Brexit, China Tariffs, Ukraine: Wealth Economic Update Dec. 1, 2018

U.S. and World News

  • iStock-815062310The House of Commons will vote on Theresa May’s new Brexit withdrawal agreement on December 11th, which calls for London to follow many of the European bloc’s rules in an effort to keep trade agreements intact. Meanwhile, people in the “Remain” group are hopeful that the European Union’s top court will determine that the U.K. can unilaterally cancel Brexit after it has been completed. European Union Brexit negotiator Michel Barnier has advised Britain that this agreement is “the only one possible”.
  • President Trump has threatened to raise tariffs to 25% from 10% on $200 billion of Chinese goods effective January 1st and institute tariffs on $267 billion more Chinese imports that would include iPhones and laptops. The announcement preludes the G20 summit in Argentina taking place this weekend that will be attended by President Trump, Xi Jinping. President Trump and the Chinese President are expected to have a dinner meeting on Saturday night to discuss trade.
  • Tensions are rising between Vladimir Putin and Ukraine after Russia captured and fired upon three Ukrainian navy vessels that had entered the Kerch strait near Crimea last weekend. Russia is now planning to deploy more surface-to-air missile systems to the area. Ukraine is calling for NATO to deploy warships to the sea of Azov, between the two countries.


Markets

  • Stocks rebounded this week. The S&P 500 gained 4.91% and closed at 2,760.16. The Dow Jones rose 5.52% and closed at 25,538.46. Year to date, the S&P is up 5.10% and the Dow Jones is up 5.54%.
  • Yields dropped again from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.82% and 2.99%, respectively.
  • The spot price of WTI Crude Oil rose slightly this week, up 0.36% and closing at $50.60 per barrel. Year to date, Oil prices are down 16.17%.
  • The spot price of Gold fell 0.07% this week and closed at $1,222.12 per ounce. Year to date, Gold prices are down 6.19%.

Economic Data

  • Initial jobless claims rose by 10,000 to 234,000 this week. The four-week moving average of claims rose by 4,000 to 223,000. Claims rose by 5,000 in New York, 3,000 in Pennsylvania, and 2,000 in Georgia.
  • The core PCE price index ex-food and energy rose by 0.10% month-over-month in October versus expectations for a 0.2%. The year-over-year rate fell 0.2% to 1.8% versus expectations for 1.9%.
  • Personal income rose by 0.5% month-over-month in October versus expectations for a 0.4% increase.
  • Consumer spending rose by 0.6% in October versus expectations for a 0.4% increase.
  • Pending home sales fell by 2.6% in October versus expectations for a 0.5% increase. Declines were led by the West region.
  • Sales of new single-family homes fell by 8.9% in October to a seasonally-adjusted annualized rate of 544k versus expectations of 575k. This is the lowest level since March 2016.
  • Second-quarter GDP growth was unrevised and remained at 3.5% versus expectations for a revision to 3.6%.
    • The October goods trade deficit increased by $1.2 billion to $77.2 billion, versus expectations for a reading of $77.0 billion.
    • Wholesale inventories rose 0.7% in October versus expectations for a 0.4% increase.
  • The Conference Board index of consumer confidence fell 2.2 points to 135.7 in November, in-line with expectations.

Fact of the Week

  • Outstanding student loan debt in the US doubled from $360 million to $720 billion from 3/31/05 to 12/31/09. It double again to $1.44 trillion as of 9/30/18.

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
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava – (630) 281-4522 mcava@oldsecond.com

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Wealth Management Economic Update February 24, 2015

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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

Wealth Management Economic Update November 3, 2014

U.S. and World News

  • The Federal Reserve Committee met this week and decided to end the remaining $15 billion of monthly asset purchases. With QE3 officially over, attention now turns to when the Fed will begin raising short term interest rates. Janet Yellen’s statement maintained that this action is still a “considerable time” off and will be entirely data dependent. While employment has certainly picked up and has surpassed the Fed’s stated goals, inflation remains very subdued below the 2% target. Consensus expectations for the first rate hike have been pushed back from March 2015 to around September 2015.
  • As the US winds down its QE program, the Bank of Japan has unexpectedly announced it will increase its asset purchases from ¥60 trillion to ¥80 trillion ($725 billion). japan_flag_000042392394_320The move resulted from the BOJ downgrading its projections for inflation and growth in the country. The announcement sent the Nikkei stock index soaring by 4.8% and led to rallies across most global markets.
  • Russia and Ukraine have signed an agreement that will guarantee the flow of Russian gas exports into Ukraine through the winter. The deal follows weeks of negotiations and a bitter dispute over payments. The European Union energy chief, Guenther Oettinger, helped broker the deal as the region depends on Russia for 1/3 of its gas.

Markets

  • Equity markets continued to rally this week as both the S&P 500 and Dow Jones Industrial Average closed at new All-Time Highs. The S&P 500 advanced 2.74% and closed at 2,018. Likewise, the Dow Jones climbed up 3.48% and closed at 17,390. Year to date, the S&P 500 is up 10.97% and the Dow Jones is up 6.83%.
  • Yields in the treasury markets continued to come back up this week. The 10 year treasury came up to 2.33% and the 5 year treasury is yielding 1.61%.
  • The spot price of WTI Crude Oil fell slightly this week, dipping 0.35%, closing at $80.73 per barrel. Year to date, Oil prices are down 12.93%.
  • The spot price of Gold plummeted by 4.87% this week, closing at this year’s low of $1,171.59 per ounce. Year to date, Gold prices are down 2.50%.

Economic Data

  • Initial jobless claims rose a bit from last week but remain quite low overall, coming in at 287,000 vs. consensus estimates of 285,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 281,000, which is the lowest it’s been since May 2000.
  • The first estimate of 3rd quarter GDP surprised to the upside, rising 3.5% vs. expectations of 3.0%. There was a 0.8% boost from government spending in the quarter which includes defense spending, while consumer spending added 1.2%. The report shows that government drag on growth appears to be waning, and the U.S. private sector continues to function as a consistent source of demand in the global economy.
  • Pending home sales rose 0.3% in September vs. expectations of 1.0%. Sales were mixed by region of the country with the South and Northeast showing gains with the Midwest and West posting losses. This leading indicator for existing home sales has been fairly flat over the past couple of months.

Fact of the Week

  • According to the US Census Bureau, 35% of Americans age 65 and older have no other source of retirement income other than Social Security. The maximum benefit paid by Social Security to a worker retiring at “full retirement age” in 2014 is $2,642 per month or $31,704 per 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® – (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 October 27, 2014

U.S. and World News

  • pipeline_000039527184_300Russia and Ukraine failed to reach a gas deal during EU-brokered talks this week but agreed to meet again next week. Negotiations regarding prices for the winter supply of gas from Russia through Ukraine and the rest of Europe stalled when Russia added new conditions to the deal. Russia cut off supplies to Ukraine in June, demanding that Ukraine pay a debt of $5 billion which Russia is still requiring before any deal is made.
  • The panel chosen to pick candidates for Hong Kong’s 2017 election could be made more democratic according to the territory’s leader Leung Chun-ying. The comment was made just before the start of the first public talks between pro-democracy student leaders and government officials. Expectations are low for any major breakthroughs during the talks, but the mere concession that the candidate selection process could be more open is a step towards a more democratic process in Hong Kong.

Markets

  • The markets bounced back this week with the S&P 500 coming up 4.12% and closed at 1,965. Likewise, the Dow Jones Industrial Average climbed up 2.59% and closed at 16,805. Year to date, the S&P 500 is up 6.29% and the Dow Jones is up 1.38%.
  • Yields in the treasury markets also increased. The 10 year treasury came up to 2.27% and the 5 year treasury is yielding 1.50%.
  • The spot price of WTI Crude Oil fell slightly this week, dipping 0.95%, closing at $81.28 per barrel. Year to date, Oil prices are down 12.34%.
  • The spot price of Gold fell 0.59% this week, closing at $1,231.01 per ounce. Year to date, Gold prices are up 2.44%.

Economic Data

  • Initial jobless claims rose a bit from last week but remain quite low overall, coming in at 283,000 vs. consensus estimates of 281,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 283,000, which is the lowest it’s been since May 2000.
  • The Headline Consumer Price Index (measure of inflation) rose 0.1% in September vs. consensus expectations of it being flat. Core CPI (excludes food and energy) was also up 0.1% in September, picking up from a flat August. Over the past year, both headline and core CPI have risen a modest 1.7%.

Fact of the Week

  • According to Forbes, Bill Gates is the richest person in the world today with a net worth of $81 billion. The six living heirs of Sam Walton (Wal-Mart founder) who died in 1992 are worth a combined $153 billion.

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 September 22, 2014

U.S. and World News

  • Following a two day policy meeting, the Federal Reserve announced another $10 billion reduction of its asset purchases and announced that they are on pace to completely end its quantitative easing purchases at its next policy meeting in October. Fed Chairperson Janet Yellen renewed her pledge to keep short term interest rates at zero for a “considerable time” after asset purchases have stopped, but did not provide any clarification as to how long of a time that would be. Yellen also made dovish comments regarding the labor market, saying that the slow increase in wages was indicative of labor market slack, laying the groundwork for delaying the raising of interest rates.
  • Ukraine and the European Union ratified their long awaited association and free trade agreement this week. This agreement was largely responsible for sparking the Ukrainian revolution last February. Ukrainian President Petro Poroshenko announced after the signing that by ratifying the agreement, the country is on course for membership in the EU. The deals implementation will be postponed until December 2015 however, as they are currently facing immense pressure from Russia and pro-Russian separatists in Ukraine.
  • Residents of Scotland have voted to remain a part of the United Kingdom. The independence referendum showed a very close race at times but with 55% of the vote, “No” to Scotland’s independence won out. UK Prime Minister David Cameron said that he was delighted by the referendum result and added that it was time for the UK to come together and move forward.
  • Stock_000001029623_320Today, the stock market closely monitored the biggest IPO in America’s history. Chinese internet retailer, Alibaba, made its debut today and closed at $93.89. This closing price was about a 38% increase from the original stock price of $68.

Markets

  • Markets improved this week as the S&P 500 gained 1.25% and closed at 2,010. The Dow Jones Industrial Average followed suit and increased 1.72% and closed at 17,280. Year to date, the S&P is up 8.77% and the Dow is up 4.24%.
  • Interest rates didn’t change much this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.81% and 2.58%, respectively.
  • The spot price of WTI Crude Oil climbed up slightly by 0.36% this week, closing at $92.60 per barrel. Year to date, Oil prices are down 1.49%.
  • The spot price of Gold continued its decline and fell by 1.06% this week, closing at $1,216.65 per ounce. Year to date, Gold prices are up 1.25%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 280,000 vs. consensus estimates of 305,000. The Labor Department noted that claims are difficult to measure around the Labor Day holiday. The four week moving average for claims now stands at 300,000.
  • Housing starts fell 14.4% in August vs. consensus estimates of a drop of 5.2%. Most of the decline occurred in the more volatile multifamily category which fell 31.7%, while single family starts moved down a more moderate 2.4%. Building permits also disappointed, declining 5.6% vs. expectations of -1.6%, again mainly due to the multifamily category.
  • The headline consumer price index declined 0.2% in August vs. expectations of flat prices, due in part to a 2.6% decline in energy prices. Core CPI, which doesn’t include volatile food or energy prices, was flat for the month and was disappointing compared to expectations of +0.2%. Over the past year, headline and core consumer prices both rose at a subdued rate of 1.7%.

Fact of the Week

  • According to a Federal Reserve Economic Well-Being Survey, 34% of Americans surveyed said that they have gone without some form of medical care (i.e. medication, surgery, therapy) in the last 12 months because they could not afford to pay for the product or service.

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 September 15, 2014

U.S. and World News

  • President Obama announced his four pronged plan for dealing with terrorist group Islamic State (ISIS) in an address this week. The plan includes training Iraqi and Kurdish forces fighting ISIS, increasing counterterrorism efforts by working with allies to prevent foreign fighters from joining ISIS, humanitarian assistance to those in danger from ISIS and finally, ramping up airstrikes wherever the terrorists are, including in Syrian land. The four point plan has the objective to “degrade and ultimately destroy” ISIS. President Obama stressed in his address that this action was different from prior wars with Iraq and Afghanistan, and highlighted prior examples of Yemen and Somalia as successful operations that were similar in nature.
  • The European Union is set to implement new sanctions on Russia but officials say that they will determine the application of the sanctions based on Russia’s cooperation with the ceasefire agreement that was reached last week. The sanctions would hit Russia’s state-controlled banks and oil companies. In response to the new sanctions, Russia has indicated that it may ban Western airlines from flying over its territory. The U.S. announced its own new round of sanctions on Friday, which target Russian financial services, energy and defense and seek to further isolate Russia from the global financial system until they genuinely work towards a diplomatic resolution of the crisis.
  • bagpipe_333Residents of Scotland will go to the polls next Thursday to vote on a referendum that could make them an independent country, breaking up the United Kingdom. Polling has shown increasing support for independence, with several polls indicating it’s a 50-50 proposition. Several issues lie ahead for Scotland should they vote for their independence, including choosing a currency, whether to join the European Union, the sharing of North Sea oil revenue and its share of the British national debt. UK Prime Minister David Cameron made a plea to the Scots to vote down independence, saying “We do not want this family of nations to be ripped apart. If the U.K. breaks apart, it breaks apart forever.”

Markets

  • Markets lost ground this week as the S&P 500 fell 1.05% and closed at 1,986. The Dow Jones Industrial Average lost 0.81% and closed at 16,987. Year to date, the S&P is up 9.01% and the Dow is up 4.25%.
  • Interest rates rose again this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.82% and 2.61%, respectively.
  • The spot price of WTI Crude Oil continued its decline and fell by 1.19% this week, closing at $92.18 per barrel. Year to date, Oil prices have decreased 1.94%.
  • The spot price of Gold dropped by 3.04% this week, closing at $1,230.29 per ounce. Year to date, Gold prices are up 2.38%.

Economic Data

  • Initial jobless claims rose a bit from last week, coming in at 315,000 vs. consensus estimates of 300,000. The Labor Department noted that claims are difficult to measure around the Labor Day holiday. The four week moving average for claims now stands at 304,000.

Fact of the Week

  • According to the Federal Reserve Bank of New York, as of 6/30/12, 8.9% of student loan debt (measured by dollar amount outstanding) was at least 3 months delinquent or is in default. Two years later, the proportion of student loan debt that is delinquent or in default has risen to 10.9%. With an estimated $1.08 trillion of student loan debt outstanding, this leaves nearly $118 billion of delinquent or defaulting debt that isn’t dissolvable in bankruptcy.

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 September 8, 2014

U.S. and World News

  • The European Central Bank announced this week a series of surprising and aggressive policy moves intended to stimulate growth in the stagnated region. The ECB announced three rate cuts, lowering its main refinancing rate from 0.15% to 0.05%, lowering the marginal lending facility rate from 0.4% to 0.3% and lowering the deposit facility rate from -0.1% to -0.2% (banks have to pay to hold deposits with the central bank). ECB President Mario Draghi also announced that the central bank would begin to buy bonds (similar to the quantitative easing seen here in the U.S.), specifically covered and asset-back bonds. Draghi hopes the measures will boost inflation by keeping credit markets liquid and interest rates very low.
  • handshake_320Ukraine’s government and pro-Russian separatist leaders signed a ceasefire deal on Friday after talks in Belarus yielded an agreement. There is hope that the deal will bring peace to the eastern Ukraine region that has been embroiled in conflict for nearly five months. Separatist leaders were quick to point out that the ceasefire does not mean an end to the separatists groups like the Dontesk People’s Republic and the Luthansk People’s Republic. European leaders will wait and see how the situation progresses before implementing a new round of economic sanctions on Russia. Some of the proposed restrictions include banning Russian companies from accessing the European capital markets, denying use of European oil companies for deep-sea drilling and possibly boycotting Russia from hosting the 2018 World Cup.
  • The Federal Reserve is increasing its efforts to find an alternative to LIBOR (London Interbank Offered Rate), in a potential transition that would affect trillions of dollars in U.S. and worldwide contracts and derivatives. Many financial products use this rate as a benchmark in their structures and Fed Governor Jerome Powell warns that reliance on this one rate could result in a “horrible mess”. The Fed and large financial firms will meet and discuss this over the next year to work toward an alternative benchmark.

Markets

  • Markets were positive this week despite continued geopolitical turmoil. The S&P 500 closed at a new All-Time High on Friday, gaining 0.24% this week and closing at 2,008. The Dow Jones Industrial Average gained 0.25% and closed at 17,137. Year to date, the S&P is up 10.14% and the Dow is up 5.09%.
  • Interest rates rose this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.69% and 2.46%, respectively.
  • The spot price of WTI Crude Oil fell by 2.61% this week, closing at $93.46 per barrel. Year to date, Oil prices have decrease 0.57%.
  • The spot price of Gold decreased by 1.47% this week, closing at $1,268.46 per ounce. Year to date, Gold prices are up 5.56%.

Economic Data

  • Initial jobless claims rose a bit from last week, coming in at 302,000 vs. consensus estimates of 300,000. The level of claims remains near the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 303,000.
  • The ISM manufacturing index increased to 59.0 in August vs. expectations of 57. This is close to the post-recession high of 59.3 set in February 2011. 17 of 18 manufacturing industries reported growth in August and most of the commentary in the report was very positive.
    • The ISM non-manufacturing index also beat expectations by rising to 59.6 in August vs. the consensus estimate of 57.7. This brings the ISM Composite Index, which incorporates both surveys, to near an all-time high.
  • Monthly non-farm payrolls increased by less than expected in August, rising by 142,000 vs. consensus estimates of 230,000. There were also net revisions of -28,000 applied to the prior two months.
    • The unemployment rate fell by 0.1%, down to 6.1%. This was aided by a 0.1% drop in the labor force participation rate, which now stands at 62.8%.
    • Average hourly earnings rose 0.2%, in line with expectations but still somewhat subdued by historical standards. Hourly earnings have increased by 2.1% over the past 12 months.

Fact of the Week

  • According to the Census Bureau, there are 76 million homeowners in the United States. Of the 76 million, 24 million have no housing debt (ie. own it free and clear). Of the remaining 52 million that do have housing debt, 9 million (12.5%) homeowners have mortgage debt that exceeds the value of their homes (ie. mortgage is underwater).

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 September 2, 2014

U.S. and World News

  • The hostilities between Ukraine and Russia continued this week on reports of Russian tanks, artillery and infantry being passed over the border of eastern Ukraine. This follows an in-person meeting between Ukrainian President Petro Poroshenko and Russia’s Vladimir Putin which failed to yield any substantial progress between the two nations as Putin claimed that it is ultimately up to Kiev to work out conditions for a ceasefire with separatist rebels. The United States and European Union are now considering another round of sanctions on Russia based on NATO reports that well over 1,000 Russian troops have breached the border. Despite the recent escalation, President Obama has ruled out military intervention in the region.
  • drone_000030705766_330The U.S. is preparing to expand its military air campaign beyond Iraq. This week, President Obama authorized surveillance flights to gather intelligence on Islamic State (formerly ISIS) targets in Syria. A decision to launch air strikes in Syria has not been made yet as the drones being utilized are just collecting information at this time.

Markets

  • Markets were positive this week despite continued geopolitical turmoil. The S&P 500 closed at a new All-Time High on Friday, gaining 0.79% this week and closing at 2,003. The Dow Jones Industrial Average gained 0.63% and closed at 17,098. Year to date, the S&P is up 9.87% and the Dow is up 4.84%
  • Interest rates dipped a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.63% and 2.35%, respectively.
  • The spot price of WTI Crude Oil rose by 2.33% this week, closing at $95.84 per barrel. Year to date, Oil prices have increased 1.96%.
  • The spot price of Gold increased by 0.49% this week, closing at $1287.32 per ounce. Year to date, Gold prices are up 7.13%.

Economic Data

  • Initial jobless claims held steady from last week, coming in at 298,000 vs. consensus estimates of 300,000. The level of claims remains near the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 300,000.
  • Several reports on housing data were released this week, showing a mixed but possibly improving picture:
    • New home sales declined by 2.4% in July vs. consensus estimates of a gain of 5.8%.
    • The Case-Shiller home price index declined by 0.2% in June vs. expectations of remaining flat. Over the past year, the home price index has risen 8.1%.
    • Pending home sales rose 3.3% in July vs. expectations of 0.5%. This number, which is based on contract signings instead of closings, is a good leading indicator of existing home sales one to two months in the future.

Fact of the Week

  • According to the Office of Management and Budget, the government is projecting a $525 billion deficit for fiscal year 2014 (the government’s fiscal year ends on September 30). If that amount comes to fruition, this would be the smallest national budget deficit since fiscal 2008.

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 August 25, 2014

U.S. and World News

  • Middle_East_000038001262_320President Obama says that the U.S. will continue limited airstrikes against Islamic State militants. The efforts have helped Iraqi and Kurdish forces retake the vital Mosul dam and halted the advance of Islamic State on the city of Erbil. News of the recaptured dam has helped to push down oil prices this week.
  • The latest cease-fire in the Gaza Strip has collapsed, after rocket fire from the Palestinians resumed eight hours before the cease-fire was due to expire. Israel responded with airstrikes and ordered its delegates back from Cairo saying they will not negotiate under fire. Egyptian officials have been struggling to mediate during the conflict, striking several temporary cease-fires, but not achieving a permanent truce as of yet.
  • Vladimir Putin is scheduled to meet face to face with Ukrainian President Petro Poroshenko in Belarus on August 26th. Among the issues surely to be discussed will be stabilizing the border situation with Ukraine and addressing Ukraine’s energy concerns. Ukraine’s energy sector is faltering considerably and estimates suggest that coal supplies to electricity producers may run out in about a month due to rail lines that were damaged by pro-Russian separatists.
  • The annual retreat in Jackson Hole, Wyoming where central bankers, finance ministers and academics from all around the world come to discuss global economic issues went on this week without too many market moving headlines. Fed Chairwoman Janet Yellen’s comments noted both a more rapid than expected pace of recent labor market improvements, as well as the still significant level of labor underutilization. She continued to emphasize that future policy decisions will be data driven and that the Fed could raise rates earlier than expected should the data improve more than expected but that it could also raise rates later than expected if labor and inflation data disappoints.

Markets

  • Markets were positive this week despite continued geopolitical turmoil. The S&P 500 closed at a new All-Time High on Thursday but lost ground on Friday, gaining 1.74% this week and closing at 1,988. The Dow Jones Industrial Average gained 2.07% and closed at 17,001. Year to date, the S&P is up 9.00% and the Dow is up 4.16%
  • Interest rates floated back up a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.66% and 2.40%, respectively.
  • The spot price of WTI Crude Oil fell by 1.91% this week, closing at $93.50 per barrel. Year to date, Oil prices have dipped 0.53%.
  • The spot price of Gold decreased by 1.89% this week, closing at $1280.04 per ounce. Year to date, Gold prices are up 6.52%.

Economic Data

  • Initial jobless claims declined from last week, coming in at 298,000 vs. consensus estimates of 303,000. The level of claims is near the pre-crisis lows. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 301,000.
  • Nearly all of the 2nd quarter earnings reports from the S&P 500 have come out with 94% of companies reporting. Overall, 67% of companies exceeded earnings expectations with healthcare and financial stocks beating the highest percentage of the time and telecommunication stocks performing the worst. On the top line, 63% of companies beat revenue expectations, again with healthcare leading the way while telecom and staples lagged.
  • Housing starts rose a stronger than expected 15.7% in July vs. consensus expectations of 8.1%. Both single family and multifamily starts contributed to the gains and left the level of housing starts just shy of the post-recession high seen last November.

Fact of the Week

  • According to a study conducted by Reuters, 40% of people identifying themselves as retired reported that they had stopped working involuntarily. Additionally, 30% of those retired people surveyed said that if the labor market improved and a job became available, they would effectively “unretire” and rejoin the workforce. These findings show that headline unemployment rate isn’t always a representative statistic, as those 30% are currently not counted as being in the workforce but would reenter it if conditions improve.

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