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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

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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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Trump speech, Fed, Sessions: Wealth Economic Update Mar. 6, 2017

U.S. and World News

  • politician_podium76797371_320President Trump delivered his first address to a joint session of Congress this week and spoke on a number of initiatives that the administration aims to put through. Trump pledged to overhaul the immigration system, improve jobs and wages for Americans, and promised “massive” tax relief to the middle class and tax cuts for businesses. Trump also laid out some general principles for an Obamacare replacement. Details on these items were absent from the address but Trump did say that he plans to ask Congress for $1 trillion in infrastructure investment, guided by the principle “Buy American and Hire American.”
  • The Federal Reserve came more into focus this week as Fed officials have indicated that there is a strong likelihood of a March interest rate hike. San Francisco Fed President John Williams said that an interest rate hike in March will be under “serious consideration” and New York’s William Dudley feels the case for tightening at the next meeting “has become a lot more compelling.” The market is now assigning a 94% chance of a Fed Funds Rate hike in March.
  • Attorney General Jeff Sessions has announced that he will recuse himself from any investigations related to President Trump’s election campaign amid backlash over his testimony about his contacts with Russia. At Sessions’ confirmation hearing, during which he was under oath, he failed to disclose meeting with Russia’s ambassador on multiple occasions when asked about contact with the Russian government during Trump’s campaign.

Markets

  • Markets rose this week following President Trump’s address to Congress. The streak of 55 consecutive trading days without a trading range of +/- 1% in the S&P 500 was broken this week. The S&P 500 gained 0.71% and closed at 2,383. The Dow Jones followed suit by rising 0.94% and closing at 21,006. Year to date, the S&P is up 6.84% and the Dow is up 6.79%.
  • Interest rates rose quite a bit this week following the address to Congress and increased rate hike odds. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.01% and 2.48%, respectively.
  • The spot price of WTI Crude Oil was down 1.39% this week, closing at $53.24 per barrel. Year to date, Oil prices have dipped 0.89%.
  • The spot price of Gold decreased by 1.78% this week, closing at $1,234.76 per ounce. Year to date, Gold prices are up 7.60%.

Economic Data

  • Initial jobless claims fell 19,000 from last week, coming in at 223,000 which is the lowest reading since 1973. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 234,000 which is a new 40-year low.
  • The Case-Shiller home price index rose by 0.9% in its latest reading, slightly beating expectations of a 0.7% increase. Prices rose in all 20 cities covered and the largest monthly increases were seen in Chicago (1.5%), Seattle (1.4%) and Tampa (1.4%). Over the last 12 months, home prices as measured by Case-Shiller have risen 5.6%.
  • The Headline PCE index (measure of inflation) rose 0.4% in January, slightly under expectations of 0.5%. Over the last year, prices as measure by PCE have increased 1.9%.
    • Core PCE (excludes food and energy, preferred inflation measure by the Fed) increased 0.3% in January, in line with expectations. Over the last year, Core PCE has risen 1.7%, still a bit below the Federal Reserve’s 2% target.

 

Fact of the Week

  • Over the last 30 years, the proportion of all US workers that were members of a union has fallen from 17.5% to 10.7%. Looking at just private sector workers, union membership has fallen from 14.0% in 1986 to just 6.4% now. (Source: Bureau of Labor Statistics)

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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Russia-Election, Turkey: Wealth Economic Update Dec. 30, 2016

U.S. and World News

  • In response to its alleged hacking and interference in the 2016 presidential election, the Obama administration announced new sanctions against Russia this week, including expelling 35 Russian diplomats and closing two Russian compounds in the U.S. The White House stated, “Russia’s cyber activities were intended to influence the election, erode faith in U.S. democratic institutions, sow doubt about the integrity of our electoral process, and undermine confidence in the institutions of the U.S. government.” Russian President Vladimir Putin has announced that Moscow will not retaliate in-kind and will refrain from expelling U.S. diplomats from the country, a decision that was praised by President-Elect Donald Trump in a Friday afternoon tweet.
  • Expanding on the truce that was established in Aleppo earlier this month, Russia and Turkey have brokered a nationwide ceasefire in Syria. The agreement would come into force in all regions where fighting between pro-government forces and opposition groups is taking place. The accord is already off to a shaky start as just after the ceasefire was set to take effect, it was reported that clashes between insurgents and government forces took place in several locations.

Markets

  • This week the S&P 500 fell by 1.07% and closed at 2,239. The Dow Jones Industrial Average decreased by 0.46% and closed the year at 19,763 and was unable to reach the 20,000 milestone in 2016. For the year, the S&P rose 11.77% and the Dow climbed 16.16%.
  • Interest rates continued to retreat from their recent highs this week. The 5 year and 10 year U.S. Treasury Notes now yield 1.93% and 2.45%, respectively.
  • The spot price of WTI Crude Oil rose by 1.49% this week and closed 2016 at $53.83 per barrel. WTI Crude was up 34.40% in 2016.
  • The spot price of Gold increased by 1.59% this week, ending the year at $1,151.35 per ounce. In 2016, gold prices rose 8.50%.

Economic Data

  • Weekly initial jobless claims came in at 265,000, a decrease from last week’s reading of 275,000. The Labor Department noted not major distortions to the data this week. The four week moving average for jobless claims now stands at 263,000.
  • The Case-Shiller home price index rose by 0.6% in October, beating expectations of 0.5%. Prices rose in all 20 cities measured by the index and have now risen 5.1% over the last 12 months.
  • Pending home sales fell 2.5% in November to a 10-month low. Pending sales fell in the West (-6.7%), Midwest (-2.5%) and South (-1.2%) but rose in the Northeast (+0.6%). The weak report may be an indication that higher mortgage rates are beginning to affect demand.

Fact of the Week

  • The number of electronic devices that are connected to the internet (ie. laptops, phones, care, appliances etc.) surpassed the world’s population in 2010. By 2020, the number of connected devices will reach 50 billion, or almost 7 times the world’s population of 7.3 billion. (Source: Federal Trade Commission)

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

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

Visit Old Second Wealth Management

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Presidential Transition: Wealth Economic Update Nov. 21, 2016

U.S. and World News

  • washington_dc-486225108_360President-elect Donald Trump has offered retired Lt. Gen. Michael Flynn the National Security Advisor role. Lt. Gen. Michael Flynn is the former head of the Defense Intelligence Agency and was Trump’s top national security advisor during his campaign. Donald Trump also agreed to cooperate with Vladimir Putin to “tackle international terrorism” after the two discussed the matters by telephone on Monday. An unexpected meeting between Mitt Romney and Donald Trump will take place this weekend regarding the Secretary of State position. SEC Chairman Mary Jo White plans to step down at the end of President Obama’s term and a Republican-appointed leader will assume the role which is expected to result in less regulation on Wall Street.
  • Fed Chair Janet Yellen hinted that the FOMC is on course to raise rates in December and that uncertainty related to the election would not influence the decision. Janet Yellen stated that a rate increase “could well become appropriate relatively soon” and that recent economic data has shown that the economy is “making very good progress”.

Markets

  • This week the S&P 500 increased 0.89% and closed at 2,182. The Dow Jones rose 0.26% and closed at 18,868. So far in 2016, the S&P is up 8.74% and the Dow is up 9.10%.
  • Interest rates increased significantly higher once again this week as investors foresee higher inflation in the future as a result of a Trump presidency. The Dollar index hit 100 for the first time in almost a year after it rose by more than 1% this week. The 5 year and 10 year U.S. Treasury Notes now yield 1.79% and 2.35%, respectively.
  • The spot price of WTI Crude Oil increased by 4.98% this week to close at $45.57 per barrel. WTI Crude is up 3.97% in 2016.
  • The spot price of Gold fell 1.55% this week, closing at $1,208.64 per ounce. Year to date, gold prices are up 13.90%. 

Economic Data

  • Initial jobless claims came in at 235,000, a decrease from last week’s reading of 254,000 and the lowest level since the early 1970’s. The largest declines were in California, Missouri, and Illinois. The four week moving average for claims moved down to 253,000.
  • Housing starts rose 25.5% in October, which was the largest increase since July of 1982 and significantly higher than expectations of a 10.4% increase. The multifamily home starts increased by 68.8% and single family starts increased by 10.7%.
  • Retail sales increased by 0.8% in October which was above consensus expectations of a 0.5% gain. Core retail sales (excluding autos, gas, and building materials) was also up 0.8% versus consensus expectations of a 0.4% increase.
  • The consumer price index (CPI) gained 0.4% in October and 1.6% from one year ago, which was in line with expectations, and heightened by higher energy prices. The core CPI (excluding food and energy) rose by 0.15% in October versus expectations of 0.2% and increased 2.17% from one year ago. 

Fact of the Week

  • A child born in 2016 that begins kindergarten in the fall of 2021 would attend college between the years of 2034 and 2038. If that child attended an average private 4-year college and if the annual price increases for private colleges experienced over the last 30 years (+5.2% per year) continued into the future, the aggregate 4-year cost of the child’s college education (including tuition, fees, room & board) would total $490,502 or $122,625 per year (source: College Board).

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

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

Visit Old Second Wealth Management

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Russia-US-Syria: Wealth Economic Update Sept 19, 2016

U.S. and World News

  • syria_aleppo_340The United States and Russia have agreed on a cease-fire in Syria with support from Syrian President Bashar Assad, and as part of the deal, Syria will continue to strike at the Islamic state for one week until the U.S. and Russia take over. The cease-fire was successful in its first full day with no recorded combat deaths and a cautious effort to deliver aid to fortified areas has begun. However, the ability of the U.S. and Russia to work together on the fight against ISIS has been questioned as they have begun to accuse one another of failing to do their part in the agreement.
  • Greece has stated that it plans to tell its creditors that it is unable to comply with the labor reforms set by the IMF for its €86 billion bailout. The terms of the labor reform is a ban on the right of workers to collectively negotiate wages and conditions.
  • The Bank of Japan plans to continue the use of negative interest rate policy for monetary easing. Negative interest rate policy has been in use by the BOJ since February in an effort to meet their 2% inflation target. The policy has come with repercussions such as a stronger Yen and lower margins for financial institutions.
  • The market currently has priced in a 20% probability of a 0.25% rate increase from the Federal Reserve next week.

Markets

  • After a volatile week, the S&P 500 finished up 0.59% and closed at 2,139. The Dow Jones rose 0.25% and closed at 18,124. So far in 2016, the S&P is up 6.26% and the Dow is up 6.04%.
  • Interest rates were up slightly from last week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.20% and 1.69%, respectively.
  • The spot price of WTI Crude Oil fell 5.82% this week to close at $43.21 per barrel. WTI Crude is up 16.60% in 2016.
  • The spot price of Gold was down 1.33% this week, closing at $1,310.21 per ounce. Year to date, gold prices are up 23.48%.

Economic Data

  • Initial jobless claims came in at 260,000, up slightly from last week’s reading of 259,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 261,000.
  • Retail sales declined by 0.3% in August compared to consensus estimates of a decline of 0.1%. The decline in oil prices transitioning to lower gasoline station sales is part of the reason for this.
  • The Consumer Price Index (CPI) increased by 0.2% in August compared to consensus estimates of 0.1%. The increase reflects increased prices in medical care commodities and services.

Fact of the Week

  • More than 1 in 3 employed Americans (36%) work for companies that do not offer an employer-sponsored retirement plan, a total of 55 million workers lacking access to a plan (source: AARP, DOL).

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

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Brazil impeachment trial: Wealth Economic Update Aug 15, 2016

U.S. and World News

  • brazil_17780429_340The Olympic Games have begun in Brazil but that did not stop the country’s Senate from voting to put suspended President Dilma Rousseff on an impeachment trial. Rousseff had been suspended from her post for allegedly illegally financing government spending. The decision to proceed with impeachment hearings could seal her fate and lead to her successor Michel Temer taking the post on a permanent basis as early as this month.
  • Vladimir Putin has promised to respond in kind to what he called Ukraine’s “terror” tactics in the disputed region of Crimea. Fighting between Ukrainian government forces and Russian-backed rebels has intensified once again with two servicemen being killed in clashes in the last week. Putin also threatened to cancel the peace negotiations at next month’s G20 meeting and called the talks “pointless”.
  • On Thursday, in an event that hadn’t occurred since December 31, 1999, the S&P 500, the Dow Jones Industrial Average and the NASDAQ indices all set all-time highs on the same day. This accentuates a strong comeback in equity markets from historically the worst start to a year which saw those same indices decline more than 10% through mid-February.

Markets

  • This week the S&P 500 was up 0.12% and closed at 2,184. The Dow Jones rose 0.33% and closed at 18,576. So far in 2016, the S&P is up 8.21% and the Dow is up 8.29%.
  • Interest rates dipped a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.10% and 1.51%, respectively.
  • The spot price of WTI Crude Oil gained 6.96% this week to close at $44.71 per barrel. WTI Crude is up 11.64% in 2016.
  • The spot price of Gold was unchanged this week, closing at $1,335.97 per ounce. Year to date, gold prices are up 25.90%.

Economic Data

  • Initial jobless claims came in at 266,000, edging down from last week’s reading of 269,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved up to 263,000.
  • Retail sales were flat in July, missing expectations of a 0.4% acceleration. Solid increases in vehicle and parts sales were offset by lower gas station sales as fuel prices declined. Core retail sales (excludes autos, gasoline and building materials) also showed no gain, underperforming estimates of 0.3%.
  • The University of Michigan consumer sentiment index moved up to 90.4 from 90.0 in the initial August release. This was a bit below expectations of a 91.5 reading. Within the report, consumers’ assessment of current economic conditions declined while their expectations of the future improved.

Fact of the Week

  • Americans spent $3.63 billion less at gas stations in June 2016 compared to June 2015, but they spent $2.55 billion more at restaurants and bars in June 2016 than in June 2015 (Source: Census Bureau).

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

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Wealth Management Economic Update February 8, 2016

U.S. and World News

  • The first known case of Zika virus transmission in the U.S. was reported this week by the Centers for Disease Control and Prevention. This follows the World Health Organization’s declaration that the outbreak of the virus in South and Central America, which has caused serious birth defects, is an international health emergency. This was the fourth time the WHO has proclaimed a global health threat since 2007. Previously thought to only be transmitted by certain mosquitoes, the discovery that the U.S. case of the virus was sexually transmitted is an alarming development. Several large pharmaceutical companies have announced projects to develop a vaccine against the Zika virus.
  • The United Nations has suspended Syria peace talks in Geneva until later this month, after Syrian government forces (backed by Russian air strikes) escalated an offensive by cutting off rebel supply lines. The Syrian civil war has killed 250,000 people over five years and forced millions of other to flee their homes, creating a growing migrant crisis in Europe.
  • new_zealand_aukland_320The monumental Trans-Pacific Partnership was signed in New Zealand this week by ministers from its 12 member nations. However, the massive trade pact will still require years of negotiations before it becomes a reality as the deal will undergo a two year ratification period in which the final text must be agreed upon before implementation. The deal faces challenges in the U.S. as more members of Congress have pulled support for the deal as a way to strengthen their re-election bids. A vote on the deal in Congress isn’t expected to take place until after the elections in November.

Markets

  • Markets continued their volatility this week, reacting particularly poorly to the monthly jobs report. The S&P 500 fell 3.04% and closed at 1,880. Likewise, the Dow Jones dropped 1.54% and closed at 16,205. So far in 2016, the S&P is down 7.85% and the Dow is down 6.84%.
  • Interest rates continued to slide lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.25% and 1.85%, respectively.
  • The spot price of WTI Crude Oil fell 7.70% this week to close at $31.03 per barrel. WTI Crude has fallen 16.23% in 2016.
  • The spot price of Gold advanced 4.97% this week, closing at $1,173.83 per ounce. Year to date, gold prices are up 10.62%.

Economic Data

  • Initial jobless claims came in at 285,000 which was an increase from last week’s reading of 278,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 284,750.
  • The January non-farm payrolls report showed a gain of 151,000 in the month, lower than consensus estimates of 190,000. December and November’s figures were revised down a combined 2,000 jobs, bringing the 3 month average job gains to 231,000.
    • The headline unemployment rate fell to 4.9%, better than expectations that it would remain at 5.0%. However, the labor force participation rate ticked up to 62.7% from last month’s 62.6%.
    • Average hourly earnings showed an increase of 0.5% in January, beating estimates of 0.3% growth. This may reflect the effects of several states raising the minimum wage on January 1st. Wage growth over the last 12 months now stands at 2.5%.
  • The PCE price index (measure of inflation) fell -0.1% in December, lower than the forecast that prices would remain flat. The Core PCE (excludes food & energy, Fed’s preferred measure of inflation) only rose 0.04% compared to forecasts for 0.1% growth, continuing the trend of subdued inflation. Over the last 12 months, core PCE inflation has risen 1.4%.

Fact of the Week

  • The average price of gasoline nationwide as of 2/5/16 was $1.76 per gallon. The average price of gas in 1966 (50 years ago) was $0.32 per gallon. After adjusting for inflation over the last 50 years, the $0.32 price in 1966 is equivalent to $2.38 in 2016 dollars, meaning today’s real (inflation adjusted) price of gas is 26% cheaper than 50 years ago. (Sources: AAA, Department of Labor)

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.

 

Wealth Management Economic Update December 28, 2015

U.S. and World News

  • Greek Prime Minister Alexis Tsipras is pushing for the International Monetary Fund to remove itself from the country’s €86 billion bailout. This would leave the Eurozone to take full responsibility for supervising the economic reforms in Greece that the country’s third bailout depends on. The request by Greece risks alienating the IMF, which has in the past been a strong proponent of debt relief for the beleaguered nation. The IMF will likely decide whether to stay involved in the bailout shortly after the start of the new year.
  • The Obama administration has imposed fresh sanctions against Russian business leaders and other entities with close ties to Vladimir Putin. Targets of the new sanctions included state banks and a defense company. The penalties are an effort to force Russia to stabilize Ukraine, though they come at a time of perceived cooperation between the U.S. and Russia in the effort to end the Syrian civil war and fighting ISIS.
  • OPEC published its highly anticipated annual World Oil Outlook this week with observers hoping to gain insight into the cartel’s future plans. The group anticipates the price of crude oil to rise to $70/barrel by 2020 and $95/barrel by 2040. The forecast also called for demand to reach 30.7 million barrels per day in 2020, a 6% increase in the forecast from a year ago.

Markets

  • Markets rallied in a holiday shortened week. The S&P 500 gained 2.79% and closed at 2,061. Likewise, the Dow Jones rose 2.47% closing at 17,552. Year to date, the S&P is up 2.20% and the Dow is up 0.95%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.72% and 2.25%, respectively.
  • The spot price of WTI Crude Oil gained 5.49% this week, closing at $38.04 per barrel. Year to date, Oil prices are down 37.10%.
  • The spot price of Gold increased by 0.98% this week, closing at $1076.72 per ounce. Year to date, Gold prices are down 9.09%.

Economic Data

  • Initial jobless claims came in at 267,000 which was a decrease from last week’s reading of 271,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 273,000.
  • The core PCE inflation index (the Fed’s preferred inflation measure, excludes food and energy) rose by 0.1% in November. Over the last 12 months, Core PCE has risen by 1.3%, moving no closer to the Fed’s 2% inflation target.
  • New home sales increased by a higher than expected 4.3% in November, though the report showed mixed results. New home sales increased in the South and West regions but declined in the Northeast and Midwest regions.
  • Existing home sales fell by a sharp 10.5% in November, more than expected. The headline number reflected weakness across all regions, with the Midwest (-15.4%) and West (-13.9%) experiencing the largest declines.

Fact of the Week

  • 45% of all global financial business is transacted in U.S. dollars, including all oil and natural gas trading worldwide. (Source: Society for Worldwide Interbank Financial Telecommunication)

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.

Wealth Management Economic Update February 24, 2015

U.S. and World News

  • After a full week of contentious negotiations, a tentative agreement has been reached between Greece and Eurozone finance ministers, which would provide for a four month extension of Greece’s bailout program. This would allow Greece to access €10 billion of funding the country desperately needs. New Greek Prime Minister Alex Tsipras had been seeking a six month extension and a roll back of the austerity measures the original bailout had been contingent upon, instead winding up with only four months and no change to austerity. Greece must provide an action plan on Monday outlining steps they will be taking to improve its fiscal situation in order for the deal to be complete.  Additionally, Greece will be subject to reviews by the IMF and the ECB to ensure they are following the terms of the agreement, conditions which the country had been fighting against. Temporarily preventing Greece from exiting the Eurozone, this ‘kick the can down the road’ agreement will likely lead to the situation being revisited in four months.
  • russia_000057310942LargeThe U.S. has accused Russia of violating the ceasefire in Ukraine. This is amid reports that Ukrainian troops are pulling out of the key railroad hub town of Debaltseve after separatist forces fought their way into the key railway junction on Tuesday. Vice President Joe Biden strongly condemned the violence and warned the “costs to Russia will rise if it continues to violate the Minsk agreements.”
  • Minutes from the January Fed meeting showed the committee to be a bit more dovish than consensus believed. There was no clear indication that most participants thought that ‘patience’ should be removed from the upcoming Fed statement as it pertains to when an initial rate hike will come. Many still believe the Fed is on track for a June or September initial hiking of the Fed Funds rate, as long as employment and inflation data continue to improve.

Markets

  • Equity markets continued to rise this week following the four month Greek extension as both the S&P 500 and Dow Jones closed the week at new All-Time Highs. The S&P 500 gained 0.67%, closing at 2,110, while the Dow Jones gained 0.69% and closed at 18,140. Year to date, the S&P and Dow Jones are up 2.80% and 2.17%.
  • Yields in the Treasury markets continued to creep upwards this week. The 10 year Treasury bond now yields 2.12% and the 5 year Treasury bond yields 1.60%.
  • The spot price of WTI Crude Oil fell this week, losing 4.62% and closing at $50.34 per barrel. In 2015, WTI Oil prices have fallen 5.50%.
  • The spot price of Gold fell by 2.23% this week and closed at $1,229.66 per ounce. Year to date, gold prices are up 1.51%.

Economic Data

  • Initial jobless claims decreased from last week, coming in at 283,000 vs. consensus estimates of 290,000. The Labor Department noted that some states had to have their claims estimated due to severe weather. The four week moving average for claims now stands at 283,250.

Fact of the Week

  • Since the beginning of 1986 through close today, the Dow Jones Industrial Average has risen from 1,547 to 18,140, a price increase of 1,072%. Breaking down when these gains occurred results in a pretty interesting finding. The combined gains on the index on Mondays, Tuesdays and Wednesdays comes to 988.46%, while the combined gain of Thursdays and Fridays is just 8.95%. The Dow has been doing its work early in the week and been taking four day weekends for 30 years. (Source: Eddy Elfenbein, Crossing Wall Street)

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