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

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Wealth Management Economic Update February 1, 2016

U.S. and World News

  • tokyo_000048284428_320The Bank of Japan stunned financial markets this week by announcing negative interest rates for the first time in an effort to push Japan’s economy toward higher growth. BOJ Governor Haruhiko Kuroda slashed the deposit rate on excess reserves with the central bank from +0.1% to -0.1% and stated that the policy would remain in place “as long as it is necessary.” Many economists expected the BOJ to remain accommodative but the decision to push the deposit rate into negative territory was a big surprise.
  • Meanwhile, the Federal Reserve held a policy meeting this week and made no change to its monetary policy, leaving interest rates unchanged. Comments from the committee were ‘dovish’, saying they are monitoring current economic and financial developments closely. The statement acknowledged recent tightening of financial conditions and international risks. The committee made no comments regarding the future path of interest rate hikes so attention now turns to the March Fed meeting.

Markets

  • Markets finished the week positive, led by a strong rally on Friday. The S&P 500 gained 1.76% and closed at 1,940. Likewise, the Dow Jones rose 2.32% and closed at 16,466. So far in 2016, the S&P is down 4.97% and the Dow is down 5.39%.
  • Interest rates ended the week lower, despite the rally in equities. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.34% and 1.93%, respectively.
  • The spot price of WTI Crude Oil gained 4.63% this week to close at $33.68 per barrel. WTI Crude has fallen 11.76% in 2016.
  • The spot price of Gold advanced 1.84% this week, closing at $1,118.19 per ounce. Year to date, gold prices are up 5.38%.

Economic Data

  • Initial jobless claims came in at 278,000 which was a decrease from last week’s reading of 293,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 283,000.
  • The Case-Shiller home price index rose 0.9% in November, beating expectations of 0.8%. All 20 cities in the index showed price gains during the month. Over the last 12 months, home prices have risen 5.8% as measured by the index.
  • The Employment Cost Index (ECI, measures wage growth) increased by 0.6% in the 3rd quarter, in line with expectations. On a year over year basis, total compensation has increased 2.0%.
  • The first estimate of 4th quarter Real GDP showed growth of 0.7%, slightly below expectations of 0.8%. With this 4th quarter estimate, U.S. GDP growth was 2.4% in 2015.

Fact of the Week

  • With 2015 GDP coming in at 2.4%, this marks the 10th consecutive year of sub 3% growth in the United States. The next longest streak in U.S. history of sub 3% growth was the four years from 1930-1933 (during the Great Depression). (Source: Commerce Department)

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

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

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Wealth Management Economic Update January 25, 2016

U.S. and World News

  • switzerland_000008031742_320At the World Economic Forum in Davos, Switzerland this week, European Central Bank President Mario Draghi hinted at more stimulus for the Eurozone which has struggled to produce growth and inflation close to their 2% target. This action helped to stabilize global markets that had been in freefall early in the week. Draghi stated, “We have plenty of instruments and especially we have the determination and willingness and capacity of the Governing Council to act and deploy these instruments.”
  • The ECB wasn’t the only central bank suggesting additional easing. China’s Vice President Li Yuanchao signaled that Beijing would keep intervening in its stock market in an attempt to stabilize prices. Additionally, there is wide speculation that the Bank of Japan will opt for extra stimulus at its policy meeting next week.
  • This past summer’s landmark nuclear deal between Iran and six world powers came into effect this week. The result was an end of years of sanctions and the unfreezing of $100 billion of Iranian assets. Secretary of State John Kerry said in Vienna, “Today marks the first day of a safer world. We are really reminded once again of diplomacy’s power to tackle significant challenges.”

Markets

  • Markets rebounded midway through the holiday shortened week. The S&P 500 gained 1.46% and closed at 1,907. Likewise, the Dow Jones rose 0.69% and closed at 16,093. So far in 2016, the S&P is down 6.61% and the Dow is down 7.53%.
  • Interest rates ended the week relatively unchanged from where they began; however, there was plenty of volatility in between. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.48% and 2.05%, respectively.
  • The spot price of WTI Crude Oil began to rally midweek, much like the stock markets, gaining 9.62% to close at $32.25 per barrel. WTI Crude has fallen 12.93% in 2016.
  • The spot price of Gold advanced 0.83% this week, closing at $1097.95 per ounce. Year to date, gold prices are up 3.47%.

Economic Data

  • Initial jobless claims came in at 293,000 which was an increase from last week’s reading of 284,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 285,000.
  • The Consumer Price Index (measure of inflation) declined 0.1% in December, reflecting another 2.4% decline in energy prices. Core CPI (excludes food and energy) increased by 0.1%, below expectations of 0.2%. Over the last 12 months, core CPI has risen 2.1%.
  • Housing starts unexpectedly declined by 2.5% in December, much lower than expectations of a 2.3% gain following an unseasonably warm December. Multi-family starts declined by 1.0% and single-family starts were also soft, falling 3.3%.
  • Existing home sales increased 14.7% in December, beating expectations of 9.2%. The rise follows a 10.5% decline in November. Single family unit sales increased 16.1%, while multi-family unit sales rose 4.9%.

Fact of the Week

  • The U.S. economy has been expanding since July 2009 and the expansion reached 78 months as of the end of 2015. This duration of expansion has been exceeded by just 4 other U.S. expansions since 1854 or 162 years ago. (Source: National Bureau of Economic Research)

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

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

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Wealth Management Economic Update January 19, 2016

U.S. and World News

  • Poor economic data and further currency devaluation in China continued this week and sent global stocks lower.
  • President Obama delivered his 7th and final State of the Union address this week. Among the topics he discussed was ensuring opportunity for everyone, harnessing technological change and keeping the country safe. Obama lauded the economic progress the country has made since he took office but mentioned that one of his few regrets during his Presidency has been “that the rancor and suspicion between the parties has gotten worse instead of better.”

Markets

  • Markets continued their downward start to 2016 highlighted by a large down move to end the week. The S&P 500 declined 2.18% and closed at 1,880. Likewise, the Dow Jones fell 2.19% and closed at 15,988. So far in 2016, the S&P is down 7.96% and the Dow is down 8.19%.
  • Interest rates fell during this week, reflecting the weakness in the stock markets. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.46% and 2.04%, respectively.
  • The spot price of WTI Crude Oil plunged again this week, dropping 10.62% to a new 52 week low of $29.64 per barrel. WTI Crude has fallen 20.00% in 2016.
  • The spot price of Gold dipped 1.31% this week, closing at $1089.70 per ounce. Year to date, gold prices are up 2.70%.

Economic Data

  • Initial jobless claims came in at 284,000 which was an increase from last week’s reading of 277,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 279,000.
  • Headline retail sales declined by 0.1% in December, in line with expectations. However, core retail sales (excluding auto and gasoline sales) declined by 0.3%, much weaker than the estimated 0.3% increase.
  • The University of Michigan consumer sentiment index improved in the initial January estimate to 93.3 from 92.6 in December. Consumers’ expectations of the future improved, however their assessment of current economic conditions declined in the month.

Fact of the Week

  • According to the Social Security Administration, in 1994 there was 2.8% of America’s working-age population that was receiving Social Security disability benefits. This has increased to 5.1% of the working-age population in 2015.

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

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Wealth Management Economic Update January 11, 2016

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

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Wealth Management Economic Update January 4, 2016

U.S. and World News

  • iStock_000011948408_320The Obama administration is planning to impose its first financial sanctions on Iran since the landmark nuclear agreement reached in July. This will present the first major test of whether Iran will remain committed to the deal. The penalties will target around a dozen companies and individuals who are believed to be involved in Iran’s ballistic missile program, which has conducted two test firings in recent months. It remains to be seen how Supreme Leader Khamenei will react to the U.S. sanctions, which were outlined for in the nuclear deal.
  • Debt-laden Puerto Rico will not be making two of its 13 debt payments due on January 1st, including a payment to the territory’s Infrastructure Financing Authority and to its Public Finance Corporation. The rest of the nearly $1 billion in payments will be made, including to its general obligation bondholders. In order to pay off the GO bonds, Puerto Rico was forced to raise half of the funds by clawing back revenues from other bonds.

Markets

  • Markets were down a bit to close out 2015 in a holiday shortened week. The S&P 500 fell 0.81% and closed at 2,044. Likewise, the Dow Jones dropped 0.73% closing at 17,424. In 2015, the S&P gained 1.40% and the Dow is gained 0.23%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.77% and 2.28%, respectively.
  • The spot price of WTI Crude Oil fell 2.73% this week, closing at $37.06 per barrel. In 2015, Oil prices were down 38.72%.
  • The spot price of Gold decreased by 1.44% this week, closing at $1060.60 per ounce. During 2015, Gold prices fell 10.45%.

Economic Data

  • Initial jobless claims came in at 287,000 which was an increase from last week’s reading of 267,000. The Labor Department noted no special factors in the data though there may have been some effect from seasonal adjustment around the Christmas holiday. The four week moving average for claims now stands at 277,000.
  • The Case-Shiller home price index rose by 0.8% in November, beating expectations of a 0.6% increase. All 20 cities in the index saw home prices increase during the month. Over the past 12 months, home prices as measured by the index have risen 5.5%.
  • Pending home sales (track contract signings rather than closings) unexpectedly declined in November by -0.9%. Sales declined in the West (-5.5%) and Northeast (-3.0%) regions but rose modestly in the South (1.3%) and Midwest (1.0%) regions. Over the last year, pending home sales have risen by 5.1%.

Fact of the Week

  • According to the Federal Reserve Bank of New York, as of 9/30, outstanding student loan debt is $1.2 trillion. Of that, 11.6% of student debt, or $139 billion, is at least 90 days delinquent or is in default. This figure may actually understate the actual delinquency rate since loans that are currently in deferment are treated as if they are ‘current’.

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

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Wealth Management Economic Update December 28, 2015

U.S. and World News

  • Greek Prime Minister Alexis Tsipras is pushing for the International Monetary Fund to remove itself from the country’s €86 billion bailout. This would leave the Eurozone to take full responsibility for supervising the economic reforms in Greece that the country’s third bailout depends on. The request by Greece risks alienating the IMF, which has in the past been a strong proponent of debt relief for the beleaguered nation. The IMF will likely decide whether to stay involved in the bailout shortly after the start of the new year.
  • The Obama administration has imposed fresh sanctions against Russian business leaders and other entities with close ties to Vladimir Putin. Targets of the new sanctions included state banks and a defense company. The penalties are an effort to force Russia to stabilize Ukraine, though they come at a time of perceived cooperation between the U.S. and Russia in the effort to end the Syrian civil war and fighting ISIS.
  • OPEC published its highly anticipated annual World Oil Outlook this week with observers hoping to gain insight into the cartel’s future plans. The group anticipates the price of crude oil to rise to $70/barrel by 2020 and $95/barrel by 2040. The forecast also called for demand to reach 30.7 million barrels per day in 2020, a 6% increase in the forecast from a year ago.

Markets

  • Markets rallied in a holiday shortened week. The S&P 500 gained 2.79% and closed at 2,061. Likewise, the Dow Jones rose 2.47% closing at 17,552. Year to date, the S&P is up 2.20% and the Dow is up 0.95%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.72% and 2.25%, respectively.
  • The spot price of WTI Crude Oil gained 5.49% this week, closing at $38.04 per barrel. Year to date, Oil prices are down 37.10%.
  • The spot price of Gold increased by 0.98% this week, closing at $1076.72 per ounce. Year to date, Gold prices are down 9.09%.

Economic Data

  • Initial jobless claims came in at 267,000 which was a decrease from last week’s reading of 271,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 273,000.
  • The core PCE inflation index (the Fed’s preferred inflation measure, excludes food and energy) rose by 0.1% in November. Over the last 12 months, Core PCE has risen by 1.3%, moving no closer to the Fed’s 2% inflation target.
  • New home sales increased by a higher than expected 4.3% in November, though the report showed mixed results. New home sales increased in the South and West regions but declined in the Northeast and Midwest regions.
  • Existing home sales fell by a sharp 10.5% in November, more than expected. The headline number reflected weakness across all regions, with the Midwest (-15.4%) and West (-13.9%) experiencing the largest declines.

Fact of the Week

  • 45% of all global financial business is transacted in U.S. dollars, including all oil and natural gas trading worldwide. (Source: Society for Worldwide Interbank Financial Telecommunication)

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 December 21, 2015

U.S. and World News

  • The highly anticipated Fed decision on monetary policy was made on Wednesday when all members of the FOMC voted unanimously to raise the fed funds rate to a 0.25%-0.5% range. This marks the 7th anniversary since the Fed decided to reduce the Fed Funds Rate to 0%, and the first Fed Funds Rate increase since 2006. The FOMC mentioned that the path for rate increases going forward will be gradual and that they will carefully monitor inflation as it has not yet reached their 2% target.
  • An agreement has been made on an omnibus spending bill that would repeal the oil export ban which has been in place for four decades. This is considered a win for Republicans who have been pushing for the ban to be lifted so that American oil producers could take advantage of low oil prices by gaining access to the international market. Also, the production tax credit for wind power installations and the investment tax credit for solar installations would be extended for several years.
  • For the first time ever, a deal on climate change was signed in Paris over the weekend. The deal, in which participation is voluntary, is designed to limit the rise of average global temperatures to within two degrees of where they were before industrial times.

Markets

  • Markets dropped slightly after a very volatile week. The S&P 500 lost 0.34% and closed at 2,005. The Dow Jones fell 0.79% closing at 17,128. Year to date, the S&P is down 2.59% and the Dow is down 3.90%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.67% and 2.20%, respectively.
  • The spot price of WTI Crude Oil dropped again by 3.00% this week, closing at $34.55 per barrel. Year to date, Oil prices are down 42.39%.
  • The spot price of Gold decreased by 0.78% this week, closing at $1066.40 per ounce. Year to date, Gold prices are down 9.98%.

Economic Data

  • The Consumer Price Index (CPI) was unchanged in November (mom), as a result of declines in food and energy; however, core consumer prices (Core CPI, excluding food and energy) rose last month by 0.18% with help from medical care services, education, and transportation services.
  • Initial jobless claims came in at 271k for the week which was a decrease from last week’s increase to 282k. The four week moving average for jobless claims is 270,500.
  • Housing starts increased by 10.5% (mom) in November which was higher than expectations. Multi-family starts increased by 16.4% and single-family starts rose by 7.6% which is a new post-crisis high.

Fact of the Week

  • Only 53% of the nearly 3 million Americans that enrolled for college in the fall of 2009 had earned a bachelor’s or an associate degree by the summer of 2015 (source: National Student Clearinghouse Research Center).

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

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

*Image of Brazilian President Dilma Rousseff. Photo credit: Agencia Brasil, via Wikimedia Commons. License: Creative Commons Attribution 3.0 Brazil License. (See, https://commons.wikimedia.org/wiki/File:Santos_and_Rouseff.jpg).

Wealth Management Economic Update December 14, 2015

U.S. and World News

  • Brazilian President Dilma Rousseff (Photo credit: Agencia Brasil)

    Brazilian President Dilma Rousseff*

    The impeachment process for Brazilian President Dilma Rousseff has begun this week with the selection of a special committee that will handle the first phase of the investigation. The selection of the committee went poorly for the President, as Brazil’s Congress chose representatives that were opposed by Rouseff’s supporters. Rousseff is being accused of tampering with the national budget to illegally disguise poor fiscal performance and a growing budget gap.

  • In an attempt to help Puerto Rico avoid a bond default on January 1st, the U.S. Senate has introduced a bill to extend assistance to the island. However, the proposal stopped well short of giving the U.S. Commonwealth access to bankruptcy court, a measure that has been speculated on recently. The proposed measures would cut employee payroll taxes and extend as much as $3 billion in funding to the island, which is dealing with over $72 billion in debt and a 45% poverty rate.

Markets

  • Markets fell sharply this week as the price of oil continued to fall. The S&P 500 lost 3.76% and closed at 2,012. The Dow Jones followed suit by falling 3.20% and closing at 17,265. Year to date, the S&P is down 0.25% and the Dow is down 0.69%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.55% and 2.12%, respectively.
  • The spot price of WTI Crude Oil plunged by 11.53% this week, closing at a 52-week low of $35.36 per barrel. Year to date, Oil prices are down 41.04%.
  • The spot price of Gold decreased by 1.07% this week, closing at $1,074.77 per ounce. Year to date, Gold prices are down 9.25%.

Economic Data

  • Initial jobless claims came in at 282,000 which was an increase from last week’s reading of 269,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 270,750.
  • The University of Michigan consumer sentiment index rose in the first December estimate to a reading of 91.8 from 91.3 in November. Consumers’ assessment of current economic conditions rose, however expectations for the future worsened.
  • Headline retail sales increased by 0.2% in November, below consensus expectations of 0.3%. Core retail sales, which go into the official GDP calculation, rose by a larger than expected 0.6%. There were solid gains seen in sales of electronics, apparel and food service expenditures. However, sales at gas stations continued to fall, reflecting the continued decline in gas prices.

Fact of the Week

  • According to a new Pew Research Center report, middle class Americans now comprise less than half (49.9%) of the nation’s population, down from 61% in 1971. For the report, middle class was defined as households earning between 67% and 200% of the overall median income in the U.S. after adjusting for household size. For example, a family of three would be categorized as middle class if its total annual income ranged from $42,000 to $126,000.

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.

*Image of Brazilian President Dilma Rousseff. Photo credit: Agencia Brasil, via Wikimedia Commons. License: Creative Commons Attribution 3.0 Brazil License. (See, https://commons.wikimedia.org/wiki/File:Santos_and_Rouseff.jpg).

Wealth Management Economic Update December 7, 2015

U.S. and World News

  • European Central Bank President Mario Draghi announced a new stimulus plan this week that included extending the central bank’s €60 billion per month bond buying program to at least March 2017. In addition, the ECB cut its deposit rate further into negative territory, dropping it 0.1% to -0.3%. However, the measures appear to have disappointed the markets as European indices were down significantly following the announcement. ECB action thus far has failed to spur significant economic growth and inflation in the Eurozone.
  • The International Monetary Fund has added the Chinese yuan to its Special Drawing Rights Basket this week in a much anticipated announcement. The addition will be official in October 2016 and will increase China’s economic standing in global finance as it makes the yuan more freely accessible and tradable.
  • truck320The House and Senate have reached an agreement on a five year highway bill that will add $305 billion to infrastructure spending that is sorely needed. The bill also reauthorizes the Export-Import Bank which had its charter expired in June after some Republicans targeted it as a waste of government funds. The bill has now moved to President Obama’s desk where it is expected  to be approved.
  • At its semi-annual meeting in Vienna this week, members of OPEC have decided to maintain the cartel’s production ceiling of 30 million barrels per day even as oil markets remain in a supply glut. It was just over a year ago at the meeting when OPEC made the same call to maintain supply at current levels, sending crude oil prices spiraling lower. Many believe that OPEC’s stance is an attempt to drive out U.S. shale producers that have much higher costs of production.

Markets

  • Markets rose modestly in volatile end of week trade, falling on the ECB’s stimulus measures that were less than expected and then rising on a moderately strong employment report. The S&P 500 gained 0.12% and closed at 2,092. The Dow Jones followed suit by rising 0.36% and closing at 17,848. Year to date, the S&P is up 3.56% and the Dow is up 2.50%.
  • Interest rates rose a bit this week and the 5 year and 10 year U.S. Treasury Notes are now yielding 1.71% and 2.27%, respectively.
  • The spot price of WTI Crude Oil fell by 3.76% this week, closing at $40.14 per barrel. Year to date, Oil prices are down 33.07%.
  • The spot price of Gold increased by 2.74% this week, closing at $1,086.44 per ounce. Year to date, Gold prices are down 8.24%.

Economic Data

  • Initial jobless claims came in at 269,000 which was an increase from last week’s reading of 260,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 269,000.
  • The November nonfarm payroll report showed the addition of 211,000 during the month, beating expectations of 200,000. Employment growth over the prior two months was revised up by a total of 35,000, bringing the three month average to 220,000 jobs created.
    • The unemployment rate remained unchanged at 5.0%, in line with expectations. The labor force participation rate rose by 0.1% to 62.5%
    • Average hourly earnings increased by 0.2% in November, bring the 12 month increase in wages to 2.3%.

Fact of the Week

  • According to the Government Accountability Office, an estimated 9,300 Americans will turn 65 years old each day in 2016, representing the 6th of 19 years that “Baby Boomers” will turn 65. It’s estimated that by 2029, there will be 11,400 Americans turning 65 each day.

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.