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

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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 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

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 June 30, 2015

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

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

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

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

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

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

Visit Old Second Wealth Management

Wealth Management Economic Update June 29, 2015

U.S. and World News

  • Another week passed and there is still no resolution to the Greek debt crisis just days before a €1.6 billion payment is due from Athens to the International Monetary Fund (IMF). Expectations of a deal rose mid-week as Prime Minister Alexis Tsipras submitted a set of reforms that were closer to those demanded by creditors, however these talks soon fell apart. Eurozone finance ministers will meet again on Saturday in a last ditch effort before Tuesday’s deadline. German Chancellor Angela Merkel said the upcoming meeting would be “of decisive importance,” but did not provide any additional detail as to what would happen if a deal is not reached.
  • congress_000009112701_320After a six week battle that temporarily failed twice, the Senate voted to grant President Obama ‘fast-track’ authority to negotiate trade deals and expedite them through Congress. With this hurdle cleared, the next step to passing the Trans-Pacific Partnership (TPP) trade deal is for the U.S. and Japan to discuss outstanding bilateral issues at an upcoming meeting in July. If the TPP deal is struck, it would be the largest trade deal since NAFTA and would cover 40% of the world economy.
  • As its economy falters from the Middle East Respiratory Syndrome (MERS) virus, South Korea is reported to be planning a stimulus package of more than 15 trillion won ($13.5 billion). The package would aim at cushioning the economic impact of the deadly virus that has killed over 30 people and has resulted in widespread quarantines across the country.

Markets

  • Equity markets finished negatively this week. The S&P 500 lost 0.39%, closing at 2,101. Similarly, the Dow Jones fell by 0.38% and closed at 17,947. Year to date, the S&P is up 3.08% and the Dow is up 1.87%.
  • Yields in the Treasury markets were volatile yet again this week and ended higher than the week prior. The 10 year Treasury bond now yields 2.48% and the 5 year Treasury bond yields 1.76%.
  • The spot price of WTI Crude Oil dipped by 0.62% from last week, closing at $59.60 per barrel. In 2015, WTI Oil prices are now up 4.80%.
  • The spot price of Gold decreased this week by 2.12% and closed at $1,174.77 per ounce. Year to date, gold prices are down 0.81%.

Economic Data

  • Initial jobless claims increased a bit from last week and remain quite low, coming in at 271,000, below consensus expectations of 273,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 273,750.
  • The University of Michigan consumer sentiment index rose to a reading of 96.1, surpassing expectations of 94.6. Both consumers’ sentiment of present situation and expectations for the future improved.
  • The headline PCE price index (measure of inflation) rose 0.3% in May, in line with expectations. This was due in large part to a 10.2% increase in gas prices. The core PCE index (excludes food and energy) rose 0.1% in May, also in line with expectations. Over the last 12 months, headline PCE prices are up 0.2% (mainly due to lower energy costs) and core PCE prices are up 1.2%, both consistent with subdued inflation.

Fact of the Week

  • Last week, Republican presidential candidate Rand Paul proposed a 14.5% flat income tax. According to the IRS, the $9.1 trillion of adjusted gross income in the US in 2012 would generate $1.32 trillion of tax revenues if it were taxed at this 14.5% rate. This represents an additional $131 billion of revenue over the $1.19 trillion of taxes actually collected in that year.

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

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

Visit Old Second Wealth Management

Wealth Management Economic Update June 22, 2015

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

Visit Old Second Wealth Management

Wealth Management Economic Update June 15, 2015

U.S. and World News

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

Markets

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

Economic Data

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

Fact of the Week

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

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

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

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