SPECIAL: Wealth Management Market Volatility Update August 24, 2015

world_finance_000023933922_320Equity markets worldwide have seen an extreme bout of volatility over the last week and several indices have entered into correction territory. The catalyst for the downside move appears to be two-fold: China’s recent decision to devalue its currency and anticipation for an interest rate hike by the Federal Reserve. China’s call to allow the value of its currency float more freely was a pretty marked shift from its previous position of being pegged to the value of the U.S. dollar. The result was a steep devaluation of the Chinese yuan in relation to other currencies. Many market participants view this as an indication of a rapid slowdown in growth in China. Back home, the minutes from the most recent Federal Reserve meeting indicated that while most voting members need to see more improvement in inflation data to support a rate hike, those conditions are becoming closer and closer to reality. Odds of a September rate hike had been falling in recent weeks with probabilities shifting toward December, however that came into question given the minutes from the meeting.

Those two reasons aside, it is our opinion that the longer term strategic outlook for the markets is largely unchanged despite recent market volatility. Moderate global economic growth and still accommodative monetary policies appear to remain intact, however volatility and downside moves may continue until more clarity is achieved on both fronts. Domestically, the economy appears to be on solid footing as recent employment and housing data remain strong. Additionally, consumers should continue to benefit from lower energy prices, providing a boost to retail activity.

If you have any questions or concerns, please do not hesitate to contact 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

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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.

Wealth Management Economic Update August 24, 2015

U.S. and World News

  • After the Chinese Yuan fell 3.6% last week, Chinese markets continued their decline this week. The Hang Seng officially entered the bear market territory as it has plummeted over 20% from its high in April. The IMF has given a sign that it will be at least another year until the Chinese currency will be added to its basket of reserve currencies. Concerns about China’s economy has rattled markets globally this week and has been blamed for the sharp decline of the S&P 500 which is down over 6% from its high in May.
  • Germany has voted in favor of the bailout package for Greece by a large margin, putting an end to negotiations lasting months. The first disbursement of €13B of funds from the bailout package was received by Greece just in time to make a €3.2B payment due to the ECB. €12B of this amount will be used to pay down debt. Greek Prime Minister Alexis Tsipras announced his resignation shortly after receiving the first disbursement of the €86B bailout deal.
  • oil_drill_320For the first time ever, the U.S. will allow limited sales of crude oil to Mexico. The oil that will be exported is expected to be high-quality shale which will help Mexico produce premium fuel. The U.S. will continue to receive the heavy oil coming from Mexico which is better for U.S refiners than the light oil they receive from Texas and North Dakota. WTI crude declined for the eighth straight week after the U.S revealed a large supply of 2.6M barrels.

Markets

  • Equity markets plunged this week amid global worries. The S&P 500 lost 5.77%, closing at 1,971. Similarly, the Dow Jones fell 5.82% and closed at 16,460. Year to date, the S&P is down 4.27% and the Dow is down 7.65%.
  • Yields in the Treasury markets fell this week. The 10 year Treasury bond now yields 2.05% while the 5 year Treasury bond now yields 1.43%.
  • The spot price of WTI Crude Oil continued its decline, and dropped by 6.73% closing at $40.21 per barrel. In 2015, WTI Oil prices are down 30.81%.
  • The spot price of Gold continued its weekly increase and gained 4.00% closing at $1,159.70 per ounce. Year to date, gold prices are down 2.09%.

Economic Data

  • Initial jobless claims came in at 277,000 which was an increase from the prior week’s figure of 273,000. The Labor Department noted that there were no special factors that affected the claims figure. The four week moving average for claims now stands at 271,500.
  • Existing home sales rose 2.0% in July vs. consensus of -1.1% to a high of 5.59 million. Single family homes sales are up 2.7% and condo and co-op sales fell -3.1%.
  • Housing starts were up 0.2% month-over-month in July, slightly higher than consensus forecasts.
  • The Consumer Price Index (CPI) increased 0.1% month-over-month in July, slightly lower than expected.

Fact of the Week

  • 64% of Millennials (ages 18-34 in 2015) believe they have a greater chance of winning the lottery than ever receiving a penny from Social Security once they retire. (T. Rowe Price)

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 August 10, 2015

U.S. and World News

  • greece_000044812184_320The Athens Stock Exchange reopened on Monday after being closed for more than a month during the most recent Greek debt crisis. The benchmark index in Greece saw significant losses, falling by as much as 30% in its first day of resumed trading. Volatility has subsided somewhat after Greece and its lenders stated they were optimistic they could broker the final details of a bailout within days. A funding deal worth up to €86 billion must be settled by August 20th so that Greece can pay off €3.5 billion in debt it owes to the European Central Bank.
  • Puerto Rico announced that over the weekend it failed to make a debt payment, placing the U.S. commonwealth into default for the first time in its history. What happens next is unclear. Congress may assist the territory by passing a bankruptcy bill, allowing Puerto Rico to restructure its debts; however that effort has faced opposition. Another option may be for the Treasury Department to guarantee Puerto Rico’s debt when it seeks to borrow from the market again, significantly lowering the country’s future borrowing costs.
  • The Federal Reserve meeting this month produced little insight into when the Committee plans on raising the Federal Funds Rate. Policymakers continued to see an improving economy and labor situation but said that it requires additional improvement in labor market conditions before ‘liftoff’. The Committee also noted concerns about ‘international developments’, most likely referencing the summer’s Greek drama and the volatility in China’s stock markets.

Markets

  • Equity markets dwindled this week. The S&P 500 lost 1.25%, closing at 2,078. Similarly, the Dow Jones fell 1.79% and closed at 17,374. Year to date, the S&P is up 0.91% and the Dow is down 2.52%.
  • Yields in the Treasury markets went in opposite directions this week. The 10 year Treasury bond fell and now yields 2.16%. On the other hand, the 5 year Treasury bond rose and now yields 1.57%.
  • The spot price of WTI Crude Oil plummeted this week, dropping 6.98% and closed at $43.83 per barrel. In 2015, WTI Oil prices are down 23.77%.
  • The spot price of Gold continued its decline, dropping 0.13% and closing at $1,094.35 per ounce. Year to date, gold prices are down 7.60%.

Economic Data

  • Initial jobless claims came in at 270,000 which was an increase from the prior week’s figure of 267,000. The Labor Department noted that there were no special factors that affected the claims figure. The four week moving average for claims now stands at 268,250.
  • The July jobs report showed a gain of 215,000 nonfarm payrolls, lower than expectations of 225,000. The figures were revised up by 14,000 to prior months.
    • The headline unemployment rate remained unchanged at 5.30%. The labor force participation rate also remained unchanged at 62.60%.
    • Average hourly earnings rose by 0.20% vs. consensus estimates of 0.20%.

Fact of the Week

  • Approximately 21% of 401(k) plan participants who are eligible to borrow from their balances have outstanding loans. Additionally, participants in the U.S. left $24 billion in company matching funds unused because they didn’t save enough to claim the full match. (Source: ThinkAdvisor)

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 August 3, 2015

U.S. and World News

  • SHANGHaiHeightened volatility continued in Chinese equity markets this week as government intervention was unable to prevent the Shanghai Composite from posting its worst month in six years as the index fell 14%. Chinese regulators said they were prepared to lend further support to markets, while the central bank injected cash into the money markets and hinted at further easing. In addition, China’s securities regulators said it has launched a probe into automated trading, restricting accounts suspected of “influencing securities trading prices.”
  • Greece’s financial markets are finally set to reopen on Monday August 3rd after being closed since June 28th. Already dealing with dissention in his own Syriza party, Prime Minister Alexis Tsipras was informed on Friday by the International Monetary Fund that Greece’s high debt levels and current record of implementing reforms disqualify it from a third bailout. The IMF will still take part in the bailout negotiations that are underway, but will not decide whether to agree to a new program for a few months.
  • The Federal Reserve meeting this month produced little insight into when the Committee plans on raising the Federal Funds Rate. Policymakers continued to see an improving economy and labor situation but said that it requires additional improvement in labor market conditions before ‘liftoff’. The Committee also noted concerns about ‘international developments’, most likely referencing the summer’s Greek drama and the volatility in China’s stock markets.

Markets

  • Equity markets rose moderately this week. The S&P 500 gained 1.18%, closing at 2,104. Likewise, the Dow Jones rose 0.69% and closed at 17,689. Year to date, the S&P is up 3.35% and the Dow is up 0.56%.
  • Yields in the Treasury markets dipped this week. The 10 year Treasury bond now yields 2.19% and the 5 year Treasury bond yields 1.54%.
  • The spot price of WTI Crude Oil fell again this week, dropping 2.72% and closed at a 52-week low of $46.83 per barrel. In 2015, WTI Oil prices are down 18.56%.
  • Once again, the spot price of Gold fell, decreasing by 0.30% and closing at $1,095.80 per ounce. Year to date, gold prices are down 7.48%. 

Economic Data

  • Initial jobless claims came in at 267,000 which was an increase from the prior week’s figure of 255,000. The Labor Department noted that there were no special factors that affected the claims figure. The four week moving average for claims now stands at 275,000.
  • Real Gross Domestic Product increased by 2.3% (quarter over quarter) in the 2nd quarter, boosted by a solid increase of 2.9% in consumer spending. The figure for the 1st quarter GDP was revised upwards from -0.2% to +0.6%.
  • The Case-Shiller home price index declined 0.2% in May, disappointing against consensus estimates of a gain of 0.3%. Half of the 20 cities in the index showed price gains. Over the last 12 months, home prices in the index have risen 4.9%.
  • The Employment Cost Index (measure of wage growth) rose just 0.2% in the 2nd quarter which was below consensus expectations. With the Federal Reserve signaling that more improvement in inflation data is necessary for a September increase in the Fed Funds Rate, many analysts believe that this data point bring down the odds of that occurring, pushing the most likely ‘liftoff’ date to December.

Fact of the Week

  • The United States’ total outstanding debt has increased 91% over the last 7 years, an increase of 9.7% per year. The national debt has risen from $9.49 trillion on June 30, 2008 to $18.15 trillion as of June 30, 2015. (Source: Treasury 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

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 July 27, 2015

U.S. and World News

  • Greek banks finally reopened this week following the country’s deal with the European Central Bank and International Monetary Fund, although extensive capital controls still remain in place. Prime Minister Alexis Tsipras has successfully passed two reform packages through a combative parliament that were necessary in order for the bailout deal to commence. Meanwhile, ratings agency Standard and Poor’s lifted its credit rating on Greece from CCC- to CCC+.
  • cuba_000022365758_320The U.S. and Cuba have formally restored diplomatic relations that have been severed for more than five decades by re-establishing embassies in each other’s capitals. While many European officials have been visiting Cuba seeking business deals, American companies are still prohibited from conducting trade with the country and travelling there from the U.S. as a tourist remains illegal.

Markets

  • Opposite of last week, equity markets tumbled this week. The S&P 500 fell 2.21%, closing at 2,080. Likewise, the Dow Jones dropped 2.86% and closed at 17,569. Year to date, the S&P is up 1.01% and the Dow is down 1.43%.
  • Yields in the Treasury markets dipped a little this week. The 10 year Treasury bond now yields 2.26% and the 5 year Treasury bond yields 1.62%.
  • The spot price of WTI Crude Oil plummeted this week. Prices were down 6.13% and closed at $48.07 per barrel. In 2015, WTI Oil prices are down 16.40%.
  • Once again, the spot price of Gold fell decreasing by 3.09% and closing at $1,099.11 per ounce. Year to date, gold prices are down 7.20%.

Economic Data

  • Initial jobless claims showed a steep decline to 255,000 which was a decrease from the prior week’s figure of 281,000. This is the lowest level of jobless claims since November 1973. However, the Labor Department noted that there may be seasonal factors such as summer auto plant shutdowns that may have affected the claims figure. The four week moving average for claims now stands at 279,000.
  • Existing home sales rose 3.2% in June, beating expectations of 0.9%. Both single-family (+2.8%) and condo/co-op (+6.6%) sales increased. Geographically, sales increased in all four regions of the country.

Fact of the Week

  • The United States’ debt service ratio (debt payments and financial obligations as a percentage of disposable personal income) was 9.92% in the 1st quarter of 2015, down from 13.17% in the 4th quarter of 2007. This statistic has been tracked since 1980 and until the 4th quarter of 2012, the ratio had never been reported under 10%. (Source: Federal Reserve).

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 July 20, 2015

U.S. and World News

  • The Eurozone and Greece have agreed in principle to a third bailout deal that will keep the country in the Euro currency for the time being. After a near total capitulation by Prime Minister Alexis Tsipras, Greece will have to put €50 billion of state assets in a trust fund so that they can be sold off in order to pay down debt. In addition, a slate of austerity measures (more stringent than the set of measures voted down in last week’s referendum vote) was required to be passed through Greece’s parliament and was successful despite protests in Athens before the vote. Greek banks are finally expected to reopen on Monday, however capital controls will remain in place, limiting how much Greek depositors are allowed to withdraw.
  • radioactiveIran and major world powers (including the U.S.) have reached a historic nuclear deal following more than two weeks of negotiations in Vienna. As part of the deal, Iran will have to stall its nuclear program and submit to regular inspections to ensure no nuclear weapons are being developed. In exchange, Iran will receive an easing of its international trade sanctions, allowing the oil-rich nation to reenter the global energy markets and boost its oil exports as well as having greater access to international investment. While analysts believe that global oil markets won’t feel the real impact of Iran’s potential 500,000 barrels/day production until 2016, oil prices have been under pressure since the deal was reached.
  • Economic growth in China proved to be resilient in the 2nd quarter as GDP rose 7.0%. Aided by policy makers stepping up support for the country’s stock market during some harshly negative action, China is on pace to meet its 2015 growth target of about 7%. Though despite the better than expected growth figure, Chinese shares remained volatile and around 700 stocks (about 25% of the country’s listed stocks) remain halted for trading in an effort to slow losses.

Markets

  • Equity markets rallied this week on the temporary resolution to the Greek drama. The S&P 500 gained 2.42%, closing at 2,127. Similarly, the Dow Jones rose by 1.86% and closed at 18,086. Year to date, the S&P is up 4.42% and the Dow is up 2.79%.
  • Yields in the Treasury markets stabilized this week as the Greek induced volatility subsided. The 10 year Treasury bond now yields 2.35% and the 5 year Treasury bond yields 1.68%.
  • The spot price of WTI Crude Oil fell again this week on news of the Iran deal. Prices were down 3.51% and closed at $50.89 per barrel. In 2015, WTI Oil prices are down 10.51%.
  • The spot price of Gold fell to a 52 week low, declining by 2.54% and closing at $1,134.14 per ounce. Year to date, gold prices are down 4.24%. 

Economic Data

  • Initial jobless claims came in at 281,000 which was a decrease from the prior week’s figure of 297,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 282,500.
  • Housing starts rebounded in June from May’s sharply negative print, showing a gain of 9.8%, beating estimates of 6.7%. The single family category declined 0.9% while the multifamily segment showed an increase of 29.4%.
  • The headline Consumer Price Index (measure of inflation) rose 0.3% in June, boosted by a 3.4% increase in gas prices and was in line with expectations. Core CPI (excludes food and energy) rose 0.2% in June, also in line with expectations. Over the past 12 months, headline CPI has risen 0.1% and core CPI has risen 1.8% (near the Federal Reserve’s 2% target).
  • Retail sales declined 0.3% in June, which was worse than consensus expectations of a 0.3% increase. Sales of home furnishings (-1.6%), apparel (-1.5%), autos (-1.1%) and building materials (-1.3%) were largely responsible for the lower than expected figure.

Fact of the Week

  • The labor force participation rate measures the percentage of the unretired civilian adult population that is either working or looking for work. In the U.S., the figure hit its lowest level since October 1977 when the June employment report showed a 62.6% participation rate. Meanwhile, the beleaguered commonwealth of Puerto Rico shows a participation rate of 40% according to the most recent data (Source: Department of Labor)

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

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

Visit Old Second Wealth Management

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

Wealth Management Economic Update July 13, 2015

U.S. and World News

  • greece_life_preserver_320Following the resounding vote of No against a set of austerity measures put for by Greece’s international creditors in exchange for an additional bailout, the fate of Greece’s status in the Euro currency hangs in the balance. After the vote, former Finance Minister Yanis Varousfakis resigned and has been succeeded by Euclid Tsakalotos. Emergency meetings have been held this week between Greece and high ranking European Union officials and Prime Minister Alexis Tsipras has submitted an application for a new three-year bailout deal. The deal includes many of the reforms requested by creditors in the deal that was voted down in the July 5th referendum so there is optimism a deal will be reached. Meanwhile, Greek banks and markets will remain closed through July 13th as negotiations continue.
  • The Chinese government has stepped in to try to stop the plunge that the country’s stock markets have been seeing the last few weeks. After rallying over 100% over the last nine months, shares have fallen over 30% from their highs, wiping out about $2.7 trillion in market value since June 12th. Encouraged by the government, China’s largest brokerage firms have pledge to buy 120 billion yuan ($19.3 billion) of shares to try to prop up the market. After that measure failed to stop the bleeding, nearly half of all Chinese listed companies have had trading in their shares suspended and short selling has been banned for the remaining trading equities.
  • The head of Puerto Rico’s Government Development Bank, Melba Acosta, said that the country is not intending to cut principal payments to bondholders and would instead seek to renegotiate debt terms. Banking officials have scheduled a meeting for Monday, the first since Governor Alejandro Garcia Padilla rattled markets last week saying he wanted to restructure debt and postpone bond payments. Several U.S. politicians, including Hillary Clinton, have begun calling for changes in U.S. bankruptcy laws that would allow for the commonwealth to restructure its obligations.
  • Minutes from the June Federal Reserve meeting were mostly in line with expectations and continued the dovish tone the Committee has expressed at recent meetings. Fed officials made note of international developments on several occasions, particularly Greece and China. Nine of ten voting members said they needed more evidence that “economic growth was sufficiently strong and labor market conditions had firmed enough to return inflation to the Committee’s longer-run objective over the medium term.”

Markets

  • Despite all the excitement from the NYSE closing for 3.5 hours on Wednesday this week, there was little change in the equity markets for week. The S&P 500 fell slightly by 0.01%, closing at 2,077. The Dow Jones gained 0.17% and closed at 17,760. Year to date, the S&P is up 0.86% and the Dow is down 0.35%.
  • Similar to the equity markets, yields in the Treasury markets exhibited little volatility for the week. The 10 year Treasury bond now yields 2.40% and the 5 year Treasury bond yields 1.66%.
  • Once again, the spot price of WTI Crude Oil fell dramatically this week by 7.18%, closing at $52.84 per barrel. In 2015, WTI Oil prices are down 7.09%.
  • The spot price of Gold somewhat decreased this week by 0.42% and closed at $1,163.74 per ounce. Year to date, gold prices are down 1.74%.

Economic Data

  • Initial jobless claims came in at 297,000 which was an increase from the prior figure of 281,000 and above consensus expectations of 275,000. The Labor Department noted that no special factors affected claims this week, though during this time of year there can be seasonal adjustments related to auto plant shutdowns. The four week moving average for claims now stands at 279,500.

Fact of the Week

  • As of December 2013, 73% of retired workers who were receiving Social Security benefit payments had begun taking their benefits early, before attaining their full retirement age.

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.

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

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 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

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