NAFTA, Japan Typhoon: Wealth Economic Update Sept. 10, 2018

U.S. and World News

  • The United States and Canada met to further negotiate a new NAFTA deal once again this week after talks broke down last Friday. President Trump threatened to entirely terminate NAFTA if Congress interferes with these negotiations. While the President certainly has the power to do this given a six month notice, the decision would present many legal challenges. Prime Minister of Canada Justin Trudeau is also taking a tough stance through negotiations stating that “No NAFTA is better than a bad NAFTA deal for Canadians and that’s what we are going to stay with”.
  • osaka_japan-481541250_370bOn Wednesday, Western Japan was hit with the most powerful typhoon that the country has seen in 25 years. Typhoon Jebi hit the city of Osaka with sustained winds of 100 miles per hour killing 11 people, injuring 470, and leaving over a million homes without power. Kansai Airport, a major airport for the tourist cities of Osaka, Kyoto, and Kobe still remains closed after vicious waves sent a large tanker into a bridge connecting the airport to the mainland. It is not yet known when the damaged and flooded airport will be reopened, raising concerns about the impact on tourism and the economy. On Thursday, Northern Japan was hit with a strong earthquake, closing another major airport. 22 were killed, 38 were missing, and roughly 3 million homes were without power after the earthquake.


Markets

  • Stocks fell this week. The S&P 500 dropped by 0.98% and closed at 2,872 The Dow Jones dropped by 0.14% and closed at 25,917. Year to date, the S&P is up 8.79% and the Dow Jones is up 6.51%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.82% and 2.94%, respectively.
  • The spot price of WTI Crude Oil decreased by 2.85% this week to close at $67.81 per barrel. Year to date, Oil prices are up 12.81%.
  • The spot price of Gold dropped 0.35% this week, and closed at $1,196.93 per ounce. Year to date, Gold prices are down 8.13%.

Economic Data

  • Initial jobless claims fell by 10,000 to 203,000 this week. The four-week moving average of claims moved down by 2,000 to 210,000. Claims fell by 3,000 in Michigan and 2,000 in Texas, but rose 2,000 in Indiana. This is the lowest level of jobless claims since 1969.
  • Private-sector employment rose by 163,000 in August versus expectations of a 200,000 gain. Job growth in the private sector was held back by education and health, leisure and hospitality, and construction.
  • The ISM manufacturing index increased to 61.3 in August from 58.1 in July versus expectations for a reading of 57.6. This is the highest level since May of 2004.
  • The ISM non-manufacturing index rose 2.8 points to 58.5 versus expectations of a 56.8 reading. The ISM reports indicate a higher pace of growth.
  • The trade deficit rose to $50.1 billion in July versus expectations of -$50.2 billion.
  • Nonfarm payrolls increased 201,000 in August month-over-month versus expectations of a 190,000 increase. The previous two months were revised lower by a net 50,000.
    • The unemployment rate remained at 3.9% versus expectations of a tick down to 3.8%.
    • Average hourly earnings rose by 0.4% in August versus expectations of a 0.2% increase. The year-over-year rate increased by 0.2% to 2.9%.


Fact of the Week

  • Amazon has gained nearly $400 billion in market cap this year, on its way to becoming the second trillion dollar company, behind Apple. The $400 billion Amazon has gained year to date is nearly equal to the market caps of Walmart, Costco, and Target combined.

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com

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Korea, Macron: Wealth Economic Update Apr. 27, 2018

U.S. and World News

  • korea_handshake-824604454_360The leaders of North and South Korea announced this morning that they would end the war that has lasted nearly 70 years and that they would begin pursuing “complete denuclearization” of the peninsula after holding a historic summit at the border. This marked the first time that a North Korean leader set foot in South Korea since 1953. The two leaders also agreed on potentially having high-level talks and negotiations with the United States and China.
  • President Trump met with French President Emanuel Macron earlier this week to discuss foreign policy issues. Following the meeting, Emanuel Macron stated that he believes that President Trump will scrap the Iran nuclear deal before the May 12th deadline, citing the president’s strong negative feelings about the deal. The Iran deal consists of billions of dollars in sanctions imposed on Iran being removed in exchange for an agreement to cease its nuclear program.

Markets

  • After another volatile week in the markets, the indices are almost unchanged from last week. The S&P 500, in a very rare occurrence, returned 0.00% this week and closed at 2,669.91. The Dow Jones fell 0.62% and closed at 24,311.19. Year to date, the S&P is up 0.45% and the Dow Jones is down 1.01%.
  • Yields were also unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.80% and 2.96%, respectively, the same exact level as last Friday’s close.
  • The spot price of WTI Crude Oil moved lower this week by 0.53% and closed at $68.04 per barrel. Year to date, Oil prices are up 13.19%.
  • The spot price of Gold fell this week by 0.98%, closing at $1,323.33 per ounce. Year to date, Gold prices are up 1.58%.

Economic Data

  • Initial jobless claims declined 24,000 to 209,000 for the week. The largest declines were in New Jersey, Pennsylvania, and Ohio. The four-week moving average moved down 2,000 to 229,000. The pace of layoffs still remains very low.
  • New durable goods orders increased by 2.6% in March exceeding expectations of a 1.6% increase. The increase was largely influenced by the 44.5% increase in non-defense aircraft orders. N
    • New durable goods order ex-transportations was flat for the month of March compared to expectations of a 0.5% increase.
  • Wholesale inventories rose by 0.5% in March missing expectations of a 0.7% increase. The figure was held lower by a decline in retail inventories of -0.4%.
    Real GDP rose by 2.3% in the first quarter of 2018 versus expectations of a 2.0% increase.

    • Consumption growth slowed to 1.1% versus 4.0% in quarter four.
    • Housing investment came in at -3.5% versus expectations of a 0.1% increase.
    • Government spending came in at -1.4% versus expectations of a 2.5% increase.
    • Nonresidential structures rose 12.3% versus expectations of a 7.0% increase.
  • The University of Michigan’s index of consumer sentiment rose 1.0 point to 98.8 in April versus expectations of 98.0.
  • Existing home sales rose 1.1% in March to a seasonally adjusted rate of 5.60 million units exceeding expectations of a 0.2% increase.
  • Consumer confidence rose to 128.7 in April exceeding expectations of 126.0.

Fact of the Week

  • Amazon closed today at $1572.96, after reaching an all-time high during trading at $1633.26. Amazon’s first close in 1997 was $1.96, on a split-adjusted basis. If you have invested $10,000 at the first closing price, your investment would be worth $8,023,507.24 as of close today. (Source: Money.net)

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

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

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North Korea, Japan, Cuba: Wealth Economic Update Apr. 20, 2018

U.S. and World News

  • KOREA-652900206_360Japan’s Shinzo Abe traveled to Mar-a-Lago to meet with President Trump on Tuesday to discuss trade and a planned summit with North Korean leader Kim Jong-un. Japan wanted to discuss the United States renewed interest in re-entering the Trans-Pacific Partnership (TPP) and the possibility of Japan’s inclusion in the exemption of steel and aluminum tariffs with other United States allies. Japan was also concerned that they may have been excluded from nuclear negotiations with North Korea after President Trump made a decision to meet with Kim Jong-un without first conferring with Shinzo Abe. The two-day summit concluded with no deal being reached on the TPP, no exemption for Japan on the steel and aluminum tariffs, and a stronger agreement between the two leaders on North Korea.
  • After more than 60 years of Castro leadership in Cuba, Miguel Diaz-Canel was elected the next president of Cuba, a widely expected result. On Thursday, Raul Castro announced that he is stepping down and Diaz-Canel was elected after 603 out of the 604-member National Assembly had approved of him. Raul Castro will remain head of the country’s Communist Party until the next scheduled party congress in 2021. Miguel Diaz-Canel stated that he will reform the economy to improve the communication between the government and the people while preserving Cuba’s communist system.

Markets

  • The markets finished higher this week. The S&P 500 rose 0.54% and closed at 2,670.14. The Dow Jones rose 0.46% and closed at 24,462.94. Year to date, the S&P is up 0.45% and the Dow Jones is down 0.40%.
  • Yields moved much higher for yet another week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.80% and 2.96%, respectively. The 10-year Treasury yield hit its highest level since 2014.
  • The spot price of WTI Crude Oil rose again this week by 1.15% and closed at $68.10 per barrel. Year to date, Oil prices are up 13.29%.
  • The spot price of Gold fell this week by 0.76%, closing at $1,335.96 per ounce. Year to date, Gold prices are up 2.55%.

Economic Data

  • Initial jobless claims declined 1,000 to 232,000 for the week. The largest declines were in New Jersey, Pennsylvania, and Ohio. The four-week moving average moved up 1,000 to 231,000. The pace of layoffs still remains very low.
  • The Philadelphia Fed manufacturing index moved higher by 0.9 points to 23.2 vs consensus expectations of 21.0. The increase was led by the employment component and the average workweek component.
  • Retail sales increased by 0.6% in March versus expectations of a 0.4% increase. The increase was led by auto sales and slightly held back by falling gasoline prices.
    • Retail sales ex-autos increased 0.2% versus a median forecast of 0.2%
    • Retail sales ex-autos, gasoline, and building materials increased 0.4% versus a median forecast of 0.4%
  • Housing starts rose 1.9% in March to 1,319k, short of expectations of a 2.5% increase. The rise was driven by multi-family starts.
    • Building permits rose by 2.5% month-over-month in March to an annualized rate of 1,354k compared to a median forecast of an unchanged month-over-month figure.

Fact of the Week

  • Marijuana sales in Colorado generated $506 million in tax revenue for the state, through June 2017. In 2014, the first year it was legalized, the state generated $76 million in tax revenue from marijuana, nearly double the $42 million that was generated from alcohol sales in the state. The deficit in Illinois is $148 billion as of 4/20/18. (CNN Money, US Debt Clock).

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

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

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Kudlow, Japan/EU: Wealth Economic Update Mar. 19, 2018

U.S. and World News

  • economics_telescope-687981332_360CNBC Commentator Larry Kudlow has accepted the role of Chief Economic Advisor to President Trump after the departure of Gary Cohn amidst conflicting opinions on steel and aluminum tariffs. Larry Kudlow will first be tasked with negotiating the issue on tariffs while being particularly tough on China and he stated on Wednesday, “China can expect the U.S. to take a tough stance when it comes to international trade.” Larry Kudlow has been known to dislike tariffs and disagree with the President on this issue, however, after learning of the Canada and Mexico exemptions he has softened his view stating “I must say as somebody who doesn’t like tariffs, I think that China has earned a tough response not only from the United States.”
  • Japan and the European Union have pressured the United States to exempt them from the new steel and aluminum tariffs during a meeting in Brussels on Saturday. This was expected to come up as the United States has left further exemptions up for discussion after signing into law the new tariffs last week. The three countries agreed to take joint steps to combat steel overcapacity and attempt to regulate market prices with stronger subsidy rules.

Markets

  • Markets ended the week lower. The S&P 500 lost 20% and closed at 2,752.01. The Dow Jones also fell by 1.51% and closed at 24,946.51. Year to date, the S&P is up 3.37% and the Dow Jones is up 1.46%.
  • Yields were once again relatively unchanged this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 64% and 2.84%, respectively.
  • The spot price of WTI Crude Oil rose 24% this week, closing at $62.19 per barrel. Year to date, Oil prices are up 3.48%.
  • The spot price of Gold was down for the week losing 77%, closing at $1,313.70 per ounce. Year to date, Gold prices are up 0.84%.

Economic Data

  • Initial jobless claims fell by 4,000 from last week, coming in at 226,000. The four-week moving average was unchanged at 222,000. Layoffs remain at a very low pace and continue to fall further.
  • The Consumer Price Index rose by 0.15% in February, slightly below expectations of 0.2%. The rise in February was mostly influenced by rising energy prices and the year-over-year rate remained at 1.8%.
  • The Producer Price Index rose by 0.2% in the month of February driven by core producer price inflation. This was higher than expectations of a 0.1% increase and the year-over-year rate stands at 2.9%.
  • Retail Sales declined by 0.1% in February coming in short of expectations of a 0.3% increase and the previous two months were revised down slightly.
  • Housing starts declined by -7% in February to 1,236, below consensus expectations of a -2.7% decrease. The decline of housing starts in the west largely contributed to the February figure.

 

Fact of the Week

  • Just 2.2% of the banks and savings institutions in the United States hold 83% of the deposits maintained in FDIC-insured institutions nationwide as of 12/31/17. There are a total of 5,670 banks and savings institutions holdings $17.4 trillion of deposits as of the end of last year (Source: FDIC).

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

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

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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

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Fed meeting: Wealth Economic Update Sept 26, 2016

U.S. and World News

  • federal_11172872_340The Federal Reserve held its September policy meeting this week and decided to hold the Fed Funds rate at its current level. The decision was not unanimous as there were three dissenting members of the committee that favored raising rates at this meeting. The statement given after the decision included the language “near-term risks to the economic outlook appear roughly balanced” which many interpret as a rate hike being near. The next policy meeting will be held in November but given that it will take place before the Presidential election, it is not expected that a rate hike would occur at that meeting. As a result, the December Fed meeting has become the focus with markets currently pricing in a roughly 50% probability of a hike.
  • The Bank of Japan also held interest rates steady, although speculation was that they could cut rates further into negative territory as opposed to raising them. While they did not move rates, the BOJ did modify its policy framework in an attempt to spur more economic growth. Among the changes, the central bank said it would introduce yield curve controls, eliminate the maturity range of its bond purchases and confirmed that cutting rates further remains an option down the line.

Markets

  • This week the S&P 500 finished up 1.19% and closed at 2,165. The Dow Jones rose 0.76% and closed at 18,261. So far in 2016, the S&P is up 7.51% and the Dow is up 6.83%.
  • Interest rates were down slightly from last week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.18% and 1.62%, respectively.
  • The spot price of WTI Crude Oil rose 3.84% this week to close at $44.68 per barrel. WTI Crude is up 11.56% in 2016.
  • The spot price of Gold was up 2.14% this week, closing at $1,338.38 per ounce. Year to date, gold prices are up 26.13%.

Economic Data

  • Initial jobless claims came in at 252,000, down from last week’s reading of 260,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 259,000.
  • Housing starts declined -5.8% in August, worse than expectations of a -1.7% drop. Starts on single family (-6.0%) and multi-family (-5.4%) were both weak in the month.
  • Existing home sales declined -0.9% in August, missing expectations of a 1.1% increase. On a regional level, existing home sales declined in the South (-2.7%), West (-1.6%) and Midwest (-0.8%), while sales rose in the Northeast (+6.1%).

Fact of the Week

  • The 6.22 million tax returns from 2014 that reported at least $200,000 of adjusted gross income (AGI) represented 4.2% of all returns filed, received 34.2% of all AGI nationwide and paid 58.2% of all federal income tax paid during that year. (Source: Internal Revenue Service)

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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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

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 June 6, 2016

U.S. and World News

  • vienna_austria_340OPEC ministers met in Vienna, Austria this week to discuss the state of the world’s oil markets. The cartel of the largest oil producers failed to reach an agreement on setting output targets, a result that was widely expected. Saudi Arabia remains a supporter for setting output targets among the member nations; however, Iran is strongly against it as the country recently had restrictions lifted that allowed their re-entry into the oil markets.
  • As expected, the European Central Bank did not announce any new easing measures during its conference this week. The ECB has already increased stimulus twice since December, so the committee opted to hold off on any new measures for now. The previously announced step of the central bank purchasing corporate bonds is slated to begin next week.
  • Japanese Prime Minister Shinzo Abe announced the postponement of increasing the country’s sales tax from 8% to 10% amid continued tepid economic growth. The tax increase will be delayed for a second time until 2019 and marks a big reversal in Abe’s stance on the matter as he had repeatedly said that only an economic shock on the scale of the Lehman Brothers collapse or a major earthquake would cause another delay. Abe also said that he will announce a new stimulus package in the fall, further complicating Japan’s efforts to reign in the largest debt burden in the world and has led some economists to become concerned that Japan’s debt rating may be downgraded.

Markets

  • Equity markets were mostly flat during this holiday shortened week. The S&P 500 was Unchanged for the week and closed at 2099. The Dow Jones dipped 0.30% and closed at 17,807. So far in 2016, the S&P is up 3.65% and the Dow is up 3.42%.
  • Interest rates moved sharply lower on the weaker than expected jobs report, pushing back expectations of the Federal Reserve increasing interest rates. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.23% and 1.70%, respectively.
  • The spot price of WTI Crude Oil lost 1.11% this week to close at $48.78 per barrel. WTI Crude is up 18.03% in 2016.
  • The spot price of Gold gained 2.67% this week, closing at $1,244.69 per ounce. Year to date, gold prices are up 17.30%.

Economic Data

  • Initial jobless claims came in at 267,000 which was a decrease from last week’s reading of 268,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 277,000.
  • The May non-farm employment report showed a weak 38,000 jobs added during the month, well below estimates of 160,000. Some of the miss in the figure can be attributed to the 37,000 job decline in the telecommunications industry due to a major strike at Verizon. However, the weakness spread further than that category. The prior two months’ figures were revised down a total of 59,000, making the three month average for job gains 116,000.
    • The headline unemployment rate declined from 5.0% to 4.7%, a larger decline than the estimated 4.9%. However, most of this improvement in the headline figure was due to a 0.2% decrease in the labor force participation rate to 62.6%.
    • Average hourly earnings increased by 0.2%, bringing the 12-month increase in wages to 2.5%.
  • The Case-Shiller home price index rose 0.9% in March, slightly beating estimates of 0.8%. Only 1 of the 20 cities making up the index saw price declines during the month. Over the last 12 months, home prices as measured by the index have risen 5.4%.
  • The headline PCE (measure of inflation), rose by 0.3% during April, reflecting a rise in energy costs. Meanwhile, Core PCE (excludes food & energy, preferred measure of inflation by the Federal Reserve) was a bit weaker, gaining 0.17%. Over the last 12 months, headline prices measured by PCE have risen 1.1%, while core prices have risen 1.6%.

Fact of the Week

  • Per a poll by Gallup, only 68% of Americans at least age 65 and 44% of all American adults have executed a will or trust.

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 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 Economic Update May 2, 2016

U.S. and World News

  • Federal_Reserve_340The Federal Reserve kept interest rates at their current levels following their April policy meeting this week. Kansas City Fed President Esther George lodged his dissent of the decision, favoring a rate increase at this meeting. The post-meeting statement was little changed from the March statement, though the portion about global economic risks was dropped, showing an improvement in developments abroad. The statement’s tone, while dovish, leaves the door open for a rate hike at the next meeting in June.
  • The Bank of Japan also had a policy meeting this week but disappointed markets by holding off on increasing its already massive monetary easing program. After instituting negative interest rates on depositors, the Japanese central bank stated that they preferred to take more time to understand this policy’s effect before taking further action. Japan continues to struggle to achieve its growth and inflation targets, causing the expectation for action at this meeting.
  • Saudi Arabian Prince Mohammed bin Salman unveiled what he calls “Saudi Vision 2030” this week. It is a plan to overhaul the kingdom’s economy in order to reduce its massive reliance on oil revenues, which currently make up 80% of its income. Salman, who is age 31, intends to create the world’s largest sovereign-wealth fund with over $2 trillion in assets; to be partially funded by selling 5% of state controlled Saudi Aramco in an IPO.

Markets

  • Equity markets retreated this week. The S&P 500 fell 1.24% and closed at 2,065. Likewise, the Dow Jones dipped 1.28% and closed at 17,774. So far in 2016, the S&P is up 1.70% and the Dow is up 2.77%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.29% and 1.83%, respectively.
  • The spot price of WTI Crude Oil rose 5.17% this week to close at $45.99 per barrel. WTI Crude is up 12.97% in 2016.
  • The spot price of Gold gained 4.91% this week, closing at $1,293.53 per ounce. Year to date, gold prices are up 21.91%.

Economic Data

  • Initial jobless claims came in at 257,000 which was an increase from last week’s reading of 247,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 256,000.
  • The Case-Shiller home price index rose 0.7% in February, slightly below expectations of 0.8%. All of the 20 cities making up the index saw home price gains. On a year over year basis, home prices as measured by Case-Shiller have risen 5.4%.
  • The headline Personal Consumption Expenditures index (PCE, measure of inflation) rose by only 0.05% in March, below expectations of 0.1%. On a year over year basis, headline PCE has increased by 0.8%.
    • Core PCE (excludes food and energy and is the preferred inflation measure of the Fed) also rose only 0.05% in March, below a 0.1% forecast. Over the last 12 months, core prices have risen only 1.6%, well below the Fed’s 2% inflation target.
  • Real GDP for the 1st quarter of 2016 increased by 0.5% in the initial estimate, below expectations of 0.7%. The report was mixed with consumer spending rising by 1.9% and private investment falling by -3.5%.

Fact of the Week

  • According to an April 2016 Gallup poll, 37% of college graduates surveyed believe that stocks are the top “long-term investment” available to them, beating out bonds, real estate, gold or CDs. By contrast, only 17% of non-college graduates believe that stocks are the best investment.

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.