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

Wealth Management Economic Update March 10, 2015

U.S. and World News

  • All 31 banks that were tested passed the Federal Reserve imposed stress test on minimum levels of capital. The Fed simulated an economy that faced severely adverse conditions in order to determine if major banks were capitalized enough to remain solvent in those conditions. Next week, the Fed will release the results of the Comprehensive Capital Analysis and Review (CCAR) and will either approve or disapprove of the banks’ capital return plans.
  • india_coin_200The Reserve Bank of India surprised markets by cutting rates for the second time this year. Citing inflation and weakness in the economy, the central bank lowered its benchmark rate by 0.25% to 7.5%. Also joining in the worldwide trend of monetary easing, China also cut their benchmark interest rate by 0.25%. In the last few months, China has seen signs of slowing growth, with GDP dipping to 7.3% in the 4th quarter, its slowest rate of growth in over 20 years.

Markets

  • Equity markets moved lower this week following the release of the monthly non-farm payrolls report. The S&P 500 lost 1.55%, closing at 2,071, while the Dow Jones fell 1.52% and closed at 17,857. Year to date, the S&P and Dow Jones are up 0.99% and 0.67%.
  • Yields in the Treasury markets moved up significantly this week after the better than expected jobs report pushed forward expectations of the Fed’s first rake hike. The 10 year Treasury bond now yields 2.25% and the 5 year Treasury bond yields 1.70%.
  • The spot price of WTI Crude Oil was up 0.93% this week, closing at $49.26 per barrel. In 2015, WTI Oil prices have fallen 8.40%.
  • The spot price of Gold fell by 3.79% this week and closed at $1,167.24 per ounce. Year to date, gold prices are down 1.45%.

Economic Data

  • Initial jobless claims jumped up from last week, coming in at 320,000 vs. consensus estimates of 295,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 305,000.
  • The February jobs report showed a gain of 295,000 non-farm payrolls, beating estimates of 235,000. There was no significant negative weather effect apparent in the data.
    • The unemployment rate dropped to 5.5%, beating expectations of 5.6%. This drop was aided however by a 0.1% drop in the labor force participation rate to 62.8%.
    • Average hourly earnings rose 0.1% in the month, below expectations of 0.2%. Over the last 12 months, wages have grown a subdued 2.0%.
  • The PCE Price index (the Federal Reserve’s preferred measure of inflation) fell 0.5% in January, in line with expectations. This was largely due to a 10% drop in energy prices. Core PCE (excludes food and energy) rose 0.1% in the month, also in line with consensus. Core prices are up 1.3% over the last year, well below the Fed’s 2% inflation target.

Fact of the Week

  • The NASDAQ Composite traded over the 5,000 threshold this week for the first time since March 2000. In the 15 years it took to regain this level, the composition of the index has changed quite a bit. One difference is the valuations of the representative companies are drastically different. Today the NASDAQ has a price to earnings ratio (price per share of stock for every $1 per share of earnings) is 21.5 compared to 107 in 2000. Some of the top 10 stocks in the NASDAQ in March 2000 were WorldCom, Dell, Sun Microsystems and JDS Uniphase.

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 2, 2015

U.S. and World News

  • Greece submitted its list of economic reform plans to the Eurozone finance ministers just before Monday’s deadline. While the list was approved, clearing the path for a four month extension to Greece’s bailout funding, the finance ministers warned that the reforms must be expanded in detail before new bailout funding would be released.
  • Following months of negotiations, West Coast ports have been reopened and are working at full speed after a new five year labor contract agreement was reached. Port officials estimate that it will take at least three months to clear the backlog of containers that have been piling up during the labor stoppage. The strike has disrupted shipments for companies across the country as merchandise has been sitting idle in stacked containers, waiting to be unloaded.
  • world_internet_000003759439_320The FCC has approved net neutrality restrictions on the internet, reclassifying broadband services under the Telecommunications Act. The vote for the measure was 3 to 2 and went down party lines with the Democrats carrying the vote. The new rules will prevent internet service providers from prioritizing the speeds of service they provide to customers and charging higher rates for ‘fast lanes’ of the internet. FCC Chairman Tom Wheeler said the action was an “irrefutable reflection of the principle that no one, whether government or corporate, should control free and open access to the internet.”

Markets

  • Equity markets were mostly flat this week. The S&P 500 lost 0.24%, closing at 2,104, while the Dow Jones gained 0.02% and closed at 18,033. Year to date, the S&P and Dow Jones are up 2.57% and 2.22%.
  • Yields in the Treasury markets moved down this week. The 10 year Treasury bond now yields 2.00% and the 5 year Treasury bond yields 1.50%.
  • The spot price of WTI Crude Oil fell this week, losing 3.05% and closing at $49.26 per barrel. In 2015, WTI Oil prices have fallen 9.21%.
  • The spot price of Gold rose by 0.92% this week and closed at $1,213.00 per ounce. Year to date, gold prices are up 2.41%.

Economic Data

  • Initial jobless claims jumped up from last week, coming in at 313,000 vs. consensus estimates 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 294,500.
  • The Case-Shiller home price index rose 0.9% in December vs. consensus estimates of a 0.6% increase. Appreciation was seen across all 20 of the cities monitored in this index. Over the past year, home prices have risen 4.5% as measured by the index.
  • The headline Consumer Price Index (measure of inflation) fell 0.7% in January, pushed lower by an 18.7% drop in gasoline prices. Core CPI, which does not include food or energy, rose 0.2%, better than the expected 0.1%. Despite this better core CPI number for January, the one year rate of change stands at a subdued 1.6%.

Fact of the Week

  • On July 15, 2014, Federal Reserve Chair Janet Yellen stated in her scheduled testimony to Congress that, “Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched…” This sort of sector specific commentary from a Fed Chair was highly unusual and questioned at the time. Her call on social media stocks was good, as since then, those stocks have returned -1.11% (as measured by the Global X Social Media ETF, SOCL) compared to the S&P 500 return of 7.9% during that time. However, her biotech call doesn’t look so good as those stocks have gained 52.3% (as measured by the SPDR Biotech ETF, XBI) in that time. Yellen was back in front of Congress again this week but didn’t provide any asset class valuation calls this time around.

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

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

Visit Old Second Wealth Management

Wealth Management Economic Update February 24, 2015

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

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Wealth Management Economic Update February 16, 2015

U.S. and World News

  • After unsuccessful meetings this week in Brussels, Belgium, European finance ministers put off decisions on Greece’s bailout terms until they reconvene next week. Greece is trying to negotiate a €10 billion bridge loan to keep the country solvent as it works with its creditors. Greek officials are promising they will make every effort to reach an agreement on conditions for a new support program although new Greek Prime Minister Alexis Tsipras continues to vow to roll back austerity measures in the country, jeopardizing its ability to renegotiate.
  • A ceasefire between Russia and Ukraine has been reached and will begin on February 15th. This was the result of a 17 hour meeting between leaders of Russia, Ukraine, France and Germany. The new deal revives a failed September agreement and includes commitments from each side to pull back heavy weapons. Should this agreement fail, many Western nations are considering increased sanctions against Russia.
  • Sweden has joined the fray when it comes to central bank easing as its Riksbank cut its repo rate into negative territory, down to -0.1%. Riksbank also announced a 10 billion kronor ($1.2 billion) quantitative easing program in which the bank will purchase Swedish government bonds.

Markets

  • Equity markets continued to rally this week, with the S&P 500 gaining 2.09% and closing at a new All-Time High of 2,097. Likewise, the Dow Jones gained 1.26% and closed at 18,019. Year to date, the S&P and Dow Jones are up 2.11% and 1.47%.
  • Yields in the Treasury markets continued to creep upwards this week. The 10 year Treasury bond now yields 2.04% and the 5 year Treasury bond yields 1.53%.
  • The spot price of WTI Crude Oil continued to rise from very low levels, gaining 1.64% and closing at $52.54 per barrel. In 2015, WTI Oil prices have fallen 2.16%.
  • The spot price of Gold fell by 0.35% this week and closed at $1,229.66 per ounce. Year to date, gold prices are up 3.82%.

Economic Data

  • Initial jobless claims increased from last week, coming in at 304,000 vs. consensus estimates of 287,000. The Labor Department noted that some states had to have their claims estimated due to severe weather. The four week moving average for claims now stands at 289,750.
  • Headline retail sales declined 0.8% in January, more than the 0.4% decline that was expected. The drop was largely due to a 9.3% drop in gasoline station sales due to lower prices. This indicates that consumers are not yet spending the savings they’ve been enjoying at the gas pump, but this is not terribly surprising as oil price declines have historically affected the economy with a lag.

Fact of the Week

  • According to the Treasury Department, the average interest rate paid by the US government on the country’s interest-bearing debt has fallen by more than half over the last 8 years, dropping from 5.03% at the end of 2006 to 2.37% at the end of 2014.

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

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

Visit Old Second Wealth Management

Wealth Management Economic Update February 11, 2015

U.S. and World News

  • The second full week of the Syriza Party’s power in Greece was another tumultuous one that first started with Germany ruling out any debt write downs for Greece and an ECB policymaker threatening to cut off funding to Greek banks if Athens doesn’t agree to renew its bailout package. Fears were calmed a bit when Greece proposed ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus and targeting wealthy tax-evaders. However, later in the week the ECB put more pressure on Greece by revoking a waiver that allowed banks to use Greek government debt as collateral for loans. All of this is to say, stay tuned to the Greek situation.
  • australia_000047410124_300The Reserve Bank of Australia has joined the easing party, becoming the latest global central bank to cut interest rates in response to slowing inflation and concerns about economic growth. The RBA’s cut was its first change since August 2014 and lowered its benchmark rate by 0.25% to a new low of 2.25%

Markets

  • Equity markets rallied this week, with the S&P 500 gaining 3.09% and closing at 2,055. Likewise, the Dow Jones gained 3.86% and closed at 17,824. Year to date, the S&P and Dow Jones are virtually unchanged.
  • Yields in the Treasury markets spiked up this week, especially after a solid employment report seemed supportive of a Fed rate hike during the summer. The 10 year Treasury bond now yields 1.97% and the 5 year Treasury bond yields 1.49%.
  • The spot price of WTI Crude Oil continued to bounce from very low levels, rising 8.37% and closing at $52.28 per barrel. In 2015, WTI Oil prices have fallen 2.64%.
  • The spot price of Gold fell by 3.88% this week and closed at $1,234.04 per ounce. Year to date, gold prices are up 4.19%.

Economic Data

  • Initial jobless claims increased a bit from last week but remained quite low, coming in at 278,000 vs. consensus estimates of 290,000. The Labor Department noted no special factors affecting the report. The four week moving average for claims now stands at 292,750.
  • The January nonfarm payroll employment report showed a gain of 257,000 jobs vs. expectations of 228,000. Job gains for November and December were revised up by a combined 147,000, bringing the three month average gain to 336,000 jobs.
    • The headline unemployment rate ticked up from 5.6% to 5.7%. However, the labor force participation rate increased 0.2% to 62.9% which is what pushed the unemployment rate up.
    • Another positive sign was average hourly earnings rising 0.5% vs. expectations of 0.3%. The 1 year growth in average hourly earnings now stands at 2.2%.

Fact of the Week

  • According to World Bank, if the state of California were a country, its $2.2 trillion economy would rank as the 8th largest in the world, ahead of Russia, Italy, India, Canada, Australia and Spain.

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