Keystone, Interest Rates: Wealth Economic Update Feb. 17, 2017

U.S. and World News

  • oil_socialPresident Trump met with Canadian Prime Minister Justin Trudeau this week for their first face-to-face meeting. The major topic of discussion was the NAFTA trade deal that Trump has vowed to update and renegotiate. The two leaders also discussed Trump’s decision to conditionally approve the Keystone XL pipeline which begins in Alberta’s oil sands. Coming out of the meeting, Trump said that the trade situation with Canada is already “less severe” than it is with Mexico. Canada sends 75% of its exports to the United States, accounting for 20% of Canada’s GDP.
  • Janet Yellen delivered her semi-annual testimony to Congress this week and touched on a number of topics, including the pace of interest rate hikes in the near future. On that note, she stated that, “I would say every meeting would be live,” indicating that the next hike could come as soon as the Fed’s March meeting. The markets are now pricing in a little over a 1 in 3 chance that the Fed raises rates in March.

Markets

  • Markets rose this week with continued low volatility. The S&P 500 gained 1.60% and closed at 2,351 which is an All-Time High. The Dow Jones followed suit by rising 1.88% and closing at 20,624. Year to date, the S&P is up 5.31% and the Dow is up 4.76%.
  • Interest rates were little changed this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.90% and 2.42%, respectively.
  • The spot price of WTI Crude Oil was down 0.91% this week, closing at $53.37 per barrel. Year to date, Oil prices have dipped 0.65%.
  • The spot price of Gold increased by 0.11% this week, closing at $1,235.00 per ounce. Year to date, Gold prices are up 7.63%.

Economic Data

  • Initial jobless claims rose 5,000 from last week, coming in at 239,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 245,000 which is very close to a new 40-year low.
  • Retail sales increased by 0.4% in January, beating expectations of 0.1%. Retail sales ex-autos rose by 0.8%. Gains were broad-based across categories, with the largest increases coming from sporting goods (1.8%), electronics (1.6%), restaurants/bars (1.4%) and department stores (1.2%).
  • The headline Consumer Price Index (measure of inflation) increased by 0.6% in January, beating expectations of 0.3%. This was mostly the result of a 4.0% increase in energy prices during the month. Over the last 12 months, headline CPI has risen 2.5%.
    • Core CPI (excludes food and energy) increased by 0.3% during January, more than the 0.2% forecasted. In the last year, core prices have risen 2.3%.

Fact of the Week

  • 54% of student loan borrowers have either defaulted or failed to pay down even $1 of principal on their outstanding debt over the last 7 years. Until an error was discovered in the government calculations last month, it was believed that the percentage was much lower, at 34%. (Source: Education Department)

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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

 

Travel Ban, One China: Wealth Economic Update Feb. 10, 2017

U.S. and World News

  • scales_gavel-509557490_360Three judges in the U.S. Appeals Court upheld the suspension of President Trump’s travel ban this week. The government now has 14 days to ask the 9th Circuit to have a larger panel of judges review the decision or appeal directly to the U.S. Supreme Court, which would likely determine the case’s final outcome. Expressing his displeasure with the Circuit Court’s decision, Trump tweeted, “SEE YOU IN COURT, THE SECURITY OF OUR NATION IS AT STAKE!”
  • In his first phone call with Chinese President Xi Jinping, President Trump said that he would honor the nation’s “One China” policy which considers Taiwan as one with China and not a separate nation. Trump also urged closer ties between the U.S. and China. The clarification on the “One China” policy ends weeks of uncertainty regarding Washington’s approach to China.
  • According to a new U.S. Department of Homeland Security report, President Trump’s wall along the U.S.-Mexico border would be a series of fences and walls that would cost as much as $21.6 billion and take more than three years to construct. The projected price tag is much higher than the $12 billion figure cited on the campaign trail and the $15 billion estimated by Republican Congressional leaders.

Markets

  • Markets rose this week with continued low volatility. The S&P 500 gained 0.87% and closed at 2,316 which is an All-Time High. The Dow Jones followed suit by rising 1.13% and closing at 20,269, also an All-Time High. Year to date, the S&P is up 3.66% and the Dow is up 2.83%.
  • Interest rates fell this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.89% and 2.41%, respectively.
  • The spot price of WTI Crude Oil was unchanged this week, closing at $53.81 per barrel. Year to date, Oil prices have risen 0.18%.
  • The spot price of Gold increased by 1.09% this week, closing at $1,233.62 per ounce. Year to date, Gold prices are up 7.51%.

Economic Data

  • Initial jobless claims fell 12,000 from last week, coming in at 234,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 244,000 which marks a new 40-year low.
  • The University of Michigan consumer sentiment index fell to 95.7 in the preliminary February report following increases in the previous three months. Both consumers’ assessment of current conditions and expectations for the future declined with the expectations component falling further.

Fact of the Week

  • Equity market volatility has been very low for the last portion of 2016 extending into 2017. The S&P 500 has now gone 39 consecutive trading days without experiencing an intraday range of greater than +/- 1% which is the longest stretch that has occurred since 1982. (Source: Strategas Research Partners)

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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

 

SCOTUS, Brexit, Fed: Wealth Economic Update Feb. 6, 2017

U.S. and World News

  • scales-178714734_360President Trump continued to make headlines this week starting with his firing of Attorney General Sally Yates after she ordered DOJ lawyers not to defend the newly enacted travel and immigration restrictions. Dana Boente, U.S. Attorney General for the Eastern District of Virginia, has been named acting Attorney General until Jeff Sessions is confirmed by the Senate. Trump also announced his nomination of Neil Gorsuch, an appointee of President George W. Bush, to the U.S. Supreme Court. Gorsuch is the youngest (49) nominee to the Supreme Court in more than 25 years and will face a difficult confirmation process as Democrats have already come out in opposition of him.
  • After a two day debate, Britain’s departure from the European Union took a step forward this week as the House of Commons voted overwhelmingly in favor of triggering Article 50. Once triggered, it will begin a two year process for Britain to leave the EU. With that obstacle cleared, Prime Minister Theresa May is set to publish a detailed Brexit plan that includes controlling migration, pulling out of the single market and negotiation plans with Britain’s trading partners.
  • The Federal Reserve held a policy meeting this week and elected to keep interest rates unchanged as was the expectation going in. The Committee made few changes to their prior statement saying that the economy was expanding “at a moderate pace” and that job growth was still “solid.” They did make one meaningful upgrade to their assessment of the economy saying “measures of consumer and business sentiment have improved of late.” The Fed will meet again March 14-15 and the market is currently pricing in a 35% probability of a rate hike at that meeting.

Markets

  • Markets traded relatively flat this week. The S&P 500 gained 0.16% and closed at 2,297. The Dow Jones dipped 0.09% and closed at 20,071. Year to date, the S&P is up 2.76% and the Dow is up 1.69%.
  • Interest rates held steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.93% and 2.49%, respectively.
  • The spot price of WTI Crude Oil rose by 1.28% this week, closing at $53.85 per barrel. Year to date, Oil prices are unchanged.
  • The spot price of Gold increased by 2.44% this week, closing at $1,220.30 per ounce. Year to date, Gold prices are up 6.34%.

Economic Data

  • Initial jobless claims fell 14,000 from last week, coming in at 246,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 248,000.
  • The January employment report showed a gain of 227,000 jobs in the month, beating consensus estimates of 180,000. The prior two months were revised down by a combined 39,000 which brings the three month average of job gains to 183,000.
    • Headline unemployment ticked up 0.1% to 4.8% in January. The move up was the result of a 0.2% increase in the labor force participation rate to 62.9%.
    • Average hourly earnings only rose 0.1% in January, lower than expectations of 0.3%. Over the last 12 months, wages have grown 2.5%.
  • The Case-Shiller Home Price Index rose by 0.9% in December, beating forecasts of 0.7%. All 20 cities measured by the index saw increased prices and have now grown 5.3% over the last 12 months.
  • The PCE Index (measure of inflation) rose by 0.2% in December, in line with expectations. Over the last 12 months PCE prices have risen 1.6%.
    • Core PCE (excludes food and energy, preferred measure of inflation by the Fed) rose 0.1% in the month, meeting expectations. Over the last year, Core PCE has risen 1.7%, still short of the Federal Reserve’s 2% target.

Fact of the Week

  • The New York Stock Exchange introduced its opening/closing bell in the 1870’s when continuous trading began and started off as a Chinese gong. In 1903, the NYSE moved to its current building and the gong was replaced by a brass bell. The first guest to ring the opening bell (which has now become a tradition) was Leonard Ross in 1956. Leonard was a 10 year old who had won a TV quiz show answering questions about the stock market to earn that honor. (Source: NYSE.com)

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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

 

Dow 20,000, 1st Week: Wealth Economic Update Jan. 27, 2017

U.S. and World News

  • dow_20000The Dow Jones Industrial Average finally eclipsed the 20,000 mark for the first time, having flirted with the mark for more than a month. The benchmark index took 103 years to reach the 10,000 level in March 1999 and another 17 years to double. The latest 1,000 points added to the Dow came in the last 42 trading days as a post-election stock market rally sent major U.S. indices to new all-time highs.
  • In his first full week in office, President Trump has been very busy enacting many of the initiatives that he laid out on the campaign trail. He began by withdrawing the U.S. from the TPP trade agreement that had been established with many Asian nations like Japan and promising to renegotiate the NAFTA trade deal currently in place with Canada and Mexico. This was followed by executive orders clearing the path for the Keystone XL and Dakota Access Pipeline projects to move forward after they had been blocked by the Obama administration. Finally, Trump reiterated his intention on building a border wall between the U.S. and Mexico and insisted that Mexico would be footing the bill for the massive project. These statements resulted in Mexican President Enrique Pena Nieto cancelling a planned trip to meet with Trump and tensions rose further when White House spokesman Sean Spicer suggested Trump was considering a 20% tax on Mexican imports to pay for the wall. On tap for next week will be Trump’s nomination for the vacant Supreme Court seat.

Markets

  • This week the S&P 500 rose by 1.04%, closing at 2,295. The Dow Jones Industrial Average surpassed the 20,000 mark, increasing by 1.34% and closed at 20,094.
  • Interest rates were mostly unchanged this week. The 5 year and 10 year U.S. Treasury Notes now yield 1.95% and 2.48%, respectively.
  • The spot price of WTI Crude Oil increased by 1.29% this week and closed at $53.12 per barrel.
  • The spot price of Gold dropped by 1.51% this week, closing at $1,191.35 per ounce.

Economic Data

  • Weekly initial jobless claims came in at 259,000, an increase from last week’s reading of 235,000. The Labor Department noted no major distortions to the data this week. The four week moving average for jobless claims now stands at 245,000 setting a new low mark since 1973.
  • New home sales fell by 10.4% in December which was worse than consensus expectations. Only new home sales in the Northeast region rose during the month as the Midwest, South and Wet all saw declines.
  • Real GDP in the 4th quarter grew by an annualized 1.9%, missing expectations for a 2.2% gain. This brings full year 2016 growth to just under 2.0%.

Fact of the Week

  • The Dow Jones Industrial Average was launched in 1896 and consisted of 12 companies. The index expanded to 20 companies in 1916 and grew to its current size of 30 companies in 1928 when the components of the index started being referred to as “Blue Chips”. General Electric is the only stock currently in the index that was part of the original 12, although it was removed from the index twice (in 1898 and in 1901) but returned to the index both times.
  • CORRECTION: Last week’s fact incorrectly stated market returns during the Obama presidency in relation to other Presidents. A total return (includes dividends) was quoted for Obama while comparing it to Clinton’s price-only returns. The correct figures were 13.8% annualized returns during Obama’s tenure and 15.2% annualized returns during Clinton’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
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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

 

Wealth Management Economic Update November 24, 2014

U.S. and World News

  • President Obama has outlined plans to use an executive order to aid millions of illegal immigrants, granting them the chance to apply for work permits and a temporary reprieve from deportation. Obama announced, “I will make it easier and faster for high-skilled immigrants, graduates and entrepreneurs to stay and contribute to our economy, as so many business leaders have proposed.” The move would mark the most drastic changes to the nation’s immigration laws in nearly 30 years and has predictably set off a fierce fight with Republicans over the limits of presidential powers.
  • China_shanghai_finance_000038795732_320In a surprising move, China has cut its benchmark interest rates for the first time in more than two years in response to a slowing economy. China is still growing faster than most developed nations but saw its growth slow to a five year low of 7.3% last quarter. The one year benchmark lending rate was lowered by 0.4% to 5.6% and the one year deposit rate was cut by 0.25% to 2.75%.
  • Data this week showed that Japan has fallen back into recession after posting a 1.6% GDP contraction in the 3rd quarter. In response, Japanese Prime Minister Shinzo Abe announced that he will delay a sales tax hike that was set to take effect next year. He also announced that snap elections will be held after the Japanese parliament is dissolved.
  • The U.S Senate fell one vote short in its attempt to approve construction of the Keystone XL pipeline, with the final tally of 59-41. Republican leadership believes that approval will come next year when the party takes majority in the Senate. It was widely believed that President Obama would have vetoed the bill had it passed in the Senate.

Markets

  • Equity markets continued to head higher this week as the S&P 500 and Dow Jones both closed Friday at new All-Time Highs. The S&P 500 advanced 1.20% and closed at 2,063. Likewise, the Dow Jones moved up 1.04% and closed at 17,810. Year to date, the S&P is up 13.68% and the Dow Jones is up 9.69%.
  • Yields in the Treasury markets traded flat this week. The 10 year Treasury bond now yields 2.31% and the 5 year Treasury yields 1.61%.
  • The spot price of WTI Crude Oil stopped its decline this week, rising 1.21%, closing at $75.98 per barrel. Year to date, Oil prices are down 17.21%.
  • The spot price of Gold increased this week, advancing by 1.04% and closing at $1,201.16 per ounce. Year to date, Gold prices are virtually unchanged.

Economic Data

  • Initial jobless claims rose from last week, coming in at 291,000 vs. consensus estimates of 284,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 288,000, which is near the lowest it’s been since April 2000.
  • Existing home sales rose 1.5% in October vs. expectations of a 0.4% decline. Existing home sales have generally trended upward since their recent trough in March, which was largely weather related.
  • The Headline Consumer Price Index was flat in October vs. expectations of -0.1%. Energy prices declined 1.9% in the month, mainly due to gasoline. Meanwhile, Core CPI (does not include food or energy) increased 0.2% this month against expectations of 0.1%.

Fact of the Week

  • According to the Social Security Administration, about 75% of single elderly people receiving Social Security benefits get more than half of their income from the program. In addition, 22% of married couples and 47% of single people receiving Social Security benefits count on the program for 90% or more of their income.

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 November 10, 2014

U.S. and World News

  • senateThe midterm elections resulted in large gains for the Republican Party. Republicans won control of the Senate and expanded their margin in the House. This leaves the Democratic Party without a majority in either chamber of Congress for the first time since 2006. Lawmakers will now try to come together to pass legislation that has stalled in the face of partisan brinksmanship. Key issues include infrastructure spending, healthcare, the Keystone XL pipeline and tax reform.
  • China’s top regulator is working to loosen restrictions on foreign investment in certain sectors of the Chinese economy. The move is aimed at adapting to a more globalized economy and improving the efficiency of its domestic companies. The proposal from the National Development and Reform Commission includes new rules that would cut the number of sectors where China limits foreign investment to 35 from the current 79, opening up areas such as oil refining, paper making, steel and premium spirits.

Markets

  • Equity markets continued to rally this week as both the S&P 500 and Dow Jones Industrial Average closed at new All-Time Highs. The S&P 500 advanced 0.75% and closed at 2,032. Likewise, the Dow Jones climbed up 1.14% and closed at 17,574. Year to date, the S&P 500 is up 11.83% and the Dow Jones is up 8.07%.
  • Yields in the treasury markets traded down a bit this week. The 10 year treasury now yields 2.31% and the 5 year treasury yields 1.59%.
  • The spot price of WTI Crude Oil fell again this week, dipping 2.56%, closing at $78.48 per barrel. Year to date, Oil prices are down 15.36%.
  • The spot price of Gold increased marginally this week, advancing by 0.39% this week, closing at $1,177.56 per ounce. Year to date, Gold prices are down 2.00%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 278,000 vs. consensus estimates of 285,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 279,000, which is the lowest it’s been since April 2000.
  • Non-farm payroll jobs increased by 214,000 in October vs. consensus expectations of 235,000. Including revisions of previous months’ figures, the three-month average pace of job gains stands at a solid 224,000.
    • The headline unemployment rate unexpectedly fell to 5.8%. The drop was especially surprising given that the labor force participation rate went up by 0.1% to 62.8% (still a very low level).
    • Average hourly earnings rose only 0.1% vs. expectations of 0.2%. Over the last 12 months, hourly earnings have grown a subdued 2.0%.

Fact of the Week

  • Since 1946, the S&P 500 has never had a decline in the 12 months following a midterm election. There have been 16 midterm elections in that span and the S&P has risen by an average of 16.1% in the 12 months following these elections.

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 June 23, 2014

U.S. and World News

  • NATO has announced that Russia has begun increasing troops again on its border with Ukraine. Vladimir Putin has blamed Ukraine for the escalation, saying that Ukraine has been holding military exercises on the eastern border for days. Threats of new Western sanctions have been made, but while the U.S. can choose to institute them at any time, the European Union nations will have to wait until a meeting of top country leaders in Brussels on June 26-27.
  • The Federal Reserve announced another $10 billion dollar tapering of its monthly asset purchases, bringing the amount down to $35 billion per month. The announcement was largely expected and the comments about the economy given by Chairwoman Janet Yellen were slightly dovish. Yellen also discounted the possibility of inflationary pressures reentering the U.S. economy following higher than expected inflationary data earlier in the week.
  • internet_high-tech_000010815543After their 2010 version was rejected by an appeals court in January, the FCC is now revising the web’s “net neutrality” rules – the regulatory laws which ensure internet providers do not block or slow down users’ access to content on the web. With lobbies on both sides of the spectrum, the agency is considering whether to apply the new regulations to wireless internet traffic as well, due to the rise in mobile internet use.
  • With the escalating violence in Iraq and uncertainty of future crude oil prices, the Keystone XL pipeline is once again coming into focus. Supporters of the project are pointing to tensions in Iraq and possible supply cut-offs as a reason to push forward with the $5.3 billion pipeline, which has faced numerous delays over the last six years. This week the Senate Energy and Natural Resources committee voted to advance the bill toward a construction approval.

Markets

  • Markets rose this week, ending at All-Time Highs for the S&P 500 and Dow Jones Industrial Average. The S&P 500 gained 1.40% and closed at 1,963 while the Dow Jones followed suit by rising 1.02% and closing at 16,947. Year to date, the S&P is up 7.24% and the Dow is up 3.41%.
  • The 5 year and 10 year U.S. Treasury Notes held steady this week and are now yielding 1.69% and 2.61%, respectively.
  • The spot price of WTI Crude Oil remained elevated this week on reports of conflict in Iraq. Prices rose 0.44%, closing at $106.64 per barrel. Year to date, Oil prices have climbed 11.55%.
  • The spot price of Gold increased by 2.97% this week, closing at $1,314.87 per ounce. Year to date, Gold prices are up 9.89%.

Economic Data

  • Initial jobless claims fell by 5,000 from last week, coming in at 312,000 vs. consensus estimates of 313,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 312,000.
  • The headline Consumer Price Index (measure of inflation) increased by 0.4% in May vs. consensus estimates of 0.2%, boosted in part by increases in food (+0.5%) and energy (+0.9%) prices. Core CPI, which does not consider food and energy, was also up a bit more than expected showing an increase of 0.3% vs. expectations of 0.2%.

Fact of the Week

  • A study of retirement investments showed that in 2013, nearly 35% of workers participating in a 401(k) programs who had changed jobs in that year opted to cash out their balance as opposed to leaving the money in their former employer’s plan or rolling it over into a new 401(k) or IRA. Employees doing so before they reach age 59 ½ are subjected to a 10% penalty on the balance, as well as being responsible for paying any taxes on capital gains the account may have accumulated. Younger participants were guiltier of this behavior, with workers between ages 20-39 cashing out 401(k) balances over 40% of the time when they change jobs.

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 February 24, 2014

U.S. and World News

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

yen_safe_000015999222_250

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

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Wealth Management Weekly Update February 10, 2014

U.S. and World News

    • The suspension of the U.S. debt limit ended this week, leaving the Treasury a couple week window in which they can take measures to avoid a default. In the past, the debate over the debt ceiling has been extremely contentious, but at this time there seems to be little stomach for a new fight, so it is expected that Congress will increase the cap without too much theatrics.

Architecture in San Juan Old City

  • Rating agency S&P has cut Puerto Rico’s credit rating to BB+, or junk status, and maintained a negative outlook for the debt-laden commonwealth. They cited a reduced capacity to access to capital to fund its operating deficit as a reason for the negative outlook. Moody’s and Fitch, other rating agencies, are also contemplating dropping Puerto Rico to junk status as well.
  • A bipartisan group of Senate and House members has stepped up pressure on the White House to approve the controversial Keystone XL oil pipeline that would extend from Canada to the Gulf Coast. This follows an extensive State Department report filed last week that found that the proposed pipeline would have little to no negative environmental impact, which has been one of the primary concerns holding up approval.

Markets

  • Stock markets climbed higher this week as the S&P 500 ended up 0.90%, closing at 1,797 and the Dow Jones rose by 0.69%, closing at 15,794. So far in 2014, the S&P and Dow are down 2.78% and 4.72% respectively.
  • Treasury yields were largely flat this week with the 5 year and 10 year treasury now yielding 1.47% and 2.68% respectively.
  • The spot price of WTI Crude Oil increased this week by 2.64%, closing at $100.06 per barrel. Oil prices are now up 1.53% in 2014.
  • The spot price of Gold rose again this week, gaining 1.82% and closing at $1,267.17 per ounce. Year to date, Gold prices are up 5.45%.

Economic Data

  • Initial jobless claims fell 17,000 from last week, coming in at 331,000 vs. consensus estimates of 335,000. The four week moving average for claims rose to 334,000. The Labor Department noted that there were no special factors affecting last week’s claims.
  • The January employment report contained a confusing set of data, as payroll job growth significantly disappointed, but the unemployment rate fell by one tenth. Nonfarm payrolls rose by 113,000 vs. expectations of 180,000. Weather surprisingly didn’t appear to play too much of a role in this month’s numbers. The unemployment rate fell 0.1% to 6.6%. Labor force participation rate actually rose by 0.2% to 63.0% despite the expiration of Emergency Unemployment Compensation benefits which many believed would lead some unemployed workers to stop reporting that they were actively seeking employment.
  • The ISM manufacturing index was much weaker than expected in January with a reading of 51.3 vs. expectations of 56.0 and was a fall from 56.5 in December. Comments from several of the survey respondents pointed to poor weather as a reason for the weakness in January.

Fact of the Week

  • According to a Wall Street Journal report, 1 in 6 men in their prime working years of 25-54 don’t have jobs. The proportion is around 17%, or 10 million people, which compares with 6% in the early 70’s and 13% in 2007. Reasons cited by economists include the slow recovery from the recession and that many people are unable to keep up with the way that technology and globalization are changing the labor market.

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 January 27, 2014

gas pipe lineU.S. and World News

  • This week Treasury Secretary Jacob Lew said that Congress has until late February to lift the $16.7 trillion debt ceiling to avert a U.S. default. The cap is suspended until February 7th, after which the Treasury can move money around for a few weeks before running out of cash. The question becomes how contentious the debate will be with issues such as a decision on the Keystone XL Pipeline potentially playing a role in the negotiations.

Markets

  • Stock markets were decidedly down this week as the S&P 500 ended the week off by 2.62%, closing at 1,790 and the Dow Jones fell 3.50%, closing at 15,879. So far in 2014, the S&P and Dow are down 3.14% and 4.21% respectively.
  • Treasury yields continued to fall this week. The 5 year and 10 year treasury now yielding 1.56% and 2.73% respectively.
  • The spot price of WTI Crude Oil rose this week by 2.37%, closing at $96.83 per barrel. Oil prices are down 1.75% in 2014.
  • The spot price of Gold rose a bit this week, gaining 1.18% and closing at $1,268.83 per ounce. Year to date, Gold prices are up 5.59%.

Economic Data

  • Initial jobless claims were roughly unchanged from last week, coming in at 326,000 vs. consensus estimates of 330,000. The four week moving average for claims fell by 3,700 to 331,500. The Labor Department noted that there was nothing unusual in the data this week as we exit the holiday season.
  • Existing home sales rose 1.0% in December, better than expectations of a 0.6% gain. The December gain was the first in five months and was consistent with a general pickup in housing market activity following a soft patch in mid-late 2013.
  • 4th quarter earnings season is underway with around 33% of the S&P 500 Index having reported. A few observations so far:
    • Revenue figures have surprised to the upside more than usual but this hasn’t translated to more positive earnings surprises as usual.
    • A disproportionate number of the positive revenue beats have come from the Technology sector, although several of the companies proceeded to provide lower guidance for next quarter.
    • Previously a drag on earnings, pension adjustments are having a positive effect on the bottom line for many companies as the health of their defined benefit plans improve.

Fact of the Week

  • According to a study by the Employee Benefit Research Institute, 47% of retirees left the workforce sooner than they expected, often times the result of health issues, disabilities or corporate downsizing. Only 7% of those individuals who retired earlier than they anticipated did so because their retirement accumulation was larger than expected.

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