SPECIAL: Wealth Management Greece Update July 6, 2015

ballot_000015289231_320Greek citizens voted ‘No’ in resounding fashion in yesterday’s referendum, rejecting the set of austerity reforms that were put forward by Greece’s creditors in exchange for a bailout. By a vote of 61% ‘No’ to 39% ‘Yes’, the bailout terms were rejected and where the situation goes from here is uncertain. Greek Finance Minister Yanis Varoufakis announced his resignation this morning amid political pressure, so negotiations will now fall on new Finance Minister Euclid Tsakalotos. Emergency meetings with high ranking European officials will be held over the next few days in order to determine if any common ground can be found and a deal can reached. In the meantime, Greece announced that its banks will remain closed through Wednesday and will likely remain closed unless the European Central Bank decides to extend emergency liquidity assistance to the country. While the risks of a Greek exit from the Euro currency have increased with the results of the referendum vote (Standard & Poor’s estimates odds of over 50% for a ‘Grexit’), we continue to believe that the threat of contagion into other parts of the world is relatively contained.

If you have any additional questions or concerns, please do not hesitate to reach out to an Investment Officer or your Relationship Manager.

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

Wealth Management Economic Update July 6, 2015

U.S. and World News

  • greece_320Europe stands by and awaits the vote that will take place Sunday evening to decide in referendum on creditors’ proposals for unblocking aid to Greece, in a vote which could decide the country’s future in the euro area.
  • Not to be outdone by Greece, Puerto Rico is also embroiled in a debt crisis. The U.S. commonwealth has $72 billion in debt which is nearly 70% of its economic output. While they made all debt payments due this week, Governor Alejandro García Padilla said in a speech that it will seek to delay future payments on its debt for a number of years as part of a plan to bolster Puerto Rico’s finances and revive its economy. Padilla also appealed to Washington to make significant changes to bankruptcy rules currently in place. Although U.S. cities and municipalities are eligible to file for bankruptcy, states and commonwealths such as Puerto Rico are barred from seeking bankruptcy protection.
  • After its equity markets entered correction territory, the People’s Bank of China has again cut interest rates. The Chinese central bank cut the benchmark lending rate and the one-year deposit rate over the weekend. Additionally, Chinese regulators are now considering suspending initial public offerings in an attempt to stabilize the country’s fragile equity markets.

Markets

  • Equity markets once again are down for the week. The S&P 500 lost 1.21%, closing at 2,077. Similarly, the Dow Jones fell by 0.90% and closed at 17,730. Year to date, the S&P is up 0.87% and the Dow is up 0.52%.
  • Yields in the Treasury markets fell this week and ended lower than the week prior. The 10 year Treasury bond now yields 2.38% and the 5 year Treasury bond yields 1.63%.
  • The spot price of WTI Crude Oil fell dramatically this week by 6.89%, closing at $55.52 per barrel. In 2015, WTI Oil prices are down 2.37%.
  • The spot price of Gold slightly decreased this week by 0.58% and closed at $1,168.67 per ounce. Year to date, gold prices are down 1.33%.

Economic Data

  • Initial jobless claims came in at 281,000 which was an increase from the prior figure of 271,000 and above consensus expectations of 270,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 274,750.
  • The Case-Shiller home price rose 0.3% in April, lower than expectations of 0.8%. Prices rose in 11 of 20 cities in the index. Over the last 12 months home prices have risen 4.9%.
  • Pending home sales rose 0.9% in May, slightly less than expectations of 1.0%. Sales rose in the Northeast and West regions but fell in the South and Midwest. Pending sales are based on signings rather than closings so they are seen as a leading indicator of existing home sales. Over the last year, pending home sales rose 8.3%.
  • The U.S. unemployment rate fell to 5.3% in June, though labor force participation decline to 62.6%. Nonfarm payrolls came in at 223,000 which was an increase from the prior number of 280,000, but was below the expectations of 233,000.

Fact of the Week

  • The phrase ‘dry powder’ is often used in the investment and banking world to mean having excess cash on hand in case a buying opportunity arises. Originally coined in the mid-1600’s English military leader Oliver Cromwell, the full maxim went, “Put your trust in God, my boys, and always keep your powder dry!” In the middle of the invasion of Ireland by England, Cromwell meant quite literally for his soldier’s to keep their gun powder dry.

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

SPECIAL: Wealth Management Greece Update June 30, 2015

Tsipras_220Over the weekend Greek Prime Minister Alexis Tsipras announced he will hold a referendum on July 5th on whether to accept the terms of a bailout offered by the country’s creditors. While Prime Minister Tsipras is recommending a ‘No’ vote, initial polling indicates that a majority of citizens favoring voting ‘Yes’. Standard & Poor’s predicts a 50% chance of Greece exiting the Eurozone given the political climate in the country.

Greece also announced strict capital controls that include a bank holiday through the July 5th vote in order to stave off a bank run which had begun over the weekend with massive lines of people at banks and ATMs trying to withdraw cash. As a result of the combined news, world markets turned sharply negative yesterday on heightened expectations of a Greek default on their debt obligations and the growing possibility that the country will be forced to leave the Euro currency.

Adding to the uncertainty Greece has a €1.6 billion ($1.7 billion) debt payment to the International Monetary Fund (IMF) due June 30 and Eurozone finance ministers say they will not allow an extension of that deadline through the referendum vote next week.

While news of a Greek default combined with the imposed capital controls would certainly be painful for those in the country, we currently see little evidence that contagion would spread to the rest of the Eurozone. Most of Greece’s debt is owned by the IMF and the European Central Bank (ECB) and not by investors and national governments, so a default is believed to be contained. Lastly, given the size of Greece’s economy compared to the Eurozone as a whole, a Greek exit, or ‘Grexit’, from the Euro would not pose a large threat to accelerating economic growth we are beginning to see in much of Europe.

If you have any additional questions or concerns, please do not hesitate to reach out to an Investment Officer or your Relationship Manager.

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

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

Wealth Management Economic Update June 22, 2015

U.S. and World News

  • greek_coin46611238_320The highly anticipated Eurogroup meeting on Thursday ended without resolution for Greece’s debt crisis. Now Eurozone officials have called for an emergency summit on Monday. This is likely a last ditch effort to end the impasse that will lead to a Greek default or a Greek exit from the Eurozone if no agreement is reached by June 30th. While Greek Prime Minister Alexis Tsipras appears to remain confident that his country’s position in the euro is secure, many Greek citizens do not share that optimism with over €2 billion having been withdrawn from banks over the last three days and expectations that a bank run will continue through the weekend.
  • The Fed meeting this week produced little insight into the central bank’s timeline for raising the Fed Funds rate. Signs still point to a September hike, however Chairperson Janet Yellen continued to state that the Fed’s decision will be data dependent and that there still need to be improvements in inflation conditions which are still tracking below the Committee’s long-run objective. The assessment given to the US economy was brighter than the previous meeting, reflecting a bounce back following the stagnant 1st quarter.
  • As expected, the Bank of Japan maintained its massive stimulus program today, keeping intact its plan to make asset purchases of ¥80 trillion per year. Bank of Japan Governor Haruhiko Kuroda reiterated his expectations for consumer inflation to hit the central bank’s 2% target by mid-2016, a goal that many analysts believe is much too optimistic given Japan’s unfavorable demographic situation (rapidly aging population) and lack of natural resources.

Markets

  • Equity markets finished positively this week. The S&P 500 gained 0.76%, closing at 2,110. Similarly, the Dow Jones rose by 0.65% and closed at 18,014. Year to date, the S&P is up 3.47% and the Dow is up 2.27%.
  • Yields in the Treasury markets were volatile yet again this week and ended lower than the week prior. The 10 year Treasury bond now yields 2.26% and the 5 year Treasury bond yields 1.57%.
  • The spot price of WTI Crude Oil dipped by 0.95% from last week, closing at $59.48 per barrel. In 2015, WTI Oil prices are now up 5.72%.
  • The spot price of Gold increased this week by 1.58% and closed at $1,200.29 per ounce. Year to date, gold prices are up 1.34%.

Economic Data

  • Initial jobless claims declined from last week and remain quite low, coming in at 267,000, below consensus expectations of 277,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 276,750.
  • The headline Consumer Price Index (measure of inflation) rose 0.4% in May, below estimates of 0.5% and was boosted by a 4.3% increase in energy prices. Core CPI (does not include food or energy) rose 0.15% vs estimates of 0.2%. Over the last 12 months, headline prices are flat and core prices are now up 1.7%.

Fact of the Week

  • Famous economist John Maynard Keynes predicted in 1930 that by the year 2000, Americans would be able to choose to work as little as 15 hours per week because the bulk of their material needs would have been satisfied and a life of leisure would take precedence. The latest data showed that as of May 30th, the average American employee works 34.5 hours a week.

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

Wealth Management Economic Update June 15, 2015

U.S. and World News

  • Reports indicate that Greece is attempting to get an extension of the country’s bailout program through March 2016 in order to break the current impasse over reforms and austerity measures. With the current bailout set to run out on June 30, Greece would get access to nearly €11 billion in aid that was originally set aside to prop up Greek banks in order to remain solvent over the proposed extension period. Greek officials hope to reach a deal with its lenders at a Eurogroup meeting on June 18th as time is running out for the country to fend off a looming default.
  • lungs_320A deadly outbreak of Middle East Respiratory Syndrome (MERS) forced South Korea’s central bank to cut interest rates this week after authorities reported more new cases of the virus that first turned up in the country on May 20. There have been at least 122 cases of the virus reported and nine related deaths. The 0.25% interest rate cut to a record-low 1.5% is the country’s 4th cut in the last year. Central bankers hope to stave off any negative impact that the virus may have on South Korea’s economy.

Markets

  • Equity markets finished slightly positive after a bit of a volatile week. The S&P 500 gained 0.12%, closing at 2,094. Similarly, the Dow Jones rose by 0.35% and closed at 17,899. Year to date, the S&P is up 2.68% and the Dow is up 1.61%.
  • Yields in the Treasury markets were volatile but ended the week mostly unchanged. The 10 year Treasury bond now yields 2.40% and the 5 year Treasury bond yields 1.74%.
  • The spot price of WTI Crude Oil rose 1.56% from last week, closing at $60.05 per barrel. In 2015, WTI Oil prices are now up 6.74%.
  • The spot price of Gold increased this week by 0.81% and closed at $1,181.38 per ounce. Year to date, gold prices are down 0.25%.

Economic Data

  • Initial jobless claims rose a bit from last week and remain quite low, coming in at 279,000, above consensus expectations of 275,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 278,750.
  • Headline retail sales rose 1.2% in May which was in line with consensus expectations. This was aided by a 3.7% sales increase at gas stations on higher selling prices and a 2.0% increase in auto sales. Core retail sales (used to measure consumer spending in the GDP report) rose 0.7%, beating estimates of 0.5%. Here, gains of 1.5% in apparel sales and 1.4% in non-store retail sales were responsible for the upside surprise.
  • The University of Michigan consumer sentiment survey improved in June to a reading of 94.6 up from 90.7 in May. The survey showed that both the assessment of current conditions and for future expectations both had solid increases for the month. Expected change in income during the next year reached a post-recession high of +2.2%.

Fact of the Week

  • According to the Department of Labor, over the 10 year period ending 4/30/15, broad national inflation measured by the Consumer Price Index has increased by 1.97% per year. Over that same period, the cost of medical care has increased at a nearly 70% greater pace, rising 3.34% 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®, 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

Wealth Management Economic Update June 8, 2015

U.S. and World News

  • After another week of back and forth negotiations between Greece and its international creditors, Greece delayed a key debt payment to the IMF that was to be due on Friday. While this does not signal a formal default, the decision to postpone payment of €300 million is an unusual step. Prime Minister Alexis Tsipras claims Greece still intends to repay the debt, saying it will bundle the four payments due this month into a single €1.5 billion lump sum to be paid on June 30. A cash-for-reforms deal between Greece and its creditors still looks like somewhat of longshot, with the two sides at odds over issues like state pensions and a value-added tax.
  • Members of OPEC met this week in Vienna, Austria and again decided to leave its current production ceiling of 30 million barrels per day unchanged therefore keeping the market oversupplied. With oil prices having rebounded roughly 33% from its six-year low of $45/barrel in January, OPEC officials see little reason to deviate from its course that has seemed to resurrect oil consumption and dealt a powerful blow to the U.S. shale boom.
  • water_hands_320The EPA released a report this week based on five years of analysis of U.S. water pollution risks that concluded that there is no evidence that fracking for oil has had a “widespread, systemic impact on drinking water.” While there have been cases of spills and leaking wells, the rise of fracking has not caused extensive damage to groundwater resources according to the agency.

Markets

  • Equity markets continued their trend down this week. The S&P 500 lost 0.69%, closing at 2,093. Similarly, the Dow Jones fell by 0.90% and closed at 17,849. Year to date, the S&P is up 1.65% and the Dow is up 0.15%.
  • Yields in the Treasury markets ticked up this week. The 10 year Treasury bond now yields 2.41% and the 5 year Treasury bond yields 1.74%.
  • The spot price of WTI Crude Oil fell 1.94% this week, closing at $59.13 per barrel. In 2015, WTI Oil prices are now up 5.10%.
  • Once again, the spot price of Gold fell this week by 1.57% and closed at $1,171.94 per ounce. Year to date, gold prices down 1.05%.

Economic Data

  • Initial jobless claims declined a bit from last week and remain quite low, coming in at 276,000, below consensus expectations of 278,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 274,750.
  • The monthly employment report showed better than expected job gains with 280,000 added during the month vs. expectations of 226,000. With the 32,000 jobs that were added in back revisions, the three month average of job gains rose to 207,000.
    • The headline unemployment rate rose by 0.1% to 5.5%, though this was the result of a 0.1% increase in the labor force participation rate to 62.9%.
    • Average hourly earnings rose 0.3% during the month, beating consensus expectations of 0.2%. Wages have now grown 2.3% over the last 12 months.
  • The PCE price index (Federal Reserve’s preferred measure of inflation) was unchanged in April, vs. expectations of a 0.1% gain. Core PCE (excludes food and energy) rose only 0.1% vs. expectations of 0.2%. Over the last year, core prices are up only 1.2%, representing a very subdued inflation situation.

Fact of the Week

  • 48 years ago, Warren Buffett’s Berkshire Hathaway went public with the A shares that ended 1967 at a price of $20.50. Today, those shares are worth an astonishing $212,000/share. This represents a total return of 1,034,146% which is an annual rate of return of 21.45%.

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

Wealth Management Economic Update May 26, 2015

U.S. and World News

  • Greek officials say that the country will not be able make a €1.5 billion repayment to the International Monetary Fund that comes due on June 5th if there is no deal with its international creditors by then. Greek Prime Minister Alexis Tsipras has been in talks with French President Francois Hollande and German Chancellor Angela Merkel to try to unlock the last €7.2 billion tranche of the Greek bailout funds it needs to pay the IMF. While significant progress has reportedly been made, no agreement has been reached.
  • shoppers_000034535378Minutes from the April Fed meeting released this week were generally in line with expectations. Participants said that a hike in June was unlikely, but did not provide any further guidance on the likely timing of the first rate increase. While they noted concerns around weakness in consumer spending, the outlook for exports and underperformance in the energy sector, overall growth is expected to rebound in the near term. In a speech later in the week, Fed Chair Janet Yellen also downplayed the 1st quarter weakness and said that a rate hike will be appropriate at some point this year if the economy continues to improve in line with her expectations.

Markets

  • In a calm week, equity markets ended up mixed with both the S&P and Dow making New All Time Highs during the week. The S&P 500 gained 0.21%, closing at 2,126. Meanwhile, the Dow Jones decreased by 0.15% and closed at 18,232. Year to date, the S&P is up 4.11% and the Dow is up 3.33%.
  • Yields in the Treasury markets ended the week up moderately. The 10 year Treasury bond now yields 2.21% and the 5 year Treasury bond yields 1.57%.
  • The spot price of WTI Crude Oil was virtually flat this week, closing at $59.91 per barrel. In 2015, WTI Oil prices are now up 6.49%.
  • The spot price of Gold fell by 1.54% this week and closed at $1,205.90 per ounce. Year to date, gold prices are up 1.82%.

Economic Data

  • Initial jobless claims rose a bit from last week and remain quite low, coming in at 274,000, above consensus expectations of 270,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 266,250, the lowest it’s been since April 2000.
  • Housing starts rose 20.2% in April, beating consensus estimates of 9.6%. Both single-family (+16.7%) and multifamily (27.2%) starts posted large gains. After 1st quarter weakness, the April jump left both total and single-family starts at new highs for the recovery.
  • The headline Consumer Price Index (measure of inflation) rose 0.1% in April, in line with expectations. Core prices (ex-food and energy) rose 0.26%, slightly beating expectations of 0.2%. Inflation has been picking up a bit from its previously sluggish pace, over the past three months, core prices have risen at an annualized 2.6% rate.

Fact of the Week

  • In the iconic movie, Forest Gump, the title character made a very wise investment in ‘some kind of fruit company’ that turned out to be Apple Computers. If you were to have walked out of the theater on its day of release (July 6, 1994) inspired to follow his lead and invested $1,000 in Apple stock, you could have purchased 1,064 shares at a split adjusted price of $0.94/share. With a closing price of $132.54 on May 22nd and assuming that you reinvested the dividends you received, you would have turned that $1,000 into $144,214.56, a total return of 14,322% or a 27% annual return.

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

Wealth Management Economic Update May 18, 2015

U.S. and World News

  • China’s central bank continued its easing measures as it cut its benchmark lending rates by 0.25%, down to 5.1%. The one-year benchmark deposit rate was also cut by 0.25%, down to 2.25%. This was the third reduction of rates since November. As economic growth cools to levels not seen since the global financial crisis, China’s central bank has been quite active in an effort to avoid a ‘hard landing’ for their economy.
  • pen_signature_320This week, the Senate voted to hold a debate on a bill that would give President Obama the ability to ‘fast-track’ trade deals such as the proposed Trans-Pacific Partnership (TPP). The measure does still face much opposition in the House due to concerns about currency manipulation, the freedom it gives to presidents and the potential effect on American jobs. The TPP would create a free trade zone covering 40% of the world economy, linking the U.S. with many Asia-Pacific countries including Japan, Malaysia and Singapore. Conclusion of the agreement has been held up for months as the political process in the U.S. has dragged somewhat expectedly, but if it is finalized in its current form, the TPP would be the biggest trade deal since NAFTA.

Markets

  • In another choppy week, equity markets ended up in positive territory. The S&P 500 gained 0.37%, closing at a New All-Time High of 2,123. Meanwhile, the Dow Jones increased by 0.52% and closed at 18,272. Year to date, the S&P is up 3.88% and the Dow is up 3.44%.
  • Yields in the Treasury market were quite volatile this week but ended mostly unchanged. The 10 year Treasury bond now yields 2.15% and the 5 year Treasury bond yields 1.47%.
  • The spot price of WTI Crude Oil rose this week, gaining 0.79% and closing at $59.86 per barrel. In 2015, WTI Oil prices are now up 7.57%.
  • The spot price of Gold rose by 3.05% this week and closed at $1,224.63 per ounce. Year to date, gold prices are up 3.40%. 

Economic Data

  • Initial jobless claims dropped a bit from last week and remain quite low, coming in at 264,000, 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 271,750, the lowest it’s been since April 2000.
  • Headline retail sales were flat in April, disappointing against estimates of 0.2% growth. Some of the weak areas were auto sales (-0.4%), electronics (-0.4%) and furniture (-0.9%).

Fact of the Week

  • Legendary money manager and touted ‘Bond King’ Bill Gross wrote an article for the 11/26/2012 issue of Time magazine entitled, “Why Stocks are Dead” in which he provided his gloomy long term stock market forecast. From the date the article was published through the close on Friday, the S&P 500 has had a 58.95% total return, or 20.68% annualized.

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

Wealth Management Economic Update May 11, 2015

U.S. and World News

  • Federal Reserve Chair Janet Yellen attended an economic conference along with International Monetary Fund Managing Director Christine Lagard and shared some of her thoughts on the stock markets. Yellen said, “I would highlight that equity market valuations at this point are generally quite high. There are potential dangers there.” Although she noted the Fed was not seeing the hallmarks of a bubble, she did say that the central bank was watching the situation closely. Yellen had previous tried her hand at equity market calls in July 2014 when in her Congressional testimony she declared that many social media and biotech stocks were overvalued, only to see those sectors continue to rally to this day.
  • BRICS_000052133142_320Russian President Vladimir Putin ratified an agreement to set up a $100 billion reserve fund for the BRICS nations (Brazil, Russia, India, China and South Africa). The fund looks to reshape the Western-dominated financial system that is centered on the IMF and World Bank. China would provide the largest share to the fund at $41 billion, while Russia, Brazil and India will provide $18 billion each with South Africa pitching in $5 billion. Following Putin’s approval, the BRICS bank is on track to be finalized by the end of the month.

Markets

  • In quite another choppy week, equity markets were up on the week following a Friday rally on the monthly jobs report. The S&P 500 gained 0.44%, closing at 2,116, while the Dow Jones increased by 1.07% and closed at 18,191. Year to date, the S&P is up 3.48% and the Dow is up 2.89%.
  • Yields in the Treasury market were quite volatile this week but ended with only a modest rise. The 10 year Treasury bond now yields 2.15% and the 5 year Treasury bond yields 1.50%.
  • The spot price of WTI Crude Oil rose this week, gaining 0.43% and closing at $59.41 per barrel. In 2015, WTI Oil prices are now up 6.76%.
  • The spot price of Gold rose by 0.84% this week and closed at $1,188.39 per ounce. Year to date, gold prices are up 0.34%.

Economic Data

  • Initial jobless claims edged up from last week but remain quite low, coming in at 265,000, below consensus expectations of 280,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 279,500, the lowest it’s been since May 2000.
  • The April jobs report showed a gain of 223,000 nonfarm payrolls, lower than expectations of 228,000. The prior two months figures were revised downwardly by a combined 39,000, bringing the three month average for job gains to 191,000.
    • The headline unemployment rate declined by 0.1%, down to 5.4%. The labor force participation rate ticked up by 0.1%, to a still historically low 62.8%.
    • Average hourly earnings rose just 0.1% vs. consensus estimates of 0.2%. The 12 month increase in average wages now stands at 2.2%.

Fact of the Week

  • According to the Census Bureau, at the end of the 1st quarter of 2015, of the 116.2 million households in the United States, 74.0 million were homeowners and 42.2 million were renters. The 63.7% homeownership rate is the lowest nationally since 1990.

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