Post-brexit: Wealth Economic Update Aug 8, 2016

U.S. and World News

  • london_big-ben_49186880_340U.K. Prime Minister Theresa has outlined her plan to reshape the British economy for a post-Brexit world. Her goal is to revive industrial productivity growth in the country by encouraging innovation and focusing on sectors and technologies that will give Britain a competitive advantage. Meanwhile, the Bank of England announced more easing measures in a continued effort to spur growth. Benchmark interest rates were cut and the central bank’s bond buying program was expanded and will now include corporate bonds.
  • Japanese Prime Minister Shinzo Abe announced a fresh stimulus package that ranks among the country’s largest since the global financial crisis. The package totals ¥28 trillion ($274 billion) and was approved in response to growing consensus that monetary policy alone won’t be able to revive Japan’s economy. Included in the package that’s expected to lift GDP 1.4% are childcare benefits, $150 handouts to 22 million low income citizens, a loan of ¥10.7 trillion for infrastructure projects and ¥7.5 trillion for direct fiscal spending.
  • India’s upper house of parliament unanimously approved the creation of a national sales tax, nearly a decade after the move was first proposed. This is considered to be the biggest legislative victory for Prime Minister Narendra Modi since he took office in 2014. The tax bill seeks to streamline the country’s fragmented tax system by imposing a single national tax, something businesses have been lobbying for as it would reduce costs and could boost economic growth by 2%. The bill now must be ratified by at least half of all states in India, a process projected to be concluded before the end of the year.

Markets

  • This week the S&P 500 was up 0.49% and closed at an All-Time High of 2,183. The Dow Jones rose 0.65% and closed at 18,544. So far in 2016, the S&P is up 8.08% and the Dow is up 7.94%.
  • Interest rates popped up this week, particularly following the strong July employment report. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.13% and 1.59%, respectively.
  • The spot price of WTI Crude Oil gained 0.91% this week to close at $41.98 per barrel. WTI Crude is up 4.77% in 2016.
  • The spot price of Gold fell 1.13% this week, closing at $1,336.00 per ounce. Year to date, gold prices are up 25.91%.

Economic Data

  • Initial jobless claims came in at 269,000 which is higher than last week’s reading of 266,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved up to 260,000.
  • The July employment report showed an increase of 255,000 non-farm payrolls, beating expectations of 180,000. The prior two months’ figures were revised up a total of 18,000, bringing the three month average for job gains to 190,000.
    • The headline unemployment rate remained at 4.9%, narrowly missing estimates of 4.8%. The small miss was due to the labor force participation rate rising by 0.1% to 62.8%.
    • Average hourly earnings rose by 0.3% in July, beating expectations of 0.2%. Over the last 12 months, wages are up 2.6%.
  • The PCE Price index (measure of inflation) rose 0.1% in June, lower than expectations of 0.2%. Over the last 12 months, the PCE index is up 0.9%.
    • The Core PCE Price Index (excludes food and energy, the Fed’s preferred measure of inflation) rose 0.1% in June, in line with expectations. Over the last year, core prices are up 1.6%.

Fact of the Week

  • At $25,000, George Washington’s presidential salary represented 2% of the U.S. budget in 1789. If that percentage of pay held today, Barrack Obama would be paid over $67 billion a year. (Source: USA Today)

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

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

 

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Wealth Management Economic Update October 5, 2015

U.S. and World News

  • india_coin_320With the preemptive resignation of House Speaker John Boehner paving the way for compromise, this week President Obama signed into law a bill that extends federal funding until December 11th. Had Congress not come to an agreement, the government would have shut down on October 1st. Both sides now have about 10 weeks to formulate a long-term budget, with the parties aiming to strike a two year deal.
  • The Reserve bank of India surprised markets by reducing its policy interest rate by a greater than expected 0.5% to 6.75%. The central bank cited low inflation as the main reason for the cut. This is the fourth interest rate cut this year in India, following three previous 0.25% cuts.

Markets

  • Equity markets increased slightly this week. The S&P 500 ended the week up 1.04%, closing at 1,951. Similarly, the Dow Jones increased 0.97% and closed at 16,472. Year to date, the S&P is down 5.22% and the Dow is down 7.58%.
  • Yields in the Treasury markets fell this week. The 10 year Treasury bond now yields 1.99% while the 5 year Treasury bond now yields 1.29%.
  • The spot price of WTI Crude Oil decreased slightly this week. Prices dropped by 0.11%, closing at $45.65 per barrel. In 2015, WTI Oil prices are down 22.35%.
  • The spot price of Gold decreased this week, declining 0.72% and closing at $1,137.99 per ounce. Year to date, gold prices are down 3.92%. 

Economic Data

  • Initial jobless claims came in at 277,000 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 271,000.
  • The Case-Shiller home price index unexpectedly declined in July, showing prices falling 0.2% vs. an expected gain of 0.1%. Prices fell in 11 of 20 cities covered by the index. Over the past 12 months, home prices have risen a solid 5.0%.
  • Nonfarm payrolls were 142,000 for the month of September, much lower than the forecasted figure of 201,000. Nonfarm payrolls for July and August were also revised down by a combined 59,000. Unemployment was unchanged at 5.1% and average hourly earnings remained flat.

Fact of the Week

  • This week in 1981, the U.S. government issued 20-year Treasury bonds at a 15.78% yield, an all-time record high interest rate for any U.S. government issue.

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).

Wealth Management Economic Update March 10, 2015

U.S. and World News

  • All 31 banks that were tested passed the Federal Reserve imposed stress test on minimum levels of capital. The Fed simulated an economy that faced severely adverse conditions in order to determine if major banks were capitalized enough to remain solvent in those conditions. Next week, the Fed will release the results of the Comprehensive Capital Analysis and Review (CCAR) and will either approve or disapprove of the banks’ capital return plans.
  • india_coin_200The Reserve Bank of India surprised markets by cutting rates for the second time this year. Citing inflation and weakness in the economy, the central bank lowered its benchmark rate by 0.25% to 7.5%. Also joining in the worldwide trend of monetary easing, China also cut their benchmark interest rate by 0.25%. In the last few months, China has seen signs of slowing growth, with GDP dipping to 7.3% in the 4th quarter, its slowest rate of growth in over 20 years.

Markets

  • Equity markets moved lower this week following the release of the monthly non-farm payrolls report. The S&P 500 lost 1.55%, closing at 2,071, while the Dow Jones fell 1.52% and closed at 17,857. Year to date, the S&P and Dow Jones are up 0.99% and 0.67%.
  • Yields in the Treasury markets moved up significantly this week after the better than expected jobs report pushed forward expectations of the Fed’s first rake hike. The 10 year Treasury bond now yields 2.25% and the 5 year Treasury bond yields 1.70%.
  • The spot price of WTI Crude Oil was up 0.93% this week, closing at $49.26 per barrel. In 2015, WTI Oil prices have fallen 8.40%.
  • The spot price of Gold fell by 3.79% this week and closed at $1,167.24 per ounce. Year to date, gold prices are down 1.45%.

Economic Data

  • Initial jobless claims jumped up from last week, coming in at 320,000 vs. consensus estimates of 295,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 305,000.
  • The February jobs report showed a gain of 295,000 non-farm payrolls, beating estimates of 235,000. There was no significant negative weather effect apparent in the data.
    • The unemployment rate dropped to 5.5%, beating expectations of 5.6%. This drop was aided however by a 0.1% drop in the labor force participation rate to 62.8%.
    • Average hourly earnings rose 0.1% in the month, below expectations of 0.2%. Over the last 12 months, wages have grown a subdued 2.0%.
  • The PCE Price index (the Federal Reserve’s preferred measure of inflation) fell 0.5% in January, in line with expectations. This was largely due to a 10% drop in energy prices. Core PCE (excludes food and energy) rose 0.1% in the month, also in line with consensus. Core prices are up 1.3% over the last year, well below the Fed’s 2% inflation target.

Fact of the Week

  • The NASDAQ Composite traded over the 5,000 threshold this week for the first time since March 2000. In the 15 years it took to regain this level, the composition of the index has changed quite a bit. One difference is the valuations of the representative companies are drastically different. Today the NASDAQ has a price to earnings ratio (price per share of stock for every $1 per share of earnings) is 21.5 compared to 107 in 2000. Some of the top 10 stocks in the NASDAQ in March 2000 were WorldCom, Dell, Sun Microsystems and JDS Uniphase.

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 January 26, 2015

U.S. and World News

  • President Obama delivered his State of the Union address this week, declaring that the economy has recovered under his leadership and discussed several measures that he would like to see enacted during his final two years in office. Among them, he called on Congress to impose new taxes on high-income earners and new fees on large financial institutions. Obama also reiterated his plan to offer free community college that would be funded by the federal and state government, but is seemingly seeking to discourage individuals from saving for their child’s college by eliminating the tax advantages of Section 529 and Coverdell Education Savings Accounts. Many of the issues he raised have little to no chance of passing in the Republican controlled House and Senate.
  • European Central Bank President Mario Draghi announced this week that the central bank plans to expand its purchase of European government bonds to €60 billion per month until at least September 2016. While additional quantitative easing was expected, the size of the program was larger than consensus expectations. The goal of the plan is to reverse deflationary pressures that are weighing on the Eurozone as many of the country’s economies have stagnated recently.
  • oil-rig_000003751456_250King Abdullah, 91, of Saudi Arabia died this week, calling into question the future of the Saudi’s strategy for crude oil production. Historically, the country has been the oil market’s swing producer, altering production volumes based on demand in order to keep prices stable, but this has not been the case during the current plunge in oil prices. Abdullah’s half-brother, Crown Prince Salman has been declared King and a key indicator of the future Saudi oil policy will be whether Salman retains oil minister Ali Al-Naimi, who has driven the decision making since 1995.

Markets

  • Equity markets ended positively this week following the ECB’s announcement of an increased quantitative easing program. The S&P 500 rose 1.62% and closed at 2,052. Likewise, the Dow Jones gained 0.95% and closed at 17,673. Year to date, the S&P and Dow Jones are down 0.26% and 0.73% respectively.
  • Yields in the Treasury markets remained at very low levels this week. The 10 year Treasury bond now yields 1.79% and the 5 year Treasury bond yields 1.31%.
  • The spot price of WTI Crude Oil plunged again this week, falling 7.63% and closing at $45.32 per barrel. In 2015, WTI Oil prices have fallen 15.49%.  According to AAA, the national average gas price is now $2.04/gallon as compared to $3.29 a year ago.
  • The spot price of Gold rose by 1.09% this week and closed at $1,294.39 per ounce. Year to date, gold prices are up 9.29%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 307,000 vs. consensus estimates of 300,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 306,500.
  • Housing starts rose 4.4% in December against expectations of 1.2%. Rising 7.2% in the month, the increase was primarily from the single-family home category which is a more positive signal.
  • China reported that its economy grew by 7.4% in 2014, its slowest pace since 1990 when growth was only 3.8% as a result of international sanctions following the Tiananmen Square massacre. The slowing growth pace has prompted speculation that the People’s Bank of China may undergo additional support measures.

Fact of the Week

  • The economy of the United States is estimated to be $17.5 trillion, representing 23% of the $77.6 trillion global economy. The 19 countries that make up the Eurozone and use the common currency collectively have an economy of $13.2 trillion, or 17% of the global economy.

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 January 20, 2015

U.S. and World News

  • Switzerland_swiss_250The Swiss National Bank shocked markets this week when it unexpectedly scrapped the cap that it had placed on its currency, the Swiss Franc, relative to the price of the Euro (€). The move is an attempt to fight recession and deflation threats in Switzerland that has resulted from overall economic weakness in Europe. The cost of defending that cap had become extraordinarily high, and with speculation that the European Central Bank could be announcing a large Quantitative Easing program, costs would continue to go up as the Euro would surely continue depreciating. After the announcement, the Swiss Franc nearly immediately appreciated by almost 30% against the Euro and 15% against the US Dollar.
  • India’s central bank also surprised the market with an unexpected cut in interest rates in an effort to improve growth in the country. Central bank Governor Raghuram Rajan lowered the repurchase rate in India to 7.75% from 8%, the first rate reduction in two years, as lower food and energy prices have eased inflationary fears.
  • As of Friday, Americans will be able to visit Cuba without obtaining a license from the Treasury Department. Many US airlines announced plans to seek regular service to and from Cuba. The issue of the 54 year old trade embargo with Cuba remains, as this can only be lifted by Congress and prohibits American companies from doing business in the country.

Markets

  • Equity markets ended with another volatile week. The S&P fell 1.24% and closed at 2,019. Likewise, the Dow Jones trickled down 1.27% and closed at 17,512. Year to date, the S&P and Dow Jones are down 1.92% and 1.75% respectively.
  • Yields in the Treasury markets continued their downward trend. The 10 year Treasury bond now yields 1.84% and the 5 year Treasury bond yields 1.30%.
  • The spot price of WTI Crude Oil rose slightly by 0.23% and closed at $48.47 per barrel. Year to date, the spot price of WTI Crude Oil is down 9.01%.
  • The spot price of Gold rose by 4.68% this week and closed at $1,280.45 per ounce.

Economic Data

  • Initial jobless claims rose from last week, coming in at 316,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 298,000, an increase of 7,000.
  • Headline retail sales fell 0.9% in December vs. expectations of -0.1%. Expectedly, gasoline station sales were a drag on retail sales, falling 6.5% in the month.
  • The headline Consumer Price Index declined 0.4% in December, which was in line with consensus. Much of the decline was due to a 4.7% fall in energy prices. Core CPI which excludes food and energy was unchanged in December. Over the past year, both headline and core prices have been very subdued, rising only 0.8% and 1.6% respectively.

Fact of the Week

  • In March 2009, the Congressional Budget Office projected that the taxpayer cost of the August 2008 TARP bailout would be $356 billion. However, a report by the Treasury Department in December 2014 showed an overall $15 billion profit from the TARP program.

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 Weekly Update May 19, 2014

U.S. and World News

  • Pro-Moscow separatists have declared victory in a referendum on “self-rule” for the “People’s Republic of Donetsk” in eastern Ukraine, saying that 89% of voters have approved the measure. Russia said it “respects” the results of the ballot, which should be implemented “in a civilized manner.” However, the Ukraine government, the U.S. and the EU have condemned the ballot as illegal. The fear is that if Donetsk does try to implement the poll outcome, Ukraine will slide into civil war.
  • oil_000013481523_290Saudi Arabia could increase oil production if the tension between Russia and Ukraine causes market shortages, Saudi Oil Minister Ali al-Naimi said today. Absent of any crude shortages, al-Naimi doesn’t expect OPEC to increase its output cap of 30M barrels a day when it meets next month. He also described $100 a barrel as a fair price “for everybody – consumer, producer and oil companies.”
  • Narendra Modi’s opposition Bharatiya Janata Party looks to have won India’s biggest election victory in thirty years. At the time of writing, counting showed that the BJP and its allies were ahead in 336 out of 542 seats in the lower house of parliament, well above the 272 needed for a majority. India’s Sensex stock index was +0.9% – although down sharply from earlier highs – on the prospect of a stable government that’s perceived as business friendly and committed to economic reform.

Markets

  • The S&P 500 declined by 0.03% for the week, closing at 1,878.The Dow Jones also fell this week by 0.55% closing at 16,491. So far in 2014, the S&P is up 1.60% and the Dow Jones is down 0.51%.
  • Treasury yields declined this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.55% and 2.52%, respectively.
  • The spot price of WTI Crude Oil ended the week up 2.15%, closing at $102.14 per barrel.  Year to date, Oil prices have climbed 5.00%.
  • The spot price of Gold increased by 0.31% this week, closing at $1292.93 per ounce. Year to date, Gold prices are up 7.60%.

Economic Data

  • Jobless claims dropped to 297,000 (vs. consensus 320,000) from an upwardly-revised 321,000 in the prior week. The Labor Department cited no special factors in the data. The four-week moving average of initial claims edged down to 323,000.
  • Headline consumer prices rose 0.3% in April, in line with consensus expectations. Core consumer prices rose 0.24% on an unrounded basis (vs. consensus +0.1%), somewhat higher than our view. Over the past year, headline consumer prices rose 2.0% and core prices rose 1.8%, bringing inflation numbers closer to the Fed’s stated targets.

Fact of the Week

  • Bill Gates is ranked # 1 as the richest American today ($72 billion), but the 6 living heirs of Sam Walton (who died in 1992) are worth a combined $145 billion (source: Forbes).

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 CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update April 14, 2014

U.S. and World News

  • The Senate has passed a bill that would extend unemployment benefits for 2.8 million people who have been out of work for at least six months. The legislation would restore the payout for five months retroactive to December, when the payouts expired. The bill will now be reviewed by the House, where approval is expected to be harder to come by due to concerns about costs of the extension.
  • The world’s largest election began this week in India with an electorate of 815 millionindia_taj_mahal_350 people. The ballot comprises of nine rounds and will take five weeks with results due on May 16th. The favorite to win is the Bharatiya Janata Party led by Narendra Modi, who has the support of businesses in the country. There are hopes that, if elected, he could form a stable coalition and revive India’s lackluster economy.
  • Ukraine’s security forces have been attempting to clear Kharkiv, the country’s second largest city, of separatists as the government tries to counteract what it sees as Russian schemes to engineer further annexations. Violence has flared up recently amid pro-Russian demonstrations in Ukraine.
  • The Illinois House and Senate approved a bill that would increase employee contributions to two Chicago city pension systems and will cut future cost of living increases for retirees. The bill is the start of an attempt to deal with a pension system that has a shortfall of around $20 billion, with some funds on track to completely run out of money within a decade.

Markets

  • Stock markets continued their slide this week that began last Friday. The S&P 500 was down 2.61% for the week, closing at 1,816.The Dow Jones fell 2.31%, closing at 16,026. So far in 2014, the S&P is down 1.20% and the Dow Jones is down 2.69%.
  • Treasury yields fell this week in conjunction with falling stock prices as the growth prospects of the U.S. economy have been called into question. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.58% and 2.63%, respectively.
  • The spot price of WTI Crude Oil ended the week up 2.28%, closing at $103.40 per barrel.  Year to date, Oil prices have risen 5.52%.
  • The spot price of Gold rose by 1.14% this week, closing at $1,318.34 per ounce. Year to date, Gold prices are up 9.71%.

Economic Data

  • Initial jobless claims dropped by 32,000 from last week, coming in at 300,000 vs. consensus estimates of 320,000. The level of claims was a post-recession low and was the best reading since May 2007. The four week moving average for claims fell to 316,000, continuing the improvement in this timely measure of employment.

Fact of the Week

  • According to the IRS, eliminating the deduction for home mortgage interest expense would increase annual tax revenues to the U.S. government by $175 billion, a boost of 6.3%.

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 March 31, 2014

ukraine_moscow_mapU.S. and World News

  • World leaders met in the Netherlands this week to discuss a wide range of issues, but probably most notably the situation with Russia and Ukraine. The leaders barred Russia’s participation from the scheduled G-8 meeting, making it instead a G-7 conference with the United States, Britain, France, Germany, Italy, Canada and Japan participating. The group reaffirmed that Russia’s actions will have significant consequences, declaring Russia’s annexation of Crimea as a clear violation of international law.
  • The International Monetary Fund (IMF) has agreed to provide Ukraine with $14-18 billion as part of an economic reform program that will enable the country to tap into a total of $27 billion of international support over the next two years. In the U.S., Congress has overwhelmingly approved an aid package for Ukraine that includes $1 billion in loan guarantees and $150 million in direct assistance.

Markets

  • Stock markets were mixed this week. The S&P 500 was down 0.45% for the week, closing at 1,858.The Dow Jones edged up 0.12%, closing at 16,323. So far in 2014, the S&P is up 1.00% and the Dow Jones is now down 0.97%.
  • Short maturity issues saw their yields rise again this week, continuing last week’s trend following Janet Yellen’s hints that rate hikes may be coming sooner that expected. The     5 year and 10 year U.S. Treasury Notes are now yielding 1.75% and 2.72%, respectively.
  • The spot price of WTI Crude Oil ended the week up 2.06%, closing at $101.53 per barrel.  Year to date, Oil prices have risen 3.61%.
  • The spot price of Gold fell by 3.03% this week, closing at $1,293.85 per ounce. Year to date, Gold prices are up 7.67%.

Economic Data

  • Initial jobless claims dropped by 10,000 from last week, coming in at 311,000 vs. consensus estimates of 323,000. The four week moving average for claims fell to 318,000 continuing the positive trend in this timely employment indicator.
  • The Case-Schiller home price index rose a solid 0.8% in January vs. expectations of 0.6%. All 20 cities in the index saw price increases and prices nationally have risen 13.2% over the past year.
  • Chinese factory activity has shrunk for the fifth straight month with manufacturing PMI slipping to a reading of 48.1 (a reading of 50 is breakeven). Analysts see weakness in the country being broadly based and expect the Chinese government to launch a series of policy measures in an effort to stabilize growth.

Fact of the Week

  •        According to Bloomberg, American corporations hold an estimated total of $1.95 trillion in foreign earnings that have not been brought back into the United States in order to avoid the taxation of repatriating these funds. This foreign cash is equal to 12% of the size of the U.S. economy.

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 March 17, 2014

U.S. and World News

  • Quickly condemned as an illegal referendum by the U.S., the overwhelming majority of Crimeans voted to secede from Ukraine and join Russia last Sunday. Russian President Vladimir Putin authorized the annexation despite warnings of economic sanctions from President Obama and European Union nations. Obama has since responded by imposing asset freezes and visa bans on some senior Russian officials and businessmen closely associated with Putin. Meanwhile, Ukraine plans to pull its troops out of Crimea, effectively accepting Russia’s annexation of the province and will now fortify its eastern border with Russia.
  • fed_000011172845SmallThe Federal Reserve board met this week and decided to continue on with the tapering of asset purchases, lowering monthly treasury purchases by another $10 billion to $55 billion per month. The Committee also provided an update to their forward guidance regarding raising short term interest rates from their near zero level. First, they have abandoned the use of a 6.5% unemployment rate threshold as a timing mechanism for raising rates. The unemployment rate has continued to fall, aided by a declining labor force, and was no longer useful to the policy makers as a true measure of labor market strength. Secondly, the Committee confirmed their use of a 2% inflation target when deciding on policy. Chairwoman Janet Yellen also made headlines when she estimated that rate hikes could come “around six months” after the Fed fully winds down its Quantitative Easing program. With the pace of tapering setting the course for an October end of asset purchases, higher rates could come in April of 2015, earlier than many expectations of late 2015/early 2016.

Markets

  • Despite the results of the Crimean annexation vote and an increase of international political tensions, stock markets rose this week. The S&P 500 was up 1.38% for the week, closing at 1,867. The Dow Jones climbed 1.48%, closing at 16,302. So far in 2014, the S&P is up 1.45% and the Dow Jones is now down 1.09%.
  • Treasury yields jumped higher this week, especially shorter maturity issues, after Janet Yellen’s hints that rate hikes may be coming sooner that expected. The 5 year and 10 year U.S. Treasury Notes yielding 1.71% and 2.75%, respectively.
  • The spot price of WTI Crude Oil ended the week up 1.04%, closing at $99.58 per barrel.  Year to date, Oil prices have risen 1.62%.
  • The spot price of Gold fell by 3.51% this week, closing at $1,334.32 per ounce. Year to date, Gold prices are up 11.04%.

Economic Data

  • Initial jobless claims edged up by 5,000 from last week, coming in at 320,000 vs. consensus estimates of 322,000. The four week moving average for claims fell to 327,000 continuing the positive trend in this timely employment indicator.
  • The Headline Consumer Price Index rose 0.1% in February, in line with expectations. Energy prices declined 0.5%, as a 3.6% increase in natural gas prices was offset by a 1.7% decline in motor fuel prices. Over the past year, headline CPI has increased 1.1%, consistent with a subdued inflationary environment.

Fact of the Week

  • According to a study by the National Institute on Retirement Security, 38 million of the 84 million American households (45%) that are headed by working-age people (ie. not retired) do not own any tax-advantaged retirement accounts like an IRA or 401(k).

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 March 17, 2014

iStock_000024203309Small_350U.S. and World News

  • Tensions continue to mount overseas as rhetoric and vague threats of economic sanctions from President Obama and John Kerry against Russian action in Ukraine have fallen on deaf ears. The citizens of the Ukrainian province Crimea are scheduled to hold a referendum vote on Sunday in regards to joining the Russian Federation. Russia has stated that they will honor the results of the vote by the Crimean people, while John Kerry has stated that an annexation of Crimea by Russia will not be recognized by the United States and would bring with it strong consequences.
  • A bipartisan group of senators has agreed on a proposal to renew long-term jobless benefits for five months. The payments would be made retroactively from December, when the previous extension expired. The measure, which would cost $10 billion, is expected to pass through the Senate, but is expected to meet significant opposition in the House, making ultimate passage a toss-up.

Markets

  • Stock markets fell this week amid disappointing economic data from China and intensified rhetoric leading up to the Crimean referendum vote. The S&P 500 fell 1.92% for the week, closing at 1,841. The Dow Jones dropped by 2.29%, closing at 16,066. So far in 2014, the S&P is up 0.07% and the Dow Jones is now down 2.53%.
  • Treasury yields came back down this week following the increasing of tensions overseas with the 5 year and 10 year U.S. Treasury Notes yielding 1.54% and 2.66%, respectively.
  • The spot price of WTI Crude Oil ended the week down 3.54%, closing at $98.95 per barrel.  Year to date, Oil prices have risen 0.52%.
  • The spot price of Gold increased this week, gaining 3.19% and closing at $1,382.72 per ounce. Year to date, Gold prices are up 15.07%.

Economic Data

  • Initial jobless claims dropped by 8,000 from last week, coming in at 315,000 vs. consensus estimates of 330,000. The four week moving average for claims fell to 330,500. The Labor Department noted that there were no special factors affecting last week’s claims.
  • Consumer inflation in India fell for the third consecutive month in February, dropping to 8.1% from 8.8% in January. The decline comes as the Reserve Bank of India considers setting an inflation target after having raised interest rates three times since September.

Fact of the Week

  • According to the National Institute on Retirement Security, in 1975 85% of American workers in the private sector (non-government jobs) were covered by a defined benefit pension plan. This compares to just 16% of private sector workers being covered by pensions today, highlighting the dramatic shift from defined benefit pensions toward defined contribution plans such as 401(k)’s.

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