UK Election, Qatar, Puerto Rico: Wealth Economic Update June 9, 2017

U.S. and World News

  • UKflag-518908074_360The decision to hold snap elections in the United Kingdom seems to have back-fired on Prime Minister Theresa May and her Conservative Party as they lost their majority with the Labour Party gaining significant ground in Thursday’s vote. In April, Theresa May decided to hold the snap general election in an attempt to gain a significant majority for her ahead of the Brexit negotiations but with the poor results there have been calls for her resignation. The split parliament could make Brexit negotiations with the UK’s European Union partners more difficult.
  • Four Arab states (Saudi Arabia, Egypt, the United Arab Emirates and Bahrain) have cut off diplomatic ties with Qatar, as well as closing air and sea routes. This marked a significant escalation of a rift between the Persian Gulf countries that has been brewing for a few months. President Trump stated that he wished to “de-escalate” the situation but appeared to support the isolation of Qatar, noting that his message against funding terror and extremism is being heeded by those other countries in the region.
  • Citizens of Puerto Rico are voting this weekend in a referendum on the island’s political status. There will be three choices on the ballot: statehood, “current territorial status” and independence. It’s not clear what would happen in the case of any of these choices winning decisively or how Congress would interpret the results. This is the island’s fifth referendum since 1898 and comes amid a crippling economic crisis.

Markets

  • Markets were mixed this week. The S&P 500 dropped by 0.27% and closed at 2,432. The Dow Jones gained 0.33% for the week and closed at a New All Time High 21,272. Year to date, the S&P is up 9.57% and the Dow is up 8.84%.
  • Interest rates edged higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.77% and 2.20%, respectively.
  • The spot price of WTI Crude Oil lost 3.80% this week, closing at $45.85 per barrel. Year to date, Oil prices have fallen 14.65%.
  • The spot price of Gold ended the week higher, closing at $1,267.45 per ounce. Year to date, Gold prices are up 10.45%.

 Economic Data

  • Initial jobless claims decreased by 10,000 from last week, coming in at 245,000. Most of the decreases in claims were attributed to California and Tennessee, reversing their increases last week. The four week moving average for claims moved up to 242,000.

Fact of the Week

  • The New York Stock Exchange (NYSE) has more than twice the number of listed securities as the NASDAQ exchange (8,500 vs. 3,100). Despite this difference, The NASDAQ, which lists mostly technology companies, averages more than double the daily trading volume of the NYSE (2 billion shares for the NASDAQ vs. 880 million for the NYSE). (Average daily trade volume based on 1-month average figure)

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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OPEC, Castro: Wealth Economic Update Dec. 5, 2016

U.S. and World News

  • castro-172756369_320Oil prices rallied this week as OPEC has appeared to come to an agreement to cut production for the first time in eight years following a meeting of its member nations in Vienna this week. Prospects for a harmonious meeting were shaky early on as Saudi Arabia and Iran were initially opposed to cuts and tensions between Russia and OPEC flared up. Even with an agreement in place, questions still remain regarding the implementation and monitoring of production cuts given the cartel’s history of not always honoring these types of agreements.
  • Former President of Cuba, Fidel Castro, died at the age of 90 last week. His brother, Raul, who has been in the President of the still Communist nation since 2008, is tasked with the continuation of U.S.-Cuba relations which have softened in the last year as the U.S. embargo on the country was lifted by President Obama. President-Elect Trump has been critical of re-establishing diplomatic ties with Cuba and may be willing to reverse those policies.
  • Protests in South Korea have intensified as more than 1 million people gathered to rally against President Park Guen-hye and call for her impeachment. This was the 5th consecutive week of mass protests in Seoul. Park is embroiled in a corruption scandal that has paralyzed her government for weeks, leading her to request a shorter term from parliament and relinquishing some of her powers. Her opposition, however, believes this is a tactic to avoid impeachment and is attempting to put an impeachment motion up for vote in the coming weeks.

Markets

  • This week the S&P 500 decreased 0.91% and closed at 2,192. The Dow Jones rose 0.22% and closed at 19,170. So far in 2016, the S&P is up 9.31% and the Dow is up 12.65%.
  • Interest rates paused from the dramatic increase they have seen in recent weeks. The 5 year and 10 year U.S. Treasury Notes now yield 1.82% and 2.38%, respectively.
  • The spot price of WTI Crude Oil spiked 12.20% this week on reports of an agreement by OPEC to cut production. Oil closed at $51.68 per barrel. WTI Crude is up 29.04% in 2016.
  • The spot price of Gold fell 0.52% this week, closing at $1,177.43 per ounce. Year to date, gold prices are up 10.96%.

Economic Data

  • Initial jobless claims came in at 268,000, an increase from last week’s reading of 251,000. The claims figure may have been higher this reading due to the Thanksgiving holiday last week. The four week moving average for claims moved up to 252,000.
  • The monthly employment report for November showed job gains of 178,000, slightly lower than consensus estimates of 180,000. The prior two months’ employment numbers were revised down a combined 2,000 jobs, bringing the three month average for job gains to 176,000.
    • The headline unemployment rate fell 0.3% to a new cyclical low of 4.6%, lower than estimates of 4.9%. Part of this decline in the unemployment rate can be explained by a 0.1% decline in the labor force participation rate to 62.7%.
    • The wage component of the report was disappointing as average hourly earnings declined 0.1%, compared to expectations of a 0.2% increase. Year-over-year wage growth is now down to 2.5%.
  • The Case-Shiller home price index rose 0.4% for September, in line with expectations. Prices rose in all 20 cities that are part of the index. Home prices have now risen 5.1% over the last 12 months.
  • The PCE price index (measure of inflation) rose by 0.2% in October, in line with expectations. Headline prices as measured by the PCE index have now risen 1.4% over the last 12 months.
    • Core PCE (excludes food and energy, Fed’s preferred inflation measure) rose by 0.1% in October, also in line with consensus. Core PCE prices have now risen 1.7% over the last 12 months, still a bit below the Fed’s 2% target.

Fact of the Week

  • The national homeownership rate in the U.S. as of September 30th was 63.5%. This is down from the peak level of 69.2% seen on 12/31/2004. Every 1% reduction in the homeownership rate represents 1.2 million households that have changed from homeownership to renter status. (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
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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EU/Saudi bonds: Wealth Economic Update Oct 24, 2016

U.S. and World News

  • The European Central Bank elected to take no further action following their policy meeting this week, disappointing investors who had hope for further clarification on the central bank’s plan of action. At a news conference, ECB President Mario Draghi said that policy maker’s hadn’t even discussed whether to extend its €80 billion per moth bond-purchase program which is due to end in March 2017.
  • saudi_arabia_riyhad_66106939_340Saudi Arabia tapped the global debt markets for the first time this week, selling $17.5 billion in sovereign bonds. The bond issue had high demand as banks and investors flocked to buy debt issued by the emerging market country. In fact, it’s reported that the country received orders totaling $67 billion. The sale of bonds is part of the Saudi’s plan to open up its $650 billion economy to global investment and reduce its over-reliance on oil in the face of lower prices.

Markets

  • This week the S&P 500 rose 0.41% and closed at 2,141. The Dow Jones rose 0.09% and closed at 18,146. So far in 2016, the S&P is up 6.52% and the Dow is up 6.28%.
  • Interest rates edged down slightly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.24% and 1.74%, respectively.
  • The spot price of WTI Crude Oil was up 0.39% this week to close at $50.95 per barrel. WTI Crude is up 16.24% in 2016.
  • The spot price of Gold rose 1.23% this week, closing at $1,266.46 per ounce. Year to date, gold prices are up 19.35%.

Economic Data

  • Initial jobless claims came in at 260,000, an increase from last week’s reading of 246,000. The Labor Department noted that claims may have been distorted by a bounce back from the effects of Hurricane Matthew which led to closures of filing offices in affected regions in previous weeks. The four week moving average for claims moved up to 251,750.
  • The headline Consumer Price Index rose 0.3% in September, in line with expectations. This was boosted by a 2.9% increase in energy prices. Over the last year, headline prices have risen 1.5%.
    • Core CPI (excludes food and energy) rose 0.1% in September, below estimates of 0.2%. Over the last 12 months, Core prices are up 2.2%.
  • Housing starts declined -9.0% in September, substantially missing expectations of a 2.8% gain. The composition of the housing starts was less negative than indicated by the headline figure as the more volatile multifamily category declined 38.0% in the month while more stable single family home starts rose by 8.2%.
  • Existing home sales increased by 3.2% in September, beating expectations of a 0.4% increase. September saw a 4.1% increase in single family starts which more than offset the -3.2% decline in the volatile multi-family home sales category.

Fact of the Week

  • American families in the bottom 50% of pre-tax household income are expected to receive 17.7% of national income in 2017. American families in the top 1% of pre-tax household income are expected to receive 15.4% national income in 2017. (Source: Treasury 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
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.

 

Oil price soar: Wealth Economic Update Oct 3, 2016

U.S. and World News

  • oil_440The price of oil soared this week reflecting a new cap on oil production of 32.5 million – 33 million barrels a day agreed upon by OPEC. That is a 750,000 barrel a day drop from August and the first time oil output has been capped since the financial crisis. This came as a surprise after most of the past OPEC meetings have resulted in no deal which also leads to some skepticism of the current deal.
  • In order to defend U.S. personnel overseas from the possibility of being sued by citizens of other countries, Barrack Obama has vetoed a bill that would allow Saudi Arabia to be sued for involvement in the September 11th terrorist attacks. The White House and Saudi Arabia have been lobbying to override the veto, but the effort did not pass congress.
  • After there were an insufficient amount of votes to pass a funding bill that would avoid a federal government shutdown, congress sent President Obama a bill to continue government operations until December 9th and $1.1 billion in long-delayed funding to help fight the Zika virus. Also included in the bill is $500 million to help restore Louisiana after they have endured mass flooding, and to assist the water crisis in Flint, Michigan.

Markets

  • This week the S&P 500 rose 0.20% and closed at 2,168. The Dow Jones rose 0.26% and closed at 18,308. So far in 2016, the S&P is up 7.73% and the Dow is up 7.10%.
  • Interest rates edged down slightly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.15% and 1.60%, respectively.
  • The spot price of WTI Crude Oil was up 7.87% this week to close at $47.98 per barrel. WTI Crude is up 10.78% in 2016.
  • The spot price of Gold declined 1.54% this week, closing at $1,317 per ounce. Year to date, gold prices are up 24.12%.

Economic Data

  • Pending home sales fell 2.4% in August. Pending home sales by region were down in the West (-5.3%), the South (-3.2%), and the Midwest (-0.9%) while they were up in the Northeast (+1.3%).
  • New single-family home sales declined by 7.6% in August which was better than consensus expectations for a decline of 8.6%. New home sales by region were a decline in the South (-48k), Northeast (-12k), and Midwest (-2k), and an increase in the West (+12k).
  • Top-line Q2 GDP growth was revised up by 30 basis points to +1.4%, more than consensus estimates. The revision reflected a smaller drag from inventories and trade, and higher business fixed investment than previously estimated.
  • The headline PCE (Personal Consumption Expenditures) price index rose by 0.14% in August and the core PCE index (excluding food and energy) was up 0.18%. This was a lower increase than expected as food an energy prices continued to fall.

Fact of the Week

  • 24% of 1,000 pre-retirees surveyed in the first quarter of 2016 believe they will need to accumulate at least $1 million in order to “live comfortably” during their retirement years, up from 15% in 2005 (source: Employee Benefit Research Institute Retirement Confidence Survey).

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 13, 2016

U.S. and World News

  • Saudi Arabia has approved a plan to reduce public spending and to generate income without depending on oil. The plan is expected to boost non-crude revenues to $141 billion by 2020, create 450,000 non-government jobs, and help fund a large part of production of goods and services worth $72 billion.
  • The U.S. House of Representatives has passed legislation that will assist Puerto Rico with its debt crisis ahead of a $1.9 billion debt payment that it may not be able to pay. The bill consists of the U.S. putting a federal control board in charge of managing the restructuring of Puerto Rico’s $70 billion in debt. The bill now requires the Senate’s approval and will be started in the next few weeks.
  • zurich_switzerland_340A proposal to introduce a guaranteed basic income for every person living in Switzerland has been rejected by the country. Only 23.1% of the voters were for the proposal with the argument that a monthly income of 2,500 Swiss francs per citizen would promote dignity and public service, while 76.9% were against it saying that it would cost too much and cause damage to the economy.

Markets

  • Equity markets were flat again this week. The S&P 500 was down 0.15% for the week and closed at 2096. The Dow Jones dipped 0.33% and closed at 17,865. So far in 2016, the S&P is up 2.55% and the Dow is up 2.53%.
  • Interest rates moved lower further this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.17% and 1.64%, respectively.
  • The spot price of WTI Crude Oil gained 0.66% this week to close at $48.98 per barrel. WTI Crude is up 18.44% in 2016.
  • The spot price of Gold gained 2.43% this week, closing at $1,274.43 per ounce. Year to date, gold prices are up 20.10%.

Economic Data

  • Initial jobless claims came in at 264,000 which was a decrease from last week’s reading of 267,000 reaching a post crisis low. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 270,000.
  • The University of Michigan’s index of consumer sentiment dropped to 94.3 from 94.7 in the June preliminary release which was in line with consumer expectations.
    •  Consumer sentiment remains new post-crisis highs, despite the negative jobs report last week.

Fact of the Week

  • Of the 10 largest cities in the United States, only Chicago has seen its population decline since the year 2000. 8 of the 10 largest cities have experienced population gains of at least +100,000, growth that only the cities of Chicago and Philadelphia were unable to achieve. (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

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 16, 2016

U.S. and World News

  • President Dilma Rousseff has been suspended from office after an overwhelming 55-22 senate vote to start an impeachment trial and Vice President Michel Temer will assume the role as President for up to six months while the trial is ongoing. Former Central Bank Chief Henrique Meirelles who is liked among investors, will assume the role as Finance Minister. Despite the majority, Rousseff continues to ignore calls to resign and states that she will prevail in the trial.
  • The U.S congress continues to work towards a solution to fix Puerto Rico’s debt situation after the U.S territory released its fiscal 2017 forecast which indicated that their economy would likely contract for the fifth year in a row. The House of Representatives will reveal a plan in the near future that will stipulate how Puerto Rico’s many creditors will be prioritized.
  • oil_drill_saudi_000023179128_320Saudi Arabia has named Khalid al-Falih as the new oil minister, replacing Ali al-Naimi who has been oil minister since 1995. Khalid al-Falih is currently the chairman of Aramco, a state owned oil company. Al-Falih stated that he does not intend to bring changes to Saudi Arabia’s current strategy of defending market share and maintaining stable petroleum policies.

Markets

  • Equity markets declined this week. The S&P 500 fell 0.51% and closed at 2047. Likewise, the Dow Jones dipped 1.16% and closed at 17,535. So far in 2016, the S&P is up 0.13% and the Dow is up 0.63%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.21% and 1.70%, respectively.
  • The spot price of WTI Crude Oil gained 3.61% this week to close at $46.27 per barrel. WTI Crude is up 13.66% in 2016.
  • The spot price of Gold lost 1.16% this week, closing at $1,274.06 per ounce. Year to date, gold prices are up 20.07%.

Economic Data

  • Initial jobless claims came in at 294,000 which was an increase from last week’s reading of 274,000. The increase was expected and is estimated to be attributed to seasonal factors in New York State. The four week moving average for claims ticked up to 268,000.
  • Retail sales increased 1.3% (mom) in April and beat expectations for the month. The gain reflected both higher energy prices and department store sales. Non-store retailers (online shopping) grew at a rapid monthly pace of 2.1%.
    • The Producer Price Index (PPI) increased by 0.2% (mom) in April which was supported by higher energy prices as food prices were down (-0.4%). PPI excluding food and energy rose 0.1% for the month.
  • The University of Michigan Sentiment Index preliminary release for May climbed to 95.8 from 89.0 with expectations of only a small increase. The rise in the index was driven by a rise in forward-looking consumer expectations.

Fact of the Week

  • According to the National Endowment for Financial Education, 45% of the 118 million households in the United States live “paycheck-to-paycheck”.

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.

 

Wealth Management Economic Update January 11, 2016

U.S. and World News

  • Global tensions rose over the weekend when Saudi Arabia cut off diplomatic relations with Iran and gave diplomats 48 hours to leave the country as a result of protestors storming and destroying the Saudi Arabian Embassy in Tehran. The destruction of the embassy was in response to Saudi Arabia’s execution of 47 prisoners, including a prominent Shiite cleric. The two sides are also fighting in the oil markets as Iran is poised to re-enter the global oil markets following the nuclear deal signed over the Summer.
  • China’s unstable economy and markets are again sending shockwaves throughout the globe. Following weak manufacturing and economic data, Chinese shares plummeted and the Chinese government attempted to stop the bleeding through intervention. Newly implemented, and since suspended, market circuit breakers were tripped twice as the markets were shut down following declines breaching the 7% threshold. The ban on selling by major shareholders was also kept in place indefinitely and further currency devaluation methods were deployed in an attempt to boost exports and maintain the country’s growth targets.
  • Initially detected as a 5.1 magnitude earthquake by various agencies, North Korea has claimed to have successfully test detonated its first hydrogen bomb, the fourth nuclear device that the country has detonated. According to North Korean news, the country wanted an ‘H-bomb of justice’ in order to protect from the ‘ever-growing nuclear threat and blackmail by the U.S.-led hostile forces.” In addition to condemning the tests, some U.S. officials are skeptical that the bomb tested was a hydrogen bomb, which is 1,000 times stronger than a typical atomic bomb.

Markets

  • Markets started the year in the red rather dramtically. The S&P 500 declined 5.96% and closed at 1922. The Dow Jones fell 6.19% and closed at 16346.
  • Interest rates declined slightly this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.56% and 2.11%, respectively.
  • The spot price of WTI Crude Oil dropped 11.12% this week, closing at $32.88 per barrel.
  • The spot price of Gold rose 4.05% this week, closing at $1104.16 per ounce.

Economic Data

  • Initial jobless claims came in at 277,000 which was an decrease from last week’s reading of 287,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 276,000.
  • The monthly non-farm payrolls report showed a strong increase of 292,000 jobs in December, beating consensus estimates of 200,000. There were also upward revisions to the prior two months’ figures totaling 50,000. This brings the three month average of job gains to 284,000.
    • Average hourly earnings were flat for the month, behind forecasts of 0.2% growth. Wages increased by 2.5% in calendar year 2015.
    • The headline unemployment rate held steady at 5.0% which was in line with forecasts. The labor force participation rate rose 0.1% to 62.6%.

Fact of the Week

  • The total return for the S&P 500 in 2015 was a gain of 1.4%. If an investor in the index was able to avoid the worst three trading days during the year, that return would have risen to 12.3%. Conversely, if the investor missed the three best trading days, the 1.4% gain falls to a 7.1% loss. (Source: By The Numbers Research)

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 April 20, 2015

U.S. and World News

  • Greece faces an April 24th deadline to present the necessary economic reforms in order to unlock a much needed round of financial aid from Eurozone creditors. Greek finance minister Yanis Varoufakis did not rule out the possibility of a debt default if the country can’t reach a deal by the deadline. Varoufakis has now flown to Washington to have a private meeting with President Obama ahead of next week’s deadline.
  • saudi_000014768091_330Saudi Arabia announced this week that the country will open its $530 billion stock market to foreign investments on June 15th. This will give international investors their first opportunity to have direct access to the Middle East’s largest economy. In 2008, Saudi Arabia began permitting foreign investors indirect access to its market, but is now looking to fully open the market in hopes to diversify its oil dependent economy.

Markets

  • Equity markets closed the week on a down note. The S&P 500 fell 0.98%, closing at 2,081, while the Dow Jones decreased by 1.26% and closed at 17,826. Year to date, the S&P is up 1.68% and the Dow is up 0.68%.
  • Yields in the Treasury market were pushed downwards this week. The 10 year Treasury bond now yields 1.87% and the 5 year Treasury bond yields 1.31%.
  • The spot price of WTI Crude Oil continued its rise this week, climbing 8.52% and closing at $56.04 per barrel. In 2015, WTI Oil prices are now up 1.97%.
  • The spot price of Gold dipped by 0.22% this week and closed at $1,204.92 per ounce. Year to date, gold prices are up 1.74%.

Economic Data

  • Initial jobless claims rose from last week, coming in at 294,000 vs. consensus estimates of 280,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 282,750.
  • Headline consumer prices (measure of inflation) rose 0.2% in March, slightly lower than consensus estimates of 0.3%. Gas prices rose 3.9% in the month and food prices ticked down 0.2%. Core CPI (excludes food and energy) increased 0.2% as well, in line with expectations. Core prices have risen 1.8% in the past year, still a subdued rate from the Fed’s perspective.
  • In the 1st quarter, China grew at its slowest pace since the global financial crisis in 2009. GDP growth was measured at 7.0%, lower than the 7.3% seen in the previous quarter. The lower than expected growth number combined with recent poor retail sales and industrial output figures further builds the case for more stimulus measures in China.

Fact of the Week

  • Last month Mexico sold 100-year government bonds. This was the 3rd time since 2010 the country has sold 100-year bonds but the first time that they have been transacted in Euros (€). The bonds mature in March 2115 with a coupon rate of only 4.2%.

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 April 1, 2015

U.S. and World News

  • oil_000013481523_290Oil markets jumped higher this week after Saudi Arabia and its Gulf allies started bombing militant targets in Yemen as the country moves closer toward civil war. While the Saudi attacks won’t directly disrupt importer’s supplies, the threat of a spreading war in the region could absolutely disrupt oil flows. There is a significant risk of a proxy war starting with Shiites in Iran backing the rebel Houthis of Yemen, with Saudi Arabia and other Sunni monarchies supporting current Yemeni President Abd-Rabbu Mansour Hadi.
  • In the face of defiance from allies that have signed up to become members, the Obama administration has now proposed that the new Asian Infrastructure Investment Bank (AIIB) work in partnership with U.S.-backed development institutions, such as the World Bank. The U.S. had previously warned against the Beijing-based AIIB due to quality and corruption concerns. At least 35 countries are scheduled to join the AIIB on March 31st, including U.S. allies Britain, France, Germany and Italy. Meanwhile, Australia, South Korea and Japan are notable regional absences from membership but are still weighing their options.
  • A U.S. trade group representing broadband providers has filed a court challenge against the FCC’s recently approved net neutrality rules. Once the rules are published in the Federal Register, it is expected that a flood of additional legal challenges will be instituted by other industry groups.

Markets

  • Equity markets dropped this week with the S&P 500 losing 2.21%, closing at 2,061, while the Dow Jones fell 2.29% and closed at 17,712. Year to date, the S&P is up 0.58%, while the Dow is flat.
  • Yields in the Treasury markets remained about the same this week, at lower levels than seen at the beginning of the year. The 10 year Treasury bond now yields 1.97% and the 5 year Treasury bond yields 1.44%.
  • The spot price of WTI Crude Oil rose this week following a reigniting of violence in the Middle East. Prices rose 5.77% this week, closing at $48.36 per barrel. In 2015, WTI Oil prices have fallen 12.00%.
  • The spot price of Gold rose by 1.33% this week and closed at $1,198.29 per ounce. Year to date, gold prices are up 1.17%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 282,000 vs. consensus estimates of 284,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 297,000.
  • Headline Consumer Price Index rose 0.2% in February, in line with consensus. Core prices (excludes food and energy) also rose 0.2%, beating expectations. Over the last year, Headline CPI is flat, while Core CPI is up 1.7%, consistent with subdued inflation.
  • New home sales rose 7.8% in February vs. expectations of a fall of 3.5%. Meanwhile, existing home sales increased 1.2% in February vs. forecasts of 1.7%. Both figures were welcome given recently lagging housing numbers.
  • University of Michigan consumer sentiment improved to a 93.0 reading in March vs. expectations of 92.0. Both the respondents’ assessment of current conditions and expectations for the future improved. Although sentiment has declined from its January peak, it remains at a relatively high level.

Fact of the Week

  • According to Freddie Mac, the average interest rate nationwide on a 30-year fixed rate mortgage was at least 10% for 12 consecutive years, spanning from 1979 to 1990. The average rate on a 30 year mortgage today is 3.78%.

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