%.

Economic Data

  • Initial jobless claims declined by 3,000 from last week, coming in at 258,000. The level of claims was likely affected for a second week by Winter Storm Stella. The four week moving average for claims rose to 254,000.
  • 4th Quarter GDP growth was revised up in the 3rd estimate from +1.9% to +2.1%, beating expectations of +2.0%. The main source of the upward revision was real consumer spending, which was revised up to +3.5% from +3.0% previously.
  • The Case-Schiller home price index rose by 0.9% in its latest reading, beating expectations of a 0.7% increase. Prices rose in all 20 cities measured except for Cleveland, with Seattle (+1.7%) and Chicago (+1.3%) seeing the largest increases in the month. Over the last 12 months, home prices as measured by the index have risen 5.7%.
  • The PCE index (measure of inflation) rose 0.1% in February, in line with consensus expectations. Over the last 12 months, PCE inflation has increased 2.1%, also in line with estimates.
    • Core PCE (excludes food and energy, Fed’s preferred inflation measure) rose 0.2% in February, meeting expectations. Over the last year, Core PCE has risen 1.75%, still below the Fed’s 2% inflation target.

Fact of the Week

  • 25 players will make the opening day rosters of the 30 Major League Baseball teams ahead of the season opening on Sunday night, a total of 750 big league ballplayers. Coming into this season, there have been a total of 18,593 men to appear in at least 1 game at the major league level. (Source: Major League Baseball)

PLAY BALL!!

 

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

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Interest Rates, Brexit: Wealth Economic Update Mar. 20, 2017

U.S. and World News

  • In a highly anticipated move, the Federal Reserve raised the Fed Funds Rate by 0.25% this week. Despite being the second rate hike in three months, the Committee remained committed to a gradual pace of rate hikes going forward. The Fed projects two more interest rate hikes in 2017, though there are differing views among the members. There was one dissent, Neel Kashkari, who supported not raising at this meeting and taking a wait and see approach. Finally, it was noted by Fed Chair Janet Yellen that the size of the Fed’s balance sheet (which stands at $4.5 trillion) was discussed at the meeting, but no decisions were made in regard to reducing it over time.
  • British Prime Minister Theresa May secured permission to trigger Article 50 which would officially mark the beginning of Brexit negotiations between the nation and its European Union counterparts. Having received the go-ahead from Parliament, May has said that she will invoke Article 50 by the end month. It’s expected that the negotiation process will last at least two years before Britain is officially able to leave the EU.

Markets

  • Markets closed the week moderately higher. The S&P 500 gained 0.28% and closed at 2,378. The Dow Jones followed suit by inching up 0.08% and closing at 20,915. Year to date, the S&P is up 6.71% and the Dow is up 6.45%.
  • Despite a 0.25% rate hike in the Fed Funds Rate, interest rates fell this week as the projected pace of future hikes was not accelerated. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.02% and 2.50%, respectively.
  • The spot price of WTI Crude Oil stabilized this week and gained 0.47% this week, closing at $48.72 per barrel. Year to date, Oil prices have fallen 9.31%.
  • The spot price of Gold increased by 2.04% this week, closing at $1,229.26 per ounce. Year to date, Gold prices are up 7.13%.

Economic Data

  • Initial jobless claims edged 2,000 lower from last week, coming in at 241,000. The Labor Department noted no special factors in the data. The four week moving average for claims remained at 237,000 which is a near a 40-year low.
  • Retail sales increased 0.1% in February, in line with expectations. Sales excluding autos and gasoline increased 0.2%. Delayed tax refunds appeared to bring down several Retail categories.
  • The Consumer Price Index (measure of inflation) increased 0.1% in February, slightly beating expectations for flat prices. Over the last 12 months, CPI has increased 2.7%.
    • Core CPI (excludes food and energy) rose 0.2% for February, in line with expectations. Core prices have risen 2.2% over the last year.
  • Housing starts increased by 3.0% in February, beating expectations of 1.1%. The details of the report were also favorable, as the less volatile single family starts increased by 6.5% to the highest level since October 2007 while multi-family starts decreased 3.7%.

Fact of the Week

  • The S&P 500 has now gone 108 consecutive trading days without suffering at least a 1% decline over any single trading day. That’s the longest stretch that the S&P has gone without a 1% drop since it had a run of 105 trading days without one that ended on December 15, 1995. (Source: By The Numbers 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

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NKorea/Japan, Healthcare: Wealth Economic Update Mar. 10, 2017

U.S. and World News

  • Global tensions are rising in the wake of North Korea firing four ballistic missiles into nearby waters over the weekend. Three of those missiles landed in Japan’s exclusive economic zone, causing the country to move to the highest possible alert level. Japanese Prime Minister Shinzo Abe declared, “This clearly shows North Korea has entered a new stage of threat.” Fearing a rapid escalation, China has called upon North Korea to stop its nuclear and missile tests and for South Korea and the U.S. to cease their joint military drills in the area.
  • Republican leaders in Congress unveiled their plan to repeal and replace Obamacare this week. Along with the end of the health insurance mandates, the proposal would restructure the Medicaid program and create a new tax credit tied to a person’s age and income for those who cannot get insurance through their employer. President Trump is “proud to endorse” the plan and called for its speedy passage despite some opposition within the Republican Party.

Markets

  • Markets fell a bit this week. The S&P 500 lost 0.40% and closed at 2,373. The Dow Jones followed suit by dipping 0.40% and closing at 20,903. Year to date, the S&P is up 6.41% and the Dow is up 6.36%.
  • Interest rates rose quite a bit this week as odds of a Fed rate hike next week have all but hit 100%. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.10% and 2.58%, respectively.
  • The spot price of WTI Crude Oil plunged 9.38% this week, closing at $48.33 per barrel. Year to date, Oil prices have fallen 10.03%.
  • The spot price of Gold decreased by 2.43% this week, closing at $1,204.74 per ounce. Year to date, Gold prices are up 4.99%.

Economic Data

  • Initial jobless claims bounced 20,000 higher from last week, coming in at 243,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 237,000 which is a near a 40-year low.
  • The February jobs report showed an increase of 235,000 new jobs created in the month, better than expectations of 200,000. The prior two months’ figures were revised up by a combined 8,000 which brings the three month average for job gains to 209,000 per month. The report was generally very positive, one blemish however was the 26,000 retail jobs lost during the month, continuing that sector’s recent struggles.
    • The headline unemployment rate ticked down to 4.7%, in line with expectations. The 0.1% decrease in the unemployment rate occurred despite a 0.1% increase in the labor force participation rate to 63.0%.
    • Average hourly earnings rose 0.2% in February, below forecasts of 0.3%. Over the last 12 months, wages have increased 2.8%.

Fact of the Week

  • The Standard & Poor’s 500 (S&P 500) index turned 60 years old this week. The index is widely regarded as the most accurate gauge of large American stocks and it is market capitalization weighted as opposed to the Dow, which is weighted by price, or other indexes that have an equal weighting. The S&P 500 is by far the biggest index in the world, with about $2.4 trillion being tracked by it.

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 May 31, 2016

U.S. and World News

  • While there weren’t many resolutions reached at last weekend’s G7 summit of finance ministers and central bankers in Japan, the U.S. issued a fresh warning to the host country against intervening in the currency markets. Japan has been very active in trying to devalue their Yen currency in an attempt to boost growth, a practice that has been frowned upon by the country’s trading partners.
  • medical_000071969633_320Having been hit with substantial losses in Obamacare’s first few years, major health plans are looking for premium boosts of 10% to 20% or more in many states. Proposals for increases need to be approved by state regulators before they can be passed on to customers. In addition to higher than expected costs and a population of new enrollees skewing towards the unhealthy end of the spectrum, many of the relief programs in place to cushion insurers’ losses will come to an end in 2017. While some state insurance commissioners are taking a tough public stance in regard to approving increases, experts say that they will unlikely be able to deny the requests because the losses being sustained are legitimate and they are required by law to ensure plans have funds to pay out claims.

Markets

  • Equity markets moved higher this week. The S&P 500 gained 2.32% and closed at 2099. The Dow Jones rose 2.15% and closed at 17,873. So far in 2016, the S&P is up 3.61% and the Dow is up 3.74%.
  • Interest rates did not move much this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.39% and 1.85%, respectively.
  • The spot price of WTI Crude Oil gained 3.75% this week to close at $49.54 per barrel. WTI Crude is up 21.72% in 2016.
  • The spot price of Gold lost 3.22% this week, closing at $1,212.38 per ounce. Year to date, gold prices are up 14.26%.

Economic Data

  • Initial jobless claims came in at 268,000 which was a decrease from last week’s reading of 278,000. State-level details noted that prior increases in Missouri and Michigan, which were due to temporary auto plant shutdowns, reversed this week. The four week moving average for claims moved up to 278,500.
  • Pending home sales increased by 5.1% during the month of April, much higher than expectations of 0.7%. This was the largest monthly increase in pending home sales since October 2010. By region, sales rose in the West (+11.4%), South (+6.8%) and Northeast (+1.2%), but declined in the Midwest (-0.6%)
  • 1st quarter GDP was revised up to 0.8% from an initial reading of 0.5%. Most of the upward revision was due to larger inventory accumulation and a narrower trade deficit than was reported in the first estimates.

Fact of the Week

  • May 26th marked the 120th Anniversary of the opening of the Dow Jones Industrial Average in 1896. Of the original 12 members of the index, only General Electric remains in the index today. Rounding out the other 11 original companies which were the economic stalwarts of its time were: The American Cotton Oil Company, The American Sugar Refining Company, American Tobacco Company, Chicago Gas Light & Coke Company, Distilling & Cattle Feeding Co., The Laclede Gas Company, National Lead Company, North American Company, Tennessee Coal, Iron & Railroad Company, The United States Leather Company and The United States Rubber Company.

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
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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

 

Wealth Management Weekly Update March 10, 2014

U.S. and World Newsukraine_map

  • Russian forces took control of Crimea and threatened a full-scale invasion of Ukraine early this week, causing markets to fall drastically on Monday. Russian President Vladimir Putin then calmed markets by ordering some military units back to their bases and claiming that the country has no intention of using military force in the Ukraine. However, in a bit of a surprising twist, the Crimean parliament has voted unanimously for the province to become a part of Russia. The parliament’s vote is not binding in any way but this action will now go to a referendum vote by the citizens of Crimea that is scheduled for March 16th, where a “Yes” vote to join Russia could put the U.S. and the European Union in a bit of a democratic bind.
  • The crisis in Ukraine has renewed calls among Republicans and energy state Democrats for an easing of restrictions on foreign sales of natural gas. With Russia supplying Europe with 30% of its natural gas, there are many nations who are wary of imposing major sanctions on the country. By increasing U.S. gas exports, that sort of reliance on Russia could be reduced and give the U.S. and E.U. a freer hand when dealing with Russia, particularly in the long term.
  • President Obama unveiled his $3.9 trillion budget for fiscal year 2015 this week. His budget includes tax hikes for the wealthy and energy companies, as well as increased spending on infrastructure and education. Many of the proposals included in his budget stand little chance of passing but will provide fodder for the upcoming mid-term elections.

Markets

  • Stock markets shrugged off losses on Monday due to the tensions in Ukraine and rallied to end the week. The S&P 500 again closed at an all-time high, ending up 1.04% for the week, closing at 1,878. The Dow Jones rose by 0.82%, closing at 16,453. So far in 2014, the S&P is up 2.01% and the Dow Jones is now down 0.26%.
  • Treasury yields rose this week following an easing of tensions overseas with the 5 year and 10 year U. S. Treasury Notes yielding 1.64% and 2.79%, respectively.
  • The spot price of WTI Crude Oil ended the week flat, closing at $102.55 per barrel.  Year to date, Oil prices have risen 4.16%.
  • The spot price of Gold increased this week, gaining 1.05% and closing at $1,340.32 per ounce. Year to date, Gold prices are up 11.54%.

Economic Data

  • Initial jobless claims dropped by 26,000 from last week, coming in at 323,000 vs. consensus estimates of 335,000. The four week moving average for claims fell to 336,500. The Labor Department noted that there were no special factors affecting last week’s claims.
  • The monthly non-farms payroll employment figure came in higher than expected, showing a gain of 175k jobs vs. estimates of 149k. The negative impact from weather ended up being smaller than anticipated. The previous two months numbers were revised up by 25k, bringing the three month average gain to 129k.
    • The unemployment rate ticked up to 6.7% from 6.6%, while the labor force participation rate held steady at a very low 63.0%.
    • Also in the report, average hourly earnings unexpectedly rose 0.4% for the month, the strongest gain in eight months and have risen 2.2% over the last 12 months. This could perhaps be the early signs of a more normal inflationary environment.

Fact of the Week

  • Sunday marks the 5 year anniversary of the stock market recession low (3/9/2009), which was famously called by late CNBC anchor Mark Haines when he proclaimed, “I’m going to go out on a limb here…I think we are at a bottom. I really do.” On that date, the     S&P 500 traded at 676 and has since gained 208.75% total return (including dividends) to close today at an all-time high of 1,878. In that same time frame, the Dow Jones has risen from 6,547 to 16,453, a total return of 187.55%.

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

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Wealth Management Weekly Update March 3, 2014

ukraine_moscow_mapU.S. and World News

  • Violent protests in Ukraine have escalated and the parliament has ousted President Viktor Yanukovych and put a warrant out for his arrest. Acting President Oleksandr Turchynov says that the country is close to default and is requesting $35 billion in foreign aid from the European Union, the United States and the International Monetary Fund over the next two years to say afloat. While they await response from these entities, Russian gunmen have reportedly seized government buildings in the Crimea region, including the two main airports, according to Ukraine officials. Russia is denying these reports.
  • Despite some opposition, the Japanese government disclosed in a draft regarding its long-term energy strategy that they intend to revive nuclear energy as a major source of electricity. Japan’s nuclear plants were idled following the Fukushima disaster that was caused by a tsunami almost three years ago. This has caused the country to significantly increase its energy imports and as a result, has been a drag on the country’s GDP.
  • Major bitcoin exchange Mt. Gox has gone offline and is filing for bankruptcy protection after the exchange said it may have lost 850,000 bitcoins due to hacking. The crypto-currency currently trades at around $575 per bitcoin, bringing the losses due to the bankruptcy and hacking to over $475 million.
  • David Camp, the Republican Chairman of the House Ways and Means Committee has introduced a proposal to overhaul and simplify the tax code. His plan reduces the seven individual tax brackets to two, a 10% and 25% bracket. The proposal also includes cutting the top corporate tax rate from 35% to 25%. Finally, the largest banks and insurers would have to pay a quarterly 0.035% tax on assets over $500 billion. The proposal faces many challenges before becoming a law.

Markets

  • Stock markets rose this week as the S&P 500 closed at an all-time high, ending up 1.30% for the week, closing at 1,859. The Dow Jones rose by 1.42%, closing at 16,322. So far in 2014, the S&P is now up 0.96% and the Dow Jones is now down 1.07%.
  • Treasury yields came down this week with the 5 year and 10 year U. S. Treasury Notes yielding 1.51% and 2.65%, respectively.
  • The spot price of WTI Crude Oil increased this week by 0.32%, closing at $102.53 per barrel.  Year to date, Oil prices rose 4.16%.
  • The spot price of Gold increased moderately this week, gaining 0.17% and closing at $1,326.26 per ounce. Year to date, Gold prices are up 10.37%.

Economic Data

  • Initial jobless claims rose by 12,000 from last week, coming in at 348,000 vs. consensus estimates of 335,000. The four week moving average for claims fell to 338,250. The Labor Department noted that there were no special factors affecting last week’s claims.
  • 4th quarter GDP growth was revised down to 2.4% from an initial estimate of 3.2%. Weather effects most likely had to do with the large negative revision. This revision brings total 2013 GDP growth down by 0.2% to 2.5%.
  • The Case-Shiller home price index rose 0.8% in December vs. consensus expectations of 0.6%. 19 out of the 20 cities part of the index saw price increases. In 2013, the index rose a strong 13.4%.
  • New home sales rose 9.6% in January vs. consensus estimates of them actually falling by 3.4%. This brings the level of new home sales up to a new post-recession high and is a positive surprise in light of recent downbeat data.

Fact of the Week

  • The average interest rate paid by the US government on the country’s interest-bearing debt has been more than cut in half over the last seven years. Benefitting from aggressive interest rate lowering policies by the Federal Reserve, the US government now pays an average of 2.406% on its debts, compared to 5.034% at the beginning of 2007.

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update February 24, 2014

U.S. and World News

    • The Congressional Budget Office released the findings of a study on President Obama’s proposal to raise the minimum wage to $10.10/hour by 2016 from a current level of $7.25/hour. The study found that the proposal could lead to the loss of about 500,000 jobs as some businesses would likely need to cut staff. However, the study also said that the plan would increase the pay of 16.5 million people and potentially lift 900,000 people out of poverty. A total of 45 million people are projected to be categorized as poor in 2016.

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  • The Bank of Japan surprised markets by expanding lending facilities that are designed to spur corporate investment by offering low interest loans to commercial banks in the hope that they will lend the money to businesses. The Japanese central bank also decided to maintain its asset purchasing program of ¥60-70 trillion per year. The decisions come after 4th quarter GDP data show growth of 0.3% which was much less than expected.
  • Progress toward approval of the Keystone XL pipeline hit a snag this week after a Nebraska judge overruled a law that had allowed the state’s Governor Dave Heineman to approve the building of the pipeline through the state. As a result of the ruling, the decision now rests with the Public Service Commission.

Markets

  • Stock markets rose slightly this week as the S&P 500 ended up 0.35%, closing at 1,836 and the Dow Jones rose by 0.47%, closing at 16,103. So far in 2014, the S&P and Dow have declined 0.66% and 2.86%, respectively.
  • Treasury yields rose slightly in the week with the 5 year and 10 year U. S. Treasury Notes yielding 1.53% and 2.73%, respectively.
  • The spot price of WTI Crude Oil increased this week by 2.1%, closing at $102.23 per barrel.  Year to date, Oil prices rose 3.85%.
  • The spot price of Gold increased moderately this week, gaining 0.42% and closing at $1,323.97 per ounce. Year to date, Gold prices are up 10.18%.

Economic Data

  • Initial jobless claims fell by 3,000 from last week, coming in at 336,000 vs. consensus estimates of 335,000. The four week moving average for claims rose to 338,500. The Labor Department noted that there were no special factors affecting last week’s claims.
  • Housing starts declined 16.0% in January vs. consensus estimates of a decline of 4.9%. Adverse weather conditions played a significant role in the drop off, as the Midwest region saw housing starts fall to their lowest level in the 55 year history of the economic series.

Fact of the Week

  • The proportion of workers who voluntarily left their jobs, known as the “quit rate”, rose to a post-recession high of 1.8% in November. That compares with a low of 1.2% in September 2009, but is still well under the average of 2.1% seen from 2000-2006. Many economists, including new Fed Chief Janet Yellen, view the quit rate rising as a positive indicator of the state of the labor market as they believe that people resign from their jobs either because they have a new one or are confident of finding another position.

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management