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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

Visit Old Second Wealth Management

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

 

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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

Visit Old Second Wealth Management

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

 

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

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

  • The Dow Jones Industrial Average was launched in 1896 and consisted of 12 companies. The index expanded to 20 companies in 1916 and grew to its current size of 30 companies in 1928 when the components of the index started being referred to as “Blue Chips”. General Electric is the only stock currently in the index that was part of the original 12, although it was removed from the index twice (in 1898 and in 1901) but returned to the index both times.
  • CORRECTION: Last week’s fact incorrectly stated market returns during the Obama presidency in relation to other Presidents. A total return (includes dividends) was quoted for Obama while comparing it to Clinton’s price-only returns. The correct figures were 13.8% annualized returns during Obama’s tenure and 15.2% annualized returns during Clinton’s.

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

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

Visit Old Second Wealth Management

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

 

Wealth Management Economic Update 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 June 29, 2015

U.S. and World News

  • Another week passed and there is still no resolution to the Greek debt crisis just days before a €1.6 billion payment is due from Athens to the International Monetary Fund (IMF). Expectations of a deal rose mid-week as Prime Minister Alexis Tsipras submitted a set of reforms that were closer to those demanded by creditors, however these talks soon fell apart. Eurozone finance ministers will meet again on Saturday in a last ditch effort before Tuesday’s deadline. German Chancellor Angela Merkel said the upcoming meeting would be “of decisive importance,” but did not provide any additional detail as to what would happen if a deal is not reached.
  • congress_000009112701_320After a six week battle that temporarily failed twice, the Senate voted to grant President Obama ‘fast-track’ authority to negotiate trade deals and expedite them through Congress. With this hurdle cleared, the next step to passing the Trans-Pacific Partnership (TPP) trade deal is for the U.S. and Japan to discuss outstanding bilateral issues at an upcoming meeting in July. If the TPP deal is struck, it would be the largest trade deal since NAFTA and would cover 40% of the world economy.
  • As its economy falters from the Middle East Respiratory Syndrome (MERS) virus, South Korea is reported to be planning a stimulus package of more than 15 trillion won ($13.5 billion). The package would aim at cushioning the economic impact of the deadly virus that has killed over 30 people and has resulted in widespread quarantines across the country.

Markets

  • Equity markets finished negatively this week. The S&P 500 lost 0.39%, closing at 2,101. Similarly, the Dow Jones fell by 0.38% and closed at 17,947. Year to date, the S&P is up 3.08% and the Dow is up 1.87%.
  • Yields in the Treasury markets were volatile yet again this week and ended higher than the week prior. The 10 year Treasury bond now yields 2.48% and the 5 year Treasury bond yields 1.76%.
  • The spot price of WTI Crude Oil dipped by 0.62% from last week, closing at $59.60 per barrel. In 2015, WTI Oil prices are now up 4.80%.
  • The spot price of Gold decreased this week by 2.12% and closed at $1,174.77 per ounce. Year to date, gold prices are down 0.81%.

Economic Data

  • Initial jobless claims increased a bit from last week and remain quite low, coming in at 271,000, below consensus expectations of 273,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 273,750.
  • The University of Michigan consumer sentiment index rose to a reading of 96.1, surpassing expectations of 94.6. Both consumers’ sentiment of present situation and expectations for the future improved.
  • The headline PCE price index (measure of inflation) rose 0.3% in May, in line with expectations. This was due in large part to a 10.2% increase in gas prices. The core PCE index (excludes food and energy) rose 0.1% in May, also in line with expectations. Over the last 12 months, headline PCE prices are up 0.2% (mainly due to lower energy costs) and core PCE prices are up 1.2%, both consistent with subdued inflation.

Fact of the Week

  • Last week, Republican presidential candidate Rand Paul proposed a 14.5% flat income tax. According to the IRS, the $9.1 trillion of adjusted gross income in the US in 2012 would generate $1.32 trillion of tax revenues if it were taxed at this 14.5% rate. This represents an additional $131 billion of revenue over the $1.19 trillion of taxes actually collected in that year.

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