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

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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

Wealth Management Economic Update May 4, 2015

U.S. and World News

  • The April Federal Reserve statement given this week was roughly in line with market expectations. The Committee acknowledged that economic data recently has been somewhat disappointing but was sure to mention several temporary factors they believed were causing the weakness. It is widely believed that a June rate hike has been taken off the table given the below target inflation data which continues to track below 2%.
  • china_bank_000038439476After months of urging allies not to join the China-led Asian Infrastructure Investment Bank, the Obama administration now says the new bank could be a promising development. During his press conference with Japanese Prime Minister Shinzo Abe, Obama said the bank could be very positive if it is able to overcome the issue of lack of transparency. Despite 47 nations gaining membership to the AIIB, the U.S. and Japan remain the only two major economies that have not sought to join.

Markets

  • In quite a volatile week, equity markets were down modestly. The S&P 500 fell 0.42%, closing at 2,108, while the Dow Jones decreased by 0.31% and closed at 18,024. Year to date, the S&P is up 3.03% and the Dow is up 1.81%.
  • Yields in the Treasury market rose pretty significantly this week. The 10 year Treasury bond now yields 2.11% and the 5 year Treasury bond yields 1.50%.
  • The spot price of WTI Crude Oil rose this week, gaining 3.53% and closing at $59.17 per barrel. In 2015, WTI Oil prices are now up 6.33%.
  • The spot price of Gold was virtually unchanged this week and closed at $1,178.80 per ounce. Year to date, gold prices are down 0.47%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 262,000, below consensus expectations of 290,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 283,750.
  • The first estimate of U.S. GDP growth in the 1st quarter showed disappointing growth of 0.2% vs. estimates of 1.0%. Harsh weather was one of the causes of the lackluster growth, something that was seen last year at this time when GDP came out negative. With energy prices down, consumer spending posted a larger than expected 1.9% gain.
  • The Case-Shiller home price index rose 0.93% in February, beating consensus expectations of 0.7%. All 20 cities in the index saw prices increase on the month and have now risen 5.0% in the past year.

Fact of the Week

  • According to the Tax Policy Center, the top 1% of US taxpayers from tax year 2014 are expected to pay 45.7% of all federal income tax collected by the IRS this year, up from 43% last year. The bottom 60% of taxpayers are estimated to pay less than 3% of federal income taxes for 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®, 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 April 27, 2015

U.S. and World News

  • coin_Greek_320Greece’s self-imposed April 24th deadline has passed with the country refusing to present a detailed list of economic reforms to Eurozone finance ministers in order to unlock €7.2 billion in aid Greece desperately needs to pay their creditors. The deadline has been kicked down the road again and now appears as though June will be when Greece would truly run out of liquidity and default on its debt if the aid is not received.
  • Following China’s weaker than expected GDP data last week; the country’s central bank cut the reserve requirement ratio for all banks by 1% to 18.5%. This adds more liquidity to the world’s second largest economy in an effort to combat slowing growth, which was still +7.0% in the 1st quarter.

Markets

  • Equity markets rose this week on broadly better than expected earnings reports. The S&P 500 gained 1.76%, closing at an All-Time High of 2,118, while the Dow Jones increased by 1.42% and closed at 18,080. Year to date, the S&P is up 3.46% and the Dow is up 2.10%.
  • Yields in the Treasury market rose moderately this week. The 10 year Treasury bond now yields 1.91% and the 5 year Treasury bond yields 1.32%.
  • The spot price of WTI Crude Oil rose this week, gaining 2.02% and closing at $57.18 per barrel. In 2015, WTI Oil prices are now up 2.75%.
  • The spot price of Gold dipped by 2.07% this week and closed at $1,179.35 per ounce. Year to date, gold prices are down 0.42%.

Economic Data

  • Initial jobless claims rose from last week, coming in at 295,000, a bit higher than consensus expectations. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 284,500.
  • Existing home sales rose 6.1% in March, beating consensus estimates of 3.1%. Single family home sales were up 5.5%, while condo and co-op sales rose 11.1%. Although this is a bit of a lagging housing indicator, after some recent soft data, this is a welcome development.

Fact of the Week

  • According to the Commerce Department, the average growth rate of the US economy (as measured by gross domestic product) over the last 75 years (1940-2014) has been 3.6% per year. However, U.S. GDP growth has reached 3.6% or greater in only 1 of the last 14 calendar years.

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 April 20, 2015

U.S. and World News

  • Greece faces an April 24th deadline to present the necessary economic reforms in order to unlock a much needed round of financial aid from Eurozone creditors. Greek finance minister Yanis Varoufakis did not rule out the possibility of a debt default if the country can’t reach a deal by the deadline. Varoufakis has now flown to Washington to have a private meeting with President Obama ahead of next week’s deadline.
  • saudi_000014768091_330Saudi Arabia announced this week that the country will open its $530 billion stock market to foreign investments on June 15th. This will give international investors their first opportunity to have direct access to the Middle East’s largest economy. In 2008, Saudi Arabia began permitting foreign investors indirect access to its market, but is now looking to fully open the market in hopes to diversify its oil dependent economy.

Markets

  • Equity markets closed the week on a down note. The S&P 500 fell 0.98%, closing at 2,081, while the Dow Jones decreased by 1.26% and closed at 17,826. Year to date, the S&P is up 1.68% and the Dow is up 0.68%.
  • Yields in the Treasury market were pushed downwards this week. The 10 year Treasury bond now yields 1.87% and the 5 year Treasury bond yields 1.31%.
  • The spot price of WTI Crude Oil continued its rise this week, climbing 8.52% and closing at $56.04 per barrel. In 2015, WTI Oil prices are now up 1.97%.
  • The spot price of Gold dipped by 0.22% this week and closed at $1,204.92 per ounce. Year to date, gold prices are up 1.74%.

Economic Data

  • Initial jobless claims rose from last week, coming in at 294,000 vs. consensus estimates 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 282,750.
  • Headline consumer prices (measure of inflation) rose 0.2% in March, slightly lower than consensus estimates of 0.3%. Gas prices rose 3.9% in the month and food prices ticked down 0.2%. Core CPI (excludes food and energy) increased 0.2% as well, in line with expectations. Core prices have risen 1.8% in the past year, still a subdued rate from the Fed’s perspective.
  • In the 1st quarter, China grew at its slowest pace since the global financial crisis in 2009. GDP growth was measured at 7.0%, lower than the 7.3% seen in the previous quarter. The lower than expected growth number combined with recent poor retail sales and industrial output figures further builds the case for more stimulus measures in China.

Fact of the Week

  • Last month Mexico sold 100-year government bonds. This was the 3rd time since 2010 the country has sold 100-year bonds but the first time that they have been transacted in Euros (€). The bonds mature in March 2115 with a coupon rate of only 4.2%.

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 April 13, 2015

U.S. and World News

  • Saudi Arabia announced that it has raised oil output to 10.3 million barrels a day in March, the highest in 12 years. Oil minister Ali al-Naimi said the country intends to keep producing at least 10 million barrels per day despite low crude prices. He also added in comments that he believes that oil will rise in the near future, but even if it doesn’t, it is expected that Saudi Arabia will hold production levels high until the slump in crude prices forces U.S. shale companies out of business.
  • finance_gears300Minutes released from the March Fed meeting gave insight to the central bank’s potential timing of an interest rate hike. While several participants supported a June hike, other favored waiting until later in the year, noting downward pressures on inflation due to lower energy prices and the stronger dollar. These statements, combined with last week’s weaker than expected jobs number seem to point to a September rate hike at the very earliest.

Markets

  • Equity markets closed on a positive note this week. The S&P 500 came up 1.70%, closing at 2,102, while the Dow Jones increased by 1.66% and closed at 18,058. Year to date, the S&P is up 2.10% and the Dow is up 1.32%.
  • Yields in the Treasury climbed up slightly this week. The 10 year Treasury bond now yields 1.95% and the 5 year Treasury bond yields 1.40 %.
  • The spot price of WTI Crude Oil continued its rise this week climbing up 5.23% and closing at $51.71 per barrel. In 2015, WTI Oil prices have fallen 5.91%.
  • The spot price of Gold rose by 0.05% this week and closed at $1,207.51 per ounce. Year to date, gold prices are up 1.95%.

Economic Data

  • Initial jobless claims rose from last week, coming in at 281,000 vs. an average forecast of 283,000. The Labor Department noted that no special factors affected claims this week.

Fact of the Week

  • According to American Consumer Credit Counseling, a July 2014 survey found that 31% of U.S. households are providing financial assistance to adult children, a larger proportion than the 21% of households that are providing financial assistance to elderly parents.

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 April 6, 2015

U.S. and World News

  • nuclear_000017116815_320After eight straight days of high level diplomatic negotiations between six world powers and Iran in Switzerland, an interim agreement has been reached on principles for dismantling Iran’s nuclear program in exchange for lifting heavy economic sanctions. Iran agreed to inspections and monitoring of nuclear facilities for 20 years, as well as dismantling already existing equipment. Iran will continue to be allowed to research and develop advanced nuclear technology. In exchange, the punitive economic sanctions that have crippled Iran will be lifted over time. While the interim deal marks progress, there are still several months of negotiations ahead before a deal is finalized.
  • Russia, Australia, Denmark, the Netherlands and Taiwan have become the latest countries to announce they’d be joining the China-led Asian Infrastructure Investment Bank (AIIB). That over 40 nations have pledged to join the AIIB is seen as a significant setback to the U.S. efforts to extend its influence in the region and balance China’s growing financial clout. Meanwhile, Japan and Canada missed the March 31st initial deadline for membership but are weighing the option of joining at a later time.

Markets

  • Equity markets were slightly positive during the holiday shortened week. The S&P 500 rose 0.32%, closing at 2,067, while the Dow Jones also gained 0.32% and closed at 17,763. Year to date, the S&P is up 0.92%, while the Dow is up 0.27%.
  • Yields in the Treasury markets dipped this week, particularly following the disappointing jobs report which may further delay the Fed rate hike. The 10 year Treasury bond now yields 1.85% and the 5 year Treasury bond yields 1.26%.
  • The spot price of WTI Crude Oil rose 1.61% this week, closing at $49.14 per barrel. In 2015, WTI Oil prices have fallen 10.59%.
  • The spot price of Gold rose by 0.87% this week and closed at $1,208.95 per ounce. Year to date, gold prices are up 2.07%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 268,000 vs. consensus estimates of 286,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 285,500.
  • The monthly jobs report showed a rise of only 126,000 jobs in March, falling well short of consensus estimates. January and February’s figures were revised downward a total of 69,000, bringing the three month average pace of job gains to 197,000.
    • The headline unemployment rate held steady at 5.5%, in line with expectations. The labor force participation rate declined by 0.1%, down to 62.7%, a historically low level.
    • Average hourly earnings surprised to the upside, increasing by 0.3% against expectations of 0.2%. Over the last 12 months, average earnings have increased by a total of 2.1%.
  • The Case-Shiller home price index rose 0.87% in January vs. expectations of 0.65%. All 20 cities covered in the index posted monthly gains. Over the past year, home prices as measured by the index have risen 4.5%.
  • Pending home sales (based on contract signings as opposed to closings) rose 3.1% in February, beating expectations of 0.3%. Pending home sales have risen 12.0% over the last year.

Fact of the Week

  • According to the Institute of Medicine, U.S. health care spending topped $2.9 trillion in 2013. An estimated 75% of that total ($2.2 trillion) was spent on medical care for chronic illnesses that are preventable. This incorporates illnesses that are a function of avoidable behaviors including obesity, poor diet, smoking, excessive alcohol consumption, lack of physical activity and poor oral health.

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 April 1, 2015

U.S. and World News

  • oil_000013481523_290Oil markets jumped higher this week after Saudi Arabia and its Gulf allies started bombing militant targets in Yemen as the country moves closer toward civil war. While the Saudi attacks won’t directly disrupt importer’s supplies, the threat of a spreading war in the region could absolutely disrupt oil flows. There is a significant risk of a proxy war starting with Shiites in Iran backing the rebel Houthis of Yemen, with Saudi Arabia and other Sunni monarchies supporting current Yemeni President Abd-Rabbu Mansour Hadi.
  • In the face of defiance from allies that have signed up to become members, the Obama administration has now proposed that the new Asian Infrastructure Investment Bank (AIIB) work in partnership with U.S.-backed development institutions, such as the World Bank. The U.S. had previously warned against the Beijing-based AIIB due to quality and corruption concerns. At least 35 countries are scheduled to join the AIIB on March 31st, including U.S. allies Britain, France, Germany and Italy. Meanwhile, Australia, South Korea and Japan are notable regional absences from membership but are still weighing their options.
  • A U.S. trade group representing broadband providers has filed a court challenge against the FCC’s recently approved net neutrality rules. Once the rules are published in the Federal Register, it is expected that a flood of additional legal challenges will be instituted by other industry groups.

Markets

  • Equity markets dropped this week with the S&P 500 losing 2.21%, closing at 2,061, while the Dow Jones fell 2.29% and closed at 17,712. Year to date, the S&P is up 0.58%, while the Dow is flat.
  • Yields in the Treasury markets remained about the same this week, at lower levels than seen at the beginning of the year. The 10 year Treasury bond now yields 1.97% and the 5 year Treasury bond yields 1.44%.
  • The spot price of WTI Crude Oil rose this week following a reigniting of violence in the Middle East. Prices rose 5.77% this week, closing at $48.36 per barrel. In 2015, WTI Oil prices have fallen 12.00%.
  • The spot price of Gold rose by 1.33% this week and closed at $1,198.29 per ounce. Year to date, gold prices are up 1.17%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 282,000 vs. consensus estimates of 284,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 297,000.
  • Headline Consumer Price Index rose 0.2% in February, in line with consensus. Core prices (excludes food and energy) also rose 0.2%, beating expectations. Over the last year, Headline CPI is flat, while Core CPI is up 1.7%, consistent with subdued inflation.
  • New home sales rose 7.8% in February vs. expectations of a fall of 3.5%. Meanwhile, existing home sales increased 1.2% in February vs. forecasts of 1.7%. Both figures were welcome given recently lagging housing numbers.
  • University of Michigan consumer sentiment improved to a 93.0 reading in March vs. expectations of 92.0. Both the respondents’ assessment of current conditions and expectations for the future improved. Although sentiment has declined from its January peak, it remains at a relatively high level.

Fact of the Week

  • According to Freddie Mac, the average interest rate nationwide on a 30-year fixed rate mortgage was at least 10% for 12 consecutive years, spanning from 1979 to 1990. The average rate on a 30 year mortgage today is 3.78%.

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 March 25, 2015

U.S. and World News

  • In a unanimous decision, the Federal Reserve has dropped “patient” from their description of their philosophy regarding raising interest rates. The committee ruled out the chances of a hike during its next meeting in April, seeming to indicate that the first move could come as early as June. However, the Fed acknowledged that there has been a soft patch in U.S. economic data and that, “the Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term.” Adding that, “This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.”
  • brazil_280Brazil’s government will present a package of anti-corruption measures after more the 1 million people took to the nation’s streets in protest, many of them calling for President Rousseff’s impeachment. In the midst of the biggest corruption scandal in the country’s history, higher taxes and increased prices for government regulated goods are further fueling the discontent of Brazilian citizens. Brazil’s currency has fallen to its weakest level in 12 years and its benchmark stock index has fallen over 15% since Rousseff was re-elected last October.

Markets

  • Equity markets rallied this week following the seemingly dovish message sent by the Federal Reserve despite the dropping of the “patient” language. The S&P 500 rose 2.65%, closing at 2,108, while the Dow Jones climbed 2.13% and closed at 18,127. Year to date, the S&P and Dow Jones are up 2.84% and 2.29%, respectively.
  • Yields in the Treasury markets moved downward after the Fed downgraded its view on the economy. The 10 year Treasury bond now yields 1.93% and the 5 year Treasury bond yields 1.41%.
  • The spot price of WTI Crude Oil rose a bit this week, gaining 1.96% this week, closing at $45.72 per barrel. In 2015, WTI Oil prices have fallen 14.17%.
  • The spot price of Gold rose by 2.16% this week and closed at $1,183.47 per ounce. Year to date, gold prices are virtually unchanged.

Economic Data

  • Initial jobless claims rose a bit from last week, coming in at 291,000 vs. consensus estimates of 293,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 304,750.
  • Housing starts plunged 17% in February vs. expectations of only a 2.4% decline. This was the largest decline since February 2011. The data may have been skewed by a colder and snowier than normal February, as data from the Midwest (-37%) and Northeast (-57%) were extremely poor.

Fact of the Week

  • According to the Urban Institute, an average ‘high income’ U.S. couple (defined as joint income over $125,000) that will retire in 2020 will have paid $909,000 in Social Security taxes in their lifetime, but only receive $756,000 of Social Security benefits. This is the equivalent to receiving $0.83 in benefits for every $1 put into the system.

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 March 16, 2015

U.S. and World News

  • The European Central Bank kicked off its quantitative easing program this week which calls for monthly purchases of €60 billion of government bonds. As a result, the Euro continued its steep decline against the U.S. Dollar, falling to new 12-year lows around $1.05 per €1, appearing to be on course for Euro/Dollar parity in the near future.
  • South Korea this week joined the 24 other countries across the world to ease monetary policy so far in 2015. After lowering economic growth forecasts for the next year from 3.9% to 3.4%, the central bank cut its base rate by 0.25% to a record low of 1.75%.
  • iceland_300Iceland dropped its bid to join the European Union this week. Its original application was submitted six years ago. Prime Minister Gunnlaugsson stated, “Participating in EU talks isn’t really valid anymore. Both due to changes in the EU and because it’s not in line with the policies of the ruling government to accept everything that the last government was willing to accept.”

Markets

  • Equity markets moved lower this week, the result of several volatile trading sessions. The S&P 500 lost 0.81%, closing at 2,053, while the Dow Jones fell 0.52% and closed at 17,749. Year to date, the S&P and Dow Jones are up 0.19% and 0.16%, respectively.
  • Yields in the Treasury markets drifted downward this week, following last week’s upward spike. The 10 year Treasury bond now yields 2.12% and the 5 year Treasury bond yields 1.59%.
  • The spot price of WTI Crude Oil fell to a new 52 Week Low this week, falling 8.40% this week, closing at $45.12 per barrel. In 2015, WTI Oil prices have fallen 16.80%.
  • The spot price of Gold fell by 0.94% this week and closed at $1,156.36 per ounce. Year to date, gold prices are down 2.36%.

Economic Data

  • Initial jobless claims fell from last week, coming in at 289,000 vs. consensus estimates of 305,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 302,500.
  • Headline retail sales unexpectedly fell 0.6% in February, while expectations were for a 0.3% gain. Core retail sales, which are used by the Commerce Department to estimate consumer spending in the GDP calculation, were flat in February vs. expectations of +0.4%. Gasoline station sales rose 1.5% in the month, reflecting higher prices at the pump.
  • The University of Michigan consumer sentiment survey disappointed expectations, coming in at 91.2 in March, down from 95.4 in February. Both consumers’ assessment of current conditions and expectations for the future worsened. Despite the recent downtick, likely due to the recent rise in gas prices, consumer sentiment remains solidly above average levels over the last couple of years.

Fact of the Week

  • Individual Retirement Accounts, or IRAs, were established in the U.S. by the Employee Retirement Income Security Act of 1974, with the first year of contributions happening in 1975. A lot has changed for these retirement savings vehicles in their 40 year history. They were originally only available to workers who weren’t covered by employer retirement plans and the contribution maximum was $1,500. In 1981, a new tax law let anyone under the age of 70 ½ contribute to them. In 1986, the Tax Reform Act phased out the deductibility of IRA contributions for high income workers who were also covered by employer plans. Now, IRAs have a contribution limit of $5,500 per year or $6,500 if you’re over 50 years old. Over 43 million Americans now have one or more IRAs and the vast majority of IRA balances are from rollovers from previous employer plans. According to the Federal Reserve, at the end of 2014, there were $3.1 trillion in pension plans, $5.3 trillion in 401(k)-type defined contribution plans and $7.2 trillion invested in IRAs.

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