Tax Reform, CA Wildfires: Wealth Economic Update Dec. 11, 2017

U.S. and World News

  • Washington D.C. was squarely in focus this week. First, the U.S. Senate narrowly passed its version of the tax reform bill last weekend, sending stock markets decidedly higher. Republicans still need to overcome some obstacles between the House and Senate versions to craft a joint bill, which will then be brought to President Trump. Meanwhile, the White house announced that it will move forward with a massive infrastructure program in 2018. Then, the Senate Banking Committee approved the nomination of Jerome Powell as Janet Yellenís successor as the Fed Chair. Finally, a stop-gap spending measure has been signed which continues funding the federal government for two weeks, at least temporarily preventing a government shutdown.
  • fire-157384116_360 Wildfires raging across Southern California have caused massive amounts of damage to a region that has been hit extremely hard by fires this year and has forced thousands of residents to evacuate. Affecting industries from technology to oil fields to winemakers, the massive fires are still burning and this will go down as one of the most devastating fire seasons ever for insurance losses, which are estimated to have reached $10 billion in 2017.

Markets

  • Markets were up this week following news of the tax reform bill passing the Senate. The S&P gained 0.39%, closing at a new All-Time High of 2,642. The Dow Jones rose 0.46% for the week and closed at 24,232, also a new All-Time High. Year to date, the S&P is up 20.72% and the Dow is up 26.07%.
  • Interest rates were slightly higher for the week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.15% and 2.38%, respectively.
  • The spot price of WTI Crude Oil dipped by 1.77% this week, closing at $57.33 per barrel. Year to date, Oil prices have risen 6.72%.
  • The spot price of Gold ended the week off by 2.55%, closing at $1,247.9 per ounce. Year to date, Gold prices are up 8.75%.

Economic Data

  • Initial jobless claims dropped 2,000 from last week, coming in at 236,000. The level of claims remains elevated in Puerto Rico, as the labor department notes that the claims filing process continues to be disrupted in the Virgin Islands. The four week moving average for claims was unchanged at 242,000.
  • The November payrolls report showed a gain of 228,000 jobs, better than consensus expectations of 195,000. It appears that Novemberís figure received at least some boost from post-hurricane normalization. With the prior two monthsí figures being revised down a combined 4,000 jobs, the three month average for job gains now stands at 170,000.
    • The headline unemployment rate remained at 4.1%, in line with expectations. The labor force participation also held steady at 62.7%, consistent with expectations.
    • Average hourly earnings rose 0.2% in the month, lower than the 0.3% that was expected. Wage growth over the last 12 months has totaled 2.5%.
  • The University of Michiganís consumer sentiment index declined 1.7 points to 96.8 in the preliminary December reading, lower than expectations but still near the post-crisis highs. The report was mixed, with the assessment of current conditions improving but the expectations of the future component falling.

Fact of the Week

  • For the 7 years from 2010 to 2016, the S&P 500 experienced 417 trading days in which the index gained or lost at least 1% for the day, an average of 60 trading days per year. So far in 2017, the S&P 500 has only had 9 trading days of +/- 1% movement. (Source: 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
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

Visit Old Second Wealth Management

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Tax Reform, Flynn, North Korea: Wealth Economic Update Dec. 1, 2017

U.S. and World News

  • iStock-610688960_360After the House passed its tax reform bill, the Senate has been at work crafting their own version of the bill. Progress was seemingly smooth as several procedural hurdles had been cleared with most of the GOP on the same page with the details and a vote on the bill was anticipated by the end of this week. However, some last minute road blocks have delayed any vote this week. With some Senate members concerned over the deficit, it’s now possible that the level of tax cuts might have to be moderated, future tax increases might be built in and some members may seek to attach spending cuts to the bill in order to win their support. Markets had rallied on increased optimism of passage but pulled back a bit later in the week as these obstacles arose.
  • Temporarily sending markets sharply down on Friday, former national security adviser Michael Flynn pleaded guilty to lying to the FBI about conversations with Russia’s ambassador and disclosed that he is cooperating with the special counsel Robert Mueller’s probe. Flynn is the first person inside President Trump’s administration to be reached by the probe and the latest developments are a sign that the investigation is intensifying. According to an FBI statement, Flynn communicated with Russian officials at the request of Trump transition team officials to influence foreign policy. In a statement, the White House said that “nothing about the guilty plea or the charge implicates anyone other than Mr. Flynn.”
  • North Korea fired another test missile this week, this time a new ICBM that was launched to a high enough altitude that it would put all of the U.S. mainland within range. North Korean officials said that with the launch, which reached a height of 2,780 miles, they achieved the country’s long held goal of becoming a nuclear power. In response, the U.S. is calling on all countries to suspend diplomatic ties with North Korea and has asked China to stop crude oil trade with North Korea or it will “take the oil situation into our own hands.”

Markets

  • Markets were up this week, setting new All-Time Highs along the way. The S&P gained 1.60%, closing at 2,642. The Dow Jones rose 3.00% for the week and closed at 24,232. Year to date, the S&P is up 20.25% and the Dow is up 25.49%.
  • Interest rates were slightly higher for the week albeit in more volatile trading. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.12% and 2.36%, respectively.
  • The spot price of WTI Crude Oil dipped by 1.04% this week, closing at $58.34 per barrel. Year to date, Oil prices have risen 4.51%.
  • The spot price of Gold ended the week off by 0.65%, closing at $1,279.96 per ounce. Year to date, Gold prices are up 11.54%.

 Economic Data

  • Initial jobless claims dropped 2,000 from last week, coming in at 238,000. Filings continued to fall from 10 year highs in Puerto Rico, which continues to deal with the aftermath of Hurricane Maria.  The four week moving average for claims rose to 242,000.
  • The headline PCE index (measure of inflation) rose by 0.1% in October, in line with forecasts. Headline inflation as measured by the PCE index has risen 1.6% over the last 12 months.
    • Core PCE (excludes food and energy, Fed’s preferred inflation measure) rose 0.2% in October, also in line with expectations. Over the last 12 months, Core PCE is up 1.5%, still short of the Federal Reserve’s long range target of 2%.
  • The Case-Shiller home price index rose by 0.5% in September, beating consensus expectations of 0.4%. Prices rose in all 20 cities measured, with Atlanta (+1.3%), San Francisco (+1.1%), Las Vegas (+1.0%) and Tampa (+1.0%) showing the largest monthly increases. Home prices as measured by the index have risen 6.2% over the last 12 months.

Fact of the Week

  • Adobe Analytics reports that U.S. retailers saw record online sales to start the holiday shopping season. The totals for Thanksgiving and Black Friday are reportedly $7.9 billion in sales, a 17.9% increase from a year ago. Cyber Monday sales also impressed, coming in at $6.6 billion and becoming the largest U.S. online sales day ever.

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

Visit Old Second Wealth Management

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Fed Chair, Germany, Zimbabwe: Wealth Economic Update Nov. 24, 2017

U.S. and World News

  • germany-619762776_360In one of her last appearances as Fed Chairman, Janet Yellen discussed the direction of policy and Wall Street oversight at NYU Stern School of Business.  The scheduled discussion comes after Yellen stated her resignation from the Fed’s Board of Governors once Jerome Powell is sworn into the office.  Her departure will leave yet another vacancy at the central bank.
  • Germany  has been pushed into political uncertainty due to Angela Merkel’s failure to form a three-way coalition government.  The news dropped the euro as much as 0.7% to $1.1720 overnight. Immigration, climate change, Europe, and taxation were stated to be the irreconcilable differences that caused the Free Democrats to pull out unexpectedly, despite more than four weeks of negotiations. After the formation of the coalition collapsed, Angel Merkel stated she would prefer fresh elections to reigning with a minority government.  It is the worst governing crisis in the history of Germany’s post-WWII democracy according to President Frank-Walter Steinmeier. He has compelled all parties in the parliament “to serve our country” and form a government.
  • Vice President Emmerson Mnangagwa will be replacing President Robert Mugabe as leader of Zimbabwe’s ruling ZANU_PF party.  The dismissal follows a de facto military coup and will likely send political shockwaves across Africa.  Mnangagwa will focus on rebuilding ties with the outside world and stabilizing an economy in free fall.

Markets

  • Markets were up for the week with the S&P up 0.93% reaching a record high of 2,602. The Dow Jones rose 0.89% for the week and closed at 23,558. Year to date, the S&P is up 18.36% and the Dow is up 21.83%.
  • Interest rates were flat for the week with the 5 year and 10 year U.S. Treasury Notes yielding 2.06% and 2.34%, respectively.
  • The spot price of WTI Crude Oil increased by 3.93% this week, closing at $58.95 per barrel. Year to date, Oil prices have risen 3.44%.
  • The spot price of Gold ended the week off by 0.30%, closing at $1,288.58 per ounce. Year to date, Gold prices are up 12.29%.

 Economic Data

  • Initial jobless claims dropped 13,000 from last week, coming in at 239,000. Filings also fell for Puerto Rico’s 10-year high, which continues to deal with the aftermath of Hurricane Maria.  The four week moving average for claims rose to 240,000.
  • Existing Home sales rose 2.0% in October, beating consensus expectations of 0.2%. Sales increases were broad-based across property types with single family sales +2.1% and condos and co-ops +1.7%.

Fact of the Week

  • Over $40 Billion of gift cards value has gone unused.  With over $150 Billion in gift card sales projected in 2017, it is estimated that over $1 Billion of value will again go unused.
    • Gift cards are the #1 requested gifts, preferred by over 60% of gift recipients.
    • 93% of consumers will buy or receive a gift card this year.
    • 72% of customers will spend more than the value of their card.
    • 10% of gift cards will be e-gifted digital cards in 2017.

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

Visit Old Second Wealth Management

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Tax Reform: Wealth Economic Update Nov. 17, 2017

U.S. and World News

  • iStock-611086620_360The House of Representatives has passed a tax reform bill that would result in the biggest overhaul of the U.S. tax system in 31 years. Among some of its provisions, it would reduce the number of individual tax brackets, increase the child tax credit, abolish the estate tax by 2025, cut the corporate tax rate to 20% and make other tweaks aiming to make U.S. businesses more competitive. All is not clear though as attention moves to the Senate’s version which has significant differences such as a one year delay for corporate cuts, eliminating the deduction for state and local taxes and not fully repealing the estate tax.

Markets

  • Markets marginally fell this week in choppy trade. The S&P fell 0.06% and closed at 2,579. The Dow Jones dipped 0.19% for the week and closed at 23,358. Year to date, the S&P is up 17.27% and the Dow is up 20.76%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.05% and 2.34%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.26% this week, closing at $56.59 per barrel. Year to date, Oil prices have risen 6.30%.
  • The spot price of Gold ended the week higher by 1.47%, closing at $1,293.86 per ounce. Year to date, Gold prices are up 12.76%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 249,000. The Labor Department did not note any distortions to this week’s data. The four week moving average for claims rose to 238,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.1% in October, in line with consensus expectations. Over the last 12 months, headline CPI has increased 2.1%.
    • Core CPI (excludes food and energy) rose 0.2% in October, also in line with expectations. Over the last year, Core CPI has risen 1.8%.
  • Housing starts rose 13.7% in October. The increase was led by a sharp 36.8% rise in the more volatile multifamily starts category. However, single family starts moved higher as well, rising 5.3% in the month. While hurricane rebound effects may explain some of the strength in the South region (+17.2%), starts also moved higher in the Midwest (+18.4%) and the Northeast (+42.2%), but edged lower in the West (-3.7%).

Fact of the Week

  • According to the Energy Information Administration, American exports of natural gas will exceed its imports of natural gas in 2017, the first year in which that has happened since 1958.

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

Visit Old Second Wealth Management

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Tax Reform, Fed Chair: Wealth Economic Update Nov. 10, 2017

U.S. and World News

  • Roiling equity markets a bit this week, the Senate Republicans released their tax reform plan which differs from the House of Representative’s version that was revealed last week. Among the key differences are the timing of reduced corporate tax rates (Senate plan included a 1 year delay to the cuts), deductions for state and local taxes (Senate plan eliminates the deduction for those taxes) and the estate tax (Senate plan does not fully repeal it unlike the House). The House is set to vote on its measure next week, but the Senate’s timetable is less clear at this time.
  • The U.S. Senate Banking Committee has scheduled a November 28th confirmation hearing for Jerome Powell, President Trump’s candidate for Janet Yellen’s replacement as Chair of the Federal Reserve. Despite the usual gridlock in Washington, Powell’s nomination is expected to receive bipartisan support. Powell has been through the Senate confirmation process before, most recently in 2012 and 2014 when he was nominated to join the Fed board.

Markets

  • Markets dipped this week following reports on the differences between the House and Senate tax plans. The S&P fell 0.14% and closed at 2,582. The Dow Jones dipped 0.35% for the week and closed at 23,422. Year to date, the S&P is up 17.33% and the Dow is up 20.99%.
  • Interest rates broadly rose this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.06% and 2.40%, respectively.
  • The spot price of WTI Crude Oil increased by 2.14% this week, closing at $56.83 per barrel. Year to date, Oil prices have risen 6.59%.
  • The spot price of Gold ended the week higher by 0.48%, closing at $1,276.00 per ounce. Year to date, Gold prices are up 11.20%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 239,000. The four week moving average for claims fell to 231,000. Overall, the report suggests continued post-hurricane normalization to a trend of low job losses.
  • The University of Michigan consumer sentiment index moved lower by 2.9 points to 97.8 in the preliminary November report. Despite the small drop, the index remains close to the October cycle highs. Both the survey’s measures for expectations of the future and assessment of current conditions declined during the month.

Fact of the Week

  • A child born in 2017 would presumably attend college between the years of 2035 and 2039. If that child attended an average public in-state 4 year college and the annual price increases for in-state schools continued at their prior 30 year pace (+5.5% per year), the total cost of that 4 year education (including tuition, fees, room & board) would be $235,264, or $58,816 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
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.

Fed Chair Finalists, Catalonia: Wealth Economic Update Oct. 20, 2017

U.S. and World News

  • fed_chair-104257649As Fed Chair Janet Yellen’s term expiration date nears, the finalists for the next Fed Chair are beginning to narrow. The decision between finalists Janet Yellen, Jerome Powell, Kevin Warsh, Gary Cohn, and John Taylor is expected to be made by President Trump before November 3rd. On Thursday, President Trump met with the five candidates and Fed Governor Jerome Powell is leading the pack as he appears to favor no change from current Fed policy and is favored by Treasury Secretary Steven Mnuchin.
  • The crisis in Catalonia rose to higher levels today as the possibility of the government losing power over the region has become very real after the process to suspend government powers in the region has made further progress and Regional President Carles Puigdemont continues his push for independence. The Regional President is persistently asking to meet with Prime Minister Mariano Rajoy to begin discussing the future of Catalonia while the Prime Minister has vowed to force the region to obey the law.

Markets

  • Markets surged higher this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs once again during the week. The S&P rose 0.88% and closed at 2,575. The Dow Jones rose 2.04% for the week and closed at 23,329. Year to date, the S&P is up 16.75% and the Dow is up 20.10%.
  • Interest rates also dramatically increased this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.02% and 2.38%, respectively.
  • The spot price of WTI Crude Oil increased by 0.44% this week, closing at $51.96 per barrel. Year to date, Oil prices have fallen 3.28%.
  • The spot price of Gold ended the week lower by 1.75%, closing at $1,280.95 per ounce. Year to date, Gold prices are up 11.63%.

 Economic Data

  • Initial jobless claims decreased by 22,000 from last week, coming in at 222,000, reaching its lowest level since 1973 and no state’s claims increased by more than 1,000. The decline in claims in hurricane affected states attributed to the overall decline in the month. The four week moving average for claims fell to 248,000.
  • Housing starts fell by 4.7% in September to 1,127k while August’s numbers were revised up. The decline affected both single-family and multi-family homes and the month’s weakness is likely to be explained by the hurricanes in the South region.
  • Existing home sales increased by 0.7% in September to a seasonally adjusted rate of 5.39 million units versus consensus expectations of a -0.9% decline. Declines in the South region were more than offset by other regions in the country.

Fact of the Week

  • The New York stock market crash of 1987 happened 30 years ago this week, on October 19, the Dow Jones Industrial Average (DJIA of the Dow) plunged by a then-record 508 points-a 22% decline in the index.
    • Currently, a 500-point down day would only amount to a 2.2% drop in the Dow Jones Industrial Average. It has happened 17 times since 1987.
    • Today, it is not uncommon for 1-1.5 billion shares to be traded on a given day.
    • On October 19, 1987, Apple was only 6% of the size of IBM, then the largest company in the nation. Presently, Apple Inc.’s market capitalization is 6X (or 600%) that of IBM’s.

(Source: Oppenheimer)

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

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.

 

Interest Rates, Catalonia, Hurricanes: Wealth Economic Update Oct. 13, 2017

U.S. and World News

  • Minutes from the September Federal Reserve meeting were released this week and included comments about the near-term effects from Hurricanes Harvey, Irma and Maria but generally expressed unchanged views on underlying growth and inflation conditions. Many participants thought that another rate increase this year was likely warranted “if the medium term outlook remained broadly unchanged,” and consensus views continue to call for three rate hikes in 2018. The Fed will meet twice more in 2017, in November and in December, and the market is currently pricing in a 73% probability of a rate hike in December.
  • Catalonia-579153418_360The Catalonia saga continued on this week, though tensions have somewhat eased. Catalan President Carles Puigdemont, declared independence for the region but then halted the separation process to instead propose talks with the Spanish government. With the act, Puigdemont and his team remain in danger of being arrested for sedition, and Spanish President Mariano Rajoy had previously rejected any talks until secession plans were abandoned. Spanish and other European markets experienced a relief rally as a result of Catalonia choosing the more diplomatic option.

Markets

  • Markets grinded higher with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.17% and closed at 2,553. The Dow Jones rose 0.43% for the week and closed at 22,872. Year to date, the S&P is up 15.86% and the Dow is up 17.92%.
  • Interest rates pulled back this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.90% and 2.27%, respectively.
  • The spot price of WTI Crude Oil increased by 4.20% this week, closing at $51.36 per barrel. Year to date, Oil prices have fallen 4.26%.
  • The spot price of Gold ended the week higher by 2.09%, closing at $1,303.41 per ounce. Year to date, Gold prices are up 13.59%.

 Economic Data

  • Initial jobless claims decreased by 15,000 from last week, coming in at 245,000, only modestly above its pre-hurricane level. Jobless claims continued to normalize in the hurricane-affected states. The four week moving average for claims fell to 258,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.5% in September, slightly missing expectations of 0.6%. Headline CPI was boosted by a 6.1% increase in energy prices during the month. Over the last 12 months, the CPI is up 2.2%.
    • Core CPI (excludes food and energy prices) increased 0.1% in the month, missing forecasts of 0.2%. Over the last year, core inflation has risen 1.7%.
  • Retail sales rose 1.6% for September, just below the forecast of 1.7%. After seeing weakness in August due to the hurricanes, September’s sales bounced back with auto sales rising 3.6% and gas station sales rising 5.6%.

Fact of the Week

  • It was 10 years ago this week (10/9/07) that the S&P 500 peaked at a then all-time high of 1,565. The very next day, the index began a substantial 17 month slide that dragged the S&P down 57%, its worst bear market loss in the last 80 years. With the S&P closing at 2,553 on Friday, even if an investor had bought the 2007 market top on 10/9/07, they would have still experienced a 7.3% annualized total return (includes dividends) over the last 10 years. (Source: 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
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

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.

 

Vegas shooting, Catalonia, Hurricane Maria: Wealth Economic Update Oct. 6, 2017

U.S. and World News

  • mandalay_bay_360During a country music concert in Las Vegas, Stephen Paddock perpetrated the deadliest mass shooting in U.S. history from his hotel suite at the Mandalay Bay hotel, killing 58 people and wounding more than 500 more. Paddock had a large cache of rifles, thousands of rounds of ammunition and two ‘bump-stocks’ that convert semi-automatic firearms into fully automatics. Police are still seeking clues to explain Paddock’s motives and legislators are reviewing current gun laws and how he was able to assemble such a deadly arsenal. Gun stocks rallied following the massacre on reports of people stocking up on firearms ahead of potential legislation.
  • Catalonia is once again pushing for its independence from Spain as more than 90% of Catalan voters favored breaking off in a referendum deemed by Spanish officials as illegal. Catalan leader Carles Puigdemont is calling for international mediation for the dispute with Madrid, stating its referendum was valid and must be implemented. Puigdemont is also calling for a removal of Spanish security forces that have been clashing with citizens for weeks and has said that the Catalonia region will declare independence within a “matter of days.”
  • According to the island’s treasury secretary, Puerto Rico will need “tens of billions” of dollars in aid from the U.S. as it struggles to bounce back from the devastation of Hurricane Maria. President Trump visited the island this week to assess the recovery efforts. While Trump said early in the visit, “I hate to tell you, Puerto Rico, but you threw our budget a little out of whack,” he also implied that there would be an easing of Puerto Rico’s massive debt load stating, “They owe a lot of money to your friends on Wall Street and we’re going to have to wipe that out. You’re going to say goodbye to that.”

Markets

  • Markets rallied this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 1.25% and closed at 2,549. The Dow Jones rose 1.70% for the week and closed at 22,774. Year to date, the S&P is up 15.67% and the Dow is up 17.42%.
  • Interest rates continued to push higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.97% and 2.37%, respectively.
  • The spot price of WTI Crude Oil decreased by 4.68% this week, closing at $49.25 per barrel. Year to date, Oil prices have fallen 8.32%.
  • The spot price of Gold ended the week lower by 0.24%, closing at $1,276.68 per ounce. Year to date, Gold prices are up 11.26%.

 Economic Data

  • Initial jobless claims decreased by 12,000 from last week, coming in at 260,000. Jobless claims pulled back in hurricane-affected states. The four week moving average for claims fell to 268,000.
  • The September employment report showed a loss of 33,000 jobs during the month, widely missing expectations of an 80,000 payroll increase. The miss appears to be completely related to distortions caused by the multiple hurricanes that hit the country during the month. The prior two months figures were revised down a combined 38,000, bringing the three month average of job gains down to 91,000.
    • The headline unemployment rate fell to 4.2%, beating expectations of 4.4%. It doesn’t appear as though the hurricanes had an effect on the unemployment rate and the labor force participation rate increased from 62.9% to 63.1%.
    • Average hourly earnings rose by 0.5% in September, better than forecasts of 0.3%. Over the last 12 months, average wages have increased 2.9%.

Fact of the Week

  • Harvard University’s $37.1 billion endowment fund, which is the largest university endowment fund in the world, gained just 8.1% in the 12 months ending on June 30th. This compares to a 17.9% return for the S&P 500 over the same time period; a performance that the CEO of Harvard’s management company called “disappointing”. (Source: Harvard Management Company)

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
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

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.

 

North Korea, Hurricane Maria, Tax Plan: Wealth Economic Update Sept. 29, 2017

U.S. and World News

  • jets-525969835_360China has requested that President Trump and Kim Jong Un end the ongoing war of words after the foreign minister of North Korea referred to Trump’s latest warning of “they won’t be around much longer!” as a declaration of war. North Korea has responded by threatening to shoot down any American warplanes beyond North Korean airspace while Washington stated that North Korea’s interpretation of Trump’s words was “absurd”. China, North Korea’s most important ally, has ordered all North Korean companies operating in China to shut down by January 1st, as part of recently passed sanctions by the United Nations.
  • Hurricane Maria is estimated to have caused $85 billion in insured losses after it made landfall in Puerto Rico last weekend. Most of the island was destroyed, and bondholders are attempting to put together a $1 billion restructuring deal consisting of private money to aid the struggling U.S. territory. The price of Puerto Rican debt has fallen to record lows as a result of the devastation.
  • President Trump has unveiled his tax reform plan which aims at lowering corporate and personal tax rates. The plan includes a proposal that allows a one-off low tax rate for corporations repatriating profits from overseas. The tax plan is also said to make the tax code simpler and create millions of new jobs for Americans.

Markets

  • Markets rallied this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.72% and closed at 2,519. The Dow Jones rose 0.25% for the week and closed at 22,405. Year to date, the S&P is up 14.10% and the Dow is up 15.30%.
  • Interest rates extended their rally this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.93% and 2.34%, respectively.
  • The spot price of WTI Crude Oil increased by 1.82% this week, closing at $51.58 per barrel. Year to date, Oil prices have fallen 3.98%.
  • The spot price of Gold ended the week lower by 1.33%, closing at $1,280.01 per ounce. Year to date, Gold prices are up 11.55%.

 Economic Data

  • Initial jobless claims increased by 12,000 from last week, coming in at 272,000. The increase was attributed to the southeast region as a result of Hurricane Irma. The four week moving average for claims rose to 278,000.
  • Real GDP growth for Q2 was revised up to 3.1% from 3%. The revision was attributed to a faster pace of inventory accumulation.
  • Sales of new single-family homes fell by 3.4% in August to a seasonally-adjusted annualized rate of 571k units, below expectations. The south region in areas affected by the hurricane contributed to 75% of the decline.
  • The core PCE price index (excluding food and energy) increased 0.1% last month, below expectations of a 0.2% increase.

Fact of the Week

  • After adjusting numerical data from the past for the impact of inflation, the median household income in 2016 ($59,039) is the highest ever recorded in the United States, surpassing the previous median income record high ($58,665) set in 1999 (source: Federal Reserve Bank of St. Lous).

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

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.

 

Interest Rates, Puerto Rico, North Korea: Wealth Economic Update Sept. 22, 2017

U.S. and World News

  • puerto-468910550_360The Federal Reserve left interest rates unchanged during their September meeting this week. They did however announce that they will begin to let their over $4 trillion balance sheet run off starting in October. The pace of the runoff will begin slowly and progressively pick up in size until the Fed’s balance sheet has become normalized, unwinding its massive and unprecedented Quantitative Easing program. The Committee’s projections continued to show that a third rate hike of 2017 is probable in December but that only two rate hikes were anticipated in 2018. In Fed Chair Janet Yellen’s post-meeting press conference she noted that while there may be a short-term growth impact from the recent hurricanes, she does not expect them to “materially alter the course’ of medium term growth. The market is currently pricing in a 63% chance of a rate hike in December.
  • Puerto Rico was rocked by a hurricane for the second time this month as Hurricane Maria slammed into the island this week. Still picking up the pieces from Hurricane Irma, Maria knocked out power to the entire island that has a population of over 3 million people. It’s estimated that the damage will likely cause $30 billion in damage for the island that had recently sought bankruptcy protection.
  • The North Korean saga continued this week with President Trump and Kim Jong-Un trading barbs and threats through various means. Speaking at the UN, Trump threatened to “totally destroy ‘Rocket Man’s regime”. Additionally, Trump issued an executive order that would penalize any company or person doing business with North Korea by either cutting off their access to the U.S. financial system or freezing their assets, a move seen as aimed at Chinese financial institutions which have long been tied to North Korea. In response, Un released a statement that said that Trump was ‘mentally deranged’ and that North Korea could test a hydrogen bomb over the Pacific Ocean in response to the threats.

Markets

  • Markets edged higher with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.21% and closed at 2,502. The Dow Jones rose 0.90% for the week and closed at 22,350. Year to date, the S&P is up 13.43% and the Dow is up 15.17%.
  • Interest rates continued to rise from their recent lows. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.86% and 2.25%, respectively.
  • The spot price of WTI Crude Oil increased by 1.52% this week, closing at $50.65 per barrel. Year to date, Oil prices have fallen 5.45%.
  • The spot price of Gold ended the week lower by 1.77%, closing at $1,296.81 per ounce. Year to date, Gold prices are up 13.01%.

 Economic Data

  • Initial jobless claims declined by 23,000 from last week, coming in at 259,000. The drop reflected a rebound from the effects of Hurricane Harvey, and a smaller than expected the impact from Hurricane Irma. The four week moving average for claims rose to 269,000.
  • Housing starts fell by -0.8% in August, worse than the forecasted 1.7% increase. The more volatile multi-family category (-6.5%) dragged the total down while single family starts showed a 1.6% increase.
  • Existing home sales fell -1.7% in August, lower than an expected 0.2% increase in existing homes. Data was mixed regionally as existing home sales in the South (-5.7%) and West (-4.8%) fell while they rose in the Midwest (+2.4%) and Northeast (+10.8%).

Fact of the Week

  • Prior to the first round of Quantitative Easing (QE) beginning on November 26, 2008, the Fed’s balance sheet stood at $480 billion and only held Treasury bills, notes and bonds, but not any mortgage-backed securities. As of September 6, 2017 Fed’s balance sheet stood at an enormous $4.2 trillion and included $2.4 trillion of Treasury bonds and $1.8 trillion of mortgage-backed securities. (Source: Federal Reserve)

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

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.