Wealth Management Economic Update February 23, 2016

U.S. and World News

  • Helping to at least stabilize the oil markets temporarily, top officials from Russia, Saudi Arabia and several key OPEC members have agreed to freeze crude oil output at January levels. Iran was notably absent from this agreement as the country is planning ramp up oil output to regain market share following years of international sanctions that limited the country’s production.
  • cuba_field_000015487392_320U.S. and Cuban officials have signed an agreement that will reopen airline services between the two nations for the first time in more than 50 years. Meanwhile, President Obama is planning a trip to the island nation next month; marking the first time in more than 80 years a sitting U.S. President will visit Cuba. The trip to Havana would cap off one of Obama’s foreign policy goals of normalizing relations with Cuba and moving toward expanded commercial relations after a 54 year hiatus.
  • Minutes from the Federal Reserve’s January meeting were released this week and were broadly in line with recent comments made by Fed officials. The minutes emphasized continued progress in labor market conditions and positive fundamentals but also noted increased downside risks associated with recent tightening of financial conditions and weaker growth abroad. Fed officials remain data dependent and would like to see more information in order to assess if further rate hikes are warranted.
  • Fears that Britain will leave the European Union had heightened as Prime Minister David Cameron has been engaging in tough negotiations to limit concessions necessary for Britain to stay in the bloc. Diplomats who have been negotiating around the clock during a two-day summit on issues such as welfare curbs and financial regulation have reached a deal late Friday afternoon and it appears now that Britain will remain in the EU.

Markets

  • Markets continued on from last Friday’s rally to finish up on the week. The S&P 500 gained 2.89% and closed at 1,918. Likewise, the Dow Jones rose 2.71% and closed at 16,392. So far in 2016, the S&P is down 5.87% and the Dow is down 5.50%.
  • Interest rates were little changed this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.20% and 1.74%, respectively.
  • The spot price of WTI Crude Oil gained 1.53% this week to close at $29.89 per barrel. WTI Crude has fallen 21.69% in 2016.
  • The spot price of Gold decreased 0.82% this week, closing at $1,227.77 per ounce. Year to date, gold prices are up 15.71%.

Economic Data

  • Initial jobless claims came in at 262,000 which was a decrease 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 down to 273,250.
  • Housing starts unexpectedly declined by -3.8% in January, below expectations of a 2.0% gain. More severe weather in January compared to December may have been a factor. Both multi-family (-3.7%) and single family (-3.9%) housing starts were weaker than expected.
  • The Consumer Price Index (measure of inflation) was unchanged in January, more than expectations for a -0.1% decline in prices, despite a 2.8% decline in energy prices. Core CPI (excludes food and energy costs) increased by 0.3% in January, the largest gain since March 2006. This was better than expectations of a 0.2% gain. Over the last 12 months, CPI is up 1.4% and Core CPI is up 2.2%.

Fact of the Week

  • According to the Institute of Policy Studies, the 20 wealthiest Americans are worth a combined $732 billion. This is more than combined net worth of the bottom 50% of the U.S. population which stands at 323 million people.

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.

 

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Wealth Management Economic Update February 15, 2016

U.S. and World News

  • mosquito_320President Obama has asked Congress for $1.8 billion in emergency funding to combat the Zika virus, the disease that is transmitted primarily from bites of Aedes mosquitoes, but has also been found to be passed through sexual contact or blood transfusion. The funds would be used for research for vaccines and diagnostics, as well as helping public health systems. Meanwhile, cases of Zika have been identified in 20 U.S. states and in addition to potential birth defects, the virus has caused two miscarriages in the U.S. according to the Center for Disease Control.
  • Federal Reserve Chair Janet Yellen conducted her regular testimony to Congress this week but did not clarify the Central Bank’s path for raising rates. While she did not take a March rate hike off the table, she did state that, “Financial conditions in the United States have recently become less supportive of growth.” Confusing markets further, Yellen stressed that the Fed was not on a preset path to interest rate normalization but also wouldn’t rule out negative rates at some point.
  • Sweden’s central bank has lowered key interest rates further into negative territory. The Swedish Central Bank said it’s prepared to use its full toolbox of measures as it battles to revive inflation and keep its currency from appreciating. Following Japan’s surprising move into negative rate territory last month, 25% of the world’s GDP now comes from countries with negative interest rates.

Markets

  • Markets continued their volatility and despite a rally on Friday ended the week in negative territory. The S&P 500 fell 0.73% and closed at 1,865. Likewise, the Dow Jones dropped 1.23% and closed at 15,974. So far in 2016, the S&P is down 8.53% and the Dow is down 8.00%.
  • Interest rates continued to slide lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.20% and 1.74%, respectively.
  • The spot price of WTI Crude Oil fell 5.57% this week to close at $29.17 per barrel. WTI Crude has fallen 25.58% in 2016.
  • The spot price of Gold advanced 5.55% this week, closing at $1,238.58 per ounce. Year to date, gold prices are up 16.73%.

Economic Data

  • Initial jobless claims came in at 269,000 which was a decrease from last week’s reading of 285,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 281,250.
  • Retail sales increased by 0.2% in January, beating expectations of 0.1%. Core retail sales (excludes autos and gas) were also strong, increasing 0.6% and beating forecasts of 0.3%.
  • The University of Michigan consumer sentiment index declined in the preliminary February estimate to a level of 90.7 from 92.0 in January. Both consumers’ assessment of current economic conditions and their expectations for the future declined during the month.

Fact of the Week

  • The face value for the most expensive ticket for Super Bowl 1 in Los Angeles in 1967 was $12. The face value for the most expensive ticket to Super Bowl 50 last Sunday was $1,800. This increase from 1967 to 2016 represents a 10.8% compounded annual increase, besting the return seen in the S&P 500 during that time frame of 10.1% total return per year. (Source: Super Bowl, BTN 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 February 16, 2015

U.S. and World News

  • After unsuccessful meetings this week in Brussels, Belgium, European finance ministers put off decisions on Greece’s bailout terms until they reconvene next week. Greece is trying to negotiate a €10 billion bridge loan to keep the country solvent as it works with its creditors. Greek officials are promising they will make every effort to reach an agreement on conditions for a new support program although new Greek Prime Minister Alexis Tsipras continues to vow to roll back austerity measures in the country, jeopardizing its ability to renegotiate.
  • A ceasefire between Russia and Ukraine has been reached and will begin on February 15th. This was the result of a 17 hour meeting between leaders of Russia, Ukraine, France and Germany. The new deal revives a failed September agreement and includes commitments from each side to pull back heavy weapons. Should this agreement fail, many Western nations are considering increased sanctions against Russia.
  • Sweden has joined the fray when it comes to central bank easing as its Riksbank cut its repo rate into negative territory, down to -0.1%. Riksbank also announced a 10 billion kronor ($1.2 billion) quantitative easing program in which the bank will purchase Swedish government bonds.

Markets

  • Equity markets continued to rally this week, with the S&P 500 gaining 2.09% and closing at a new All-Time High of 2,097. Likewise, the Dow Jones gained 1.26% and closed at 18,019. Year to date, the S&P and Dow Jones are up 2.11% and 1.47%.
  • Yields in the Treasury markets continued to creep upwards this week. The 10 year Treasury bond now yields 2.04% and the 5 year Treasury bond yields 1.53%.
  • The spot price of WTI Crude Oil continued to rise from very low levels, gaining 1.64% and closing at $52.54 per barrel. In 2015, WTI Oil prices have fallen 2.16%.
  • The spot price of Gold fell by 0.35% this week and closed at $1,229.66 per ounce. Year to date, gold prices are up 3.82%.

Economic Data

  • Initial jobless claims increased from last week, coming in at 304,000 vs. consensus estimates of 287,000. 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 289,750.
  • Headline retail sales declined 0.8% in January, more than the 0.4% decline that was expected. The drop was largely due to a 9.3% drop in gasoline station sales due to lower prices. This indicates that consumers are not yet spending the savings they’ve been enjoying at the gas pump, but this is not terribly surprising as oil price declines have historically affected the economy with a lag.

Fact of the Week

  • According to the Treasury Department, the average interest rate paid by the US government on the country’s interest-bearing debt has fallen by more than half over the last 8 years, dropping from 5.03% at the end of 2006 to 2.37% at the end of 2014.

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