Coronavirus, Markets, Oil production: Special Wealth Economic Update Mar. 9, 2020

SPECIAL UPDATE

virus_oil-1209053811_370The New York Stock Exchange halted trading this morning due to the circuit breaker of a 7% intra-day loss being breached on the heels of Coronavirus spread and the surprise decision made by Saudi Arabia to slash prices and increase production of oil. These circuit breakers were put in place in an effort to calm market trading during times of extreme stress & panic. Markets have been experiencing wide spread volatility over the course of the last two weeks and this past weekend’s events added to the market’s fears. While the effect on stocks has certainly been front and center, the fear has gripped the bond markets, sending interest rates to their lowest levels in history. The entirety of the U.S. Treasury curve going out to 30 years is now below a 1% yield.

One major catalyst for the heightened volatility was the plunge in oil prices as a result of Saudi Arabia’s decision at the weekend OPEC meeting to instigate a price war on oil. Early on during OPEC’s meeting in Vienna last week, Russia refused to agree upon a cartel-wide production cut in order to bolster already falling oil prices, believing that the move would be too beneficial to U.S. shale producers. In response to their non-compliance, Saudi Arabia put forth plans to slash prices and increase production in a direct shot at Russia’s market share. The response in the oil markets was precipitous, with more than a -20% drop and WTI crude pricing in the low $30’s per barrel. The size of the drop in prices signals not only a price war being waged, but also a steep decline in demand based on lower economic activity, which we believe to be overstated. Oil experienced a similar shock toward the end of 2015 when crude fell to $25/barrel as U.S. supply rose and OPEC made the decision to keep their cartel’s production at the same level.

The impact of the Coronavirus continues to expand globally. Reports came out this weekend that the Northern Italian region of Lombardy which is home to 16 million people will be quarantined until April 3rd. Here in the U.S., the number of confirmed cases stands at over 500, while deaths rose to 22.  The U.S. has ramped up efforts to contain the spread of the disease, including the cancellation of some widely attended events and temporary school closings. The lasting effects of Covid-19 and its containment efforts are still unclear but previous infectious disease episodes have resulted in temporary, albeit painful, economic disruptions.

Global central banks have been active in easing and maintaining liquidity in the markets with our own Federal Reserve announcing a 50 basis point cut to the Fed Funds Rate last week with potentially more cuts coming. The Federal Reserve also announced today that they will increase the amount of short-term loans it is offering to money markets to due to funding strains resulting from the coronavirus and an increased demand for short-term lending. This adjustment was designed to make sure the supply of bank deposits held at the Fed, called reserves, “remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation,” the New York Fed said. “They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus.” Coordinated fiscal policy efforts are being discussed and would be a welcome development, as they have a more direct influence on day-to-day activities than monetary policy and would have a larger impact on damaged consumer sentiment.

The Investment Team at Old Second Wealth Management continues to monitor these situations closely and how they affect the fundamentals of the economy. As always, should you have any questions please reach out to your Relationship Manager or Investment Officer.

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus, Oil production: Special Wealth Economic Update Mar. 6, 2020

U.S. and World News

  • President Donald Trump signed an $8.3 billion emergency spending package this morning to fight the coronavirus. At this point, there are have been more than 100,000 confirmed coronavirus cases in the world, including over 230 cases in the United States that include 14 deaths. Italy is now the worst-affected country outside of Asia with 2,502 cases and 79 deaths, which led to all schools and universities to be closed across the country. The coronavirus began to spread in several communities across the United States this week, closing schools and putting California in a state of emergency after their first death. According to the International Air Transport Association, airlines are expected to lose $63 billion to $113 billion in revenue for passenger traffic globally in 2020, depending on the future spread of the virus.
  • Looking to provide some stability to the price of oil, OPEC+ met this week in Vienna to discuss production cuts. Saudi Arabia was pushing for a cut of 1M-1.5M barrels per day in the second quarter and for an extension until the end of 2020 for existing cuts of 2.1M barrels per day that will expire this month. Russia, a country that is typically reluctant to agree to production cuts, announced that it would not back the additional cuts. The 14-member group is not scheduled to meet again until June 9th to review the policy. The price of oil fell 8% on the news.

Markets

  • Markets ended the week higher, despite the Dow Jones having 1,000 point swings nearly every day. The S&P 500 rose 0.65% and closed at 2,972. The Dow Jones gained 1.79% and closed at 25,865. Year-to-date, the S&P 500 is down 7.68% and the Dow Jones is down 8.95%.
  • Yields dropped sharply this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.61% and 0.76%, respectively.
  • The spot price of WTI Crude fell this week. Prices fell 7.42% and closed at $41.44 per barrel. Year to date, Oil prices are down 32.13%.
  • The spot price of Gold rose by 5.61% and closed at $1,674.61 per ounce. Year to date, Gold prices are up 10.37%.

Economic Data

  • Initial jobless claims fell by 3,000 to 216,000 and the four-week moving average of claims rose 3,000 to 213,000. Claims fell by 3,000 in Illinois, but increased by 5,000 in Ohio.
  • ISM manufacturing fell 0.8 points to 50.1 versus expectations for a reading of 50.5
  • The ISM non-manufacturing index rose by 1.8 points to 57.3 versus expectations for a reading of 54.8
  • Construction spending rose 1.8% versus expectations for an increase of 0.6%
  • Private sector employment rose by 183,000 versus expectations for an increase of 170,000
  • Factory orders fell by 0.5% versus expectations for a 0.1% decline
  • Nonfarm payrolls rose by 273,000 versus expectations for a 175,000 increase
  • The unemployment rate fell to 3.5% versus expectations for a reading of 3.6%
  • Average hourly earnings rose by 0.3%, in-line with expectations

Fact of the Week

  • During the 11 year bull market that began 3/10/09, the S&P 500 has had 7 “corrections” between 10 and 30 percent. The first was 07/02/10, and the last started when we entered correction territory last Friday. (Source: BTN Research)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Coronavirus, Trump in India: Special Wealth Economic Update Feb. 28, 2020

U.S. and World News

  • medicine-1090255620_370Investors across the world have started to panic as new cases of the coronavirus have started to flare up outside of China. The virus has spread to 49 countries, with epidemics emerging in Iran, Italy and South Korea, where the number of people diagnosed with the virus is growing at a rapid pace. The World Health Organization held a press conference this morning where they declared that the virus poses a “very high” risk at a global level and earlier this week the Center of Disease Control warned that the coronavirus is “likely” to spread across the United States. The CDC reported on Wednesday the first case of “community spread” within the United States when a California man contracted the virus without having any prior travel links or contact with any people diagnosed with the virus. In a press conference Wednesday night, President Trump told reporters that the risk to Americans was “very, very low” and placed Vice President Mike Pence in charge of the U.S. response. Last night, Switzerland announced a ban on all events over 1,000 people and Saudi Arabia stated that foreign visitors to Mecca is no longer allowed as countries are increasingly taking stronger measures to prevent the spread.
  • President Donald Trump traveled to India earlier this week to continue ongoing trade negotiations with Indian Prime Minister Narendra Modi. The President and Modi have agreed to “promptly” conclude trade negotiations that could potentially lead to a bilateral U.S. – India trade deal. During the trip, the United States secured a sale of $3 billion in military equipment to India. The two countries have been communicating for months regarding tariff rates, farm goods, medical devices, and digital trade. President Trump stated earlier this week that “India is probably the highest tariff nation in the world”.

Markets

  • Coronavirus fears gripped markets this week triggering steep declines. The S&P 500 fell 11.44% and closed at 2,954. The Dow Jones dropped 12.26% and closed at 25,409. Year-to-date, the S&P is down 8.24% and the Dow Jones is down 10.51%.
  • Yields dropped to record lows this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.94% and 1.16%, respectively.
  • The spot price of WTI Crude fell this week. Prices dropped 15.19% and closed at $45.27 per barrel. Year to date, Oil prices are down 25.86%.
  • The spot price of Gold fell by 3.55% and closed at $1,585.00 per ounce. Year to date, Gold prices are up 4.46%.

Economic Data

  • Initial jobless claims rose by 8,000 to 219,000 and the four-week moving average of claims rose 1,000 to 210,000. Claims rose by 4,000 in Illinois and New York.
  • Personal consumption rose by 1.7%, in-line with expectations
  • New orders for durable goods fell by 0.2% versus expectations for a decline of 1.4%
  • Durable goods ex-transports rose by 0.9% versus expectations for an increases of 0.2%
  • Core capital goods orders rose by 1.1% versus expectations for an increase of 0.1%
  • Core capital goods shipments rose by 1.1% versus expectations for no change
  • The Conference Board index of consumer confidence rose 0.3 points to 130.7 versus expectations for a reading of 132.2
  • Sales of new single-family homes increased by 7.9% to a seasonally-adjusted annualized rate of 764k units versus expectations for a reading of 718k
  • Pending home sales rose by 5.2% versus expectations for an increase of 3.0%
  • Personal income rose by 0.6% versus expectations for an increase of 0.4%
  • Personal spending rose by 0.2% versus expectations for an increase of 0.3%
  • The PCE price index rose by 0.1% versus expectations for an increase of 0.2% and the year-over-year rate rose 1.7% versus expectations for an increase of 1.8%
  • The core PCE price index rose by 0.1% versus expectations for an increase of 0.2% and the year-over-year rate rose by 1.6% versus expectations for an increase of 1.7%
  • The University of Michigan’s index of consumer sentiment rose 0.1 points to 101.0 versus expectations for a reading of 100.7

Fact of the Week

The S&P 500 and the Dow Jones posted their largest one-week losses since 2008. Despite this fall, the S&P is up 6.1% over the last year. (Source: Bloomberg)

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
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

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.

 

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

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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

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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