Brexit, California Wildfires: Wealth Economic Update Nov. 17, 2018

U.S. and World News

  • The British pound had a volatile week as uncertainty around the outcome of a Brexit deal rose higher. Theresa May has lost transport minister Jo Johnson and Brexit Secretary Dominic Raab within the past week and risks further resignations of pro-EU ministers. There was a Cabinet meeting held this week in an attempt to gain support on an agreement with a focus on the controversial Irish border. The deal would force Britain to abide by European rules and would make it very difficult for Britain to negotiate trade deals with other countries. Citing Brexiteer sources, Telegraph Chief Political Correspondent Christopher Hope tweeted “The threshold of 48 letters of no confidence in Theresa May will be passed today. They are expecting a no confidence vote in the PM on Tuesday”.

  • The death toll has climbed to 65 and over 600 people are missing in the deadliest wildfire in California state history. The two major fires are the Camp Fire, just north of Sacramento, which is 45% contained and the Woolsey Fire, just outside of Los Angeles, which is 69% contained. The state of California is also battling very serious air quality issues as a result of the fire, with the smoke continuing to flow southwest. The California utility company PG&E’s faulty power lines are believed to have started the fire.


Markets

  • Stocks retreated this week from last week’s gains. The S&P 500 fell 1.54% and closed at 2,736. The Dow Jones dropped 2.15% and closed at 25,413. Year to date, the S&P is up 4.12% and the Dow Jones is up 4.84%.
  • Yields dropped sharply from last week and the yield curve steepened. The 5 year and 10 year U.S. Treasury Notes are yielding 2.88% and 3.07%, respectively.
  • The spot price of WTI Crude Oil continued falling this week, shedding another 5.63% and closing at $56.80 per barrel. Year to date, Oil prices are down 5.51%.
  • The spot price of Gold rose 0.99% this week and closed at $1,221.59 per ounce. Year to date, Gold prices are down 6.23%.

Economic Data

  • Initial jobless claims rose by 2,000 to 216,000 this week. The four-week moving average of claims rose by 1,000 to 215,000. Claims increased by 2,000 in New York and fell by 3,000 in Michigan, 2,000 in North Carolina, and 2,000 in California.
  • Retail sales rose by 0.8% in October versus expectations for a 0.5% increase. This was led by sales at gas stations.
    • Retail sales ex-autos rose 0.7% versus expectations for a 0.5% increase.
    • Retail sales ex-auto & gas rose by 0.3% versus expectations for a 0.4% increase.
  •  Import prices rose by 0.5% in October versus expectations for a 0.1% increase.
    •  Import prices-ex petroleum rose by 0.2% versus expectations for a flat reading.
  •  The Philadelphia Fed manufacturing index fell by 9.3 points to 12.9 in November versus expectations for a reading of 20.0.
  •  The Empire State manufacturing index increased by 2.2 points to 23.3 in November versus expectations for a reading of 20.0.
  •  The consumer price index (CPI) rose by 0.33% in October, meeting expectations. The increase was driven by higher energy prices. The year-over-year rate came in a 2.53%, also meeting expectations.
    •  Core CPI rose by 0.19% in October, meeting expectations. The year-over-year rate came in at 2.15%, also meeting expectations.
  •  Industrial production rose by 0.1% in October versus expectations for a 0.2% increase.
  •  Manufacturing production rose by 0.3% in October versus expectations for a 0.2% increase.

Fact of the Week

  • As of October 31, the US was producing 11.2 million barrels of crude oil a day, while importing 7.3 million barrels. US oil production has risen substantially from October 2016, when the US produced only 8.5 million barrels and imported 9 million. (Source: BTN Research)

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
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava – (630) 281-4522 mcava@oldsecond.com

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Iran, Midterm Elections: Wealth Economic Update Nov. 9, 2018

U.S. and World News

  • On Monday, sanctions on Iran imposed by the United States that target the oil, banking and transportations sectors have taken affect. The sanctions were imposed as a means to end Iran’s nuclear program. Eight countries were given temporary exemptions, allowing them to continue to import Iranian petroleum. This will buy time for Iran to continue to negotiate their missile and nuclear programs with the United States, however, Iran is taking a tough stance on the sanctions. Iranian President Hassan Rouhani stated that Iran will “sell its oil and break sanctions” and that “This is an economic war against Iran, but we are prepared to resist any pressure”.
  • In a widely expected outcome, the 2018 midterm election resulted in the Democrats gaining control of the House of Representatives while the Republicans retained control of the Senate. In two closely watched, key races, Republican Ron DeSantis defeated Tallahassee Democratic Mayor Andrew Gillum for Governor of Florida and Republican Ted Cruz was able to keep his Texas Senate seat after defeating Beto O’Rourke. Also, 29-year-old Democrat Alexandria Ocasio-Cortez became the youngest women ever elected to Congress after her victory in New York’s 14th district.


Markets

  • Stocks continued their climb higher this week, despite the declines seen today. The S&P 500 rose 2.21% and closed at 2,781. The Dow Jones gained 3.00% and closed at 25,989. Year to date, the S&P is up 5.72% and the Dow Jones is up 7.10%.
  • Yields ended the week mostly unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.04% and 3.18%, respectively.
  • The spot price of WTI Crude Oil slid into a bear market this week, losing another 5.26% and closing at $59.82 per barrel. Year to date, Oil prices are down 0.48%.
  • The spot price of Gold fell 1.91% this week and closed at $1,209.35 per ounce. Year to date, Gold prices are down 7.17%.

Economic Data

  • Initial jobless claims fell by 1,000 to 214,000 this week. The four-week moving average of claims did not change and remained at 214,000. Claims fell by 5,000 in Illinois and by 3,000 in Missouri.
  • The ISM non-manufacturing index declined by 1.3 points to 60.3 versus expectations for a reading of 59.0.
  • The producer price index (PPI) increased by 0.6% month-over-month in October versus expectations for a 0.2% increase. The year-over-year figure rose by 2.9%. 
    • PPI excluding food, energy, and trade services rose by 0.2% month-over-month, in-line with expectations. The year-over-year figure rose by 2.8%.
  • The University of Michigan’s index of consumer sentiment fell by 0.3 points to 98.3 in the November preliminary reading versus expectations for a reading of 98.0.
  • Wholesale inventories rose by 0.4% for September versus expectations for a 0.3% increase.

Fact of the Week

  • Tuesday’s Midterm elections saw Democrats taking control of the house while Republicans bolstered their control of the senate. Historically, returns in the S&P 500 under a Republican President, Republican Senate, and Democratic House are 10.8% annualized. (Source: Strategas)

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
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava – (630) 281-4522 mcava@oldsecond.com

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Tax Reform, Flynn, North Korea: Wealth Economic Update Dec. 1, 2017

U.S. and World News

  • iStock-610688960_360After the House passed its tax reform bill, the Senate has been at work crafting their own version of the bill. Progress was seemingly smooth as several procedural hurdles had been cleared with most of the GOP on the same page with the details and a vote on the bill was anticipated by the end of this week. However, some last minute road blocks have delayed any vote this week. With some Senate members concerned over the deficit, it’s now possible that the level of tax cuts might have to be moderated, future tax increases might be built in and some members may seek to attach spending cuts to the bill in order to win their support. Markets had rallied on increased optimism of passage but pulled back a bit later in the week as these obstacles arose.
  • Temporarily sending markets sharply down on Friday, former national security adviser Michael Flynn pleaded guilty to lying to the FBI about conversations with Russia’s ambassador and disclosed that he is cooperating with the special counsel Robert Mueller’s probe. Flynn is the first person inside President Trump’s administration to be reached by the probe and the latest developments are a sign that the investigation is intensifying. According to an FBI statement, Flynn communicated with Russian officials at the request of Trump transition team officials to influence foreign policy. In a statement, the White House said that “nothing about the guilty plea or the charge implicates anyone other than Mr. Flynn.”
  • North Korea fired another test missile this week, this time a new ICBM that was launched to a high enough altitude that it would put all of the U.S. mainland within range. North Korean officials said that with the launch, which reached a height of 2,780 miles, they achieved the country’s long held goal of becoming a nuclear power. In response, the U.S. is calling on all countries to suspend diplomatic ties with North Korea and has asked China to stop crude oil trade with North Korea or it will “take the oil situation into our own hands.”

Markets

  • Markets were up this week, setting new All-Time Highs along the way. The S&P gained 1.60%, closing at 2,642. The Dow Jones rose 3.00% for the week and closed at 24,232. Year to date, the S&P is up 20.25% and the Dow is up 25.49%.
  • Interest rates were slightly higher for the week albeit in more volatile trading. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.12% and 2.36%, respectively.
  • The spot price of WTI Crude Oil dipped by 1.04% this week, closing at $58.34 per barrel. Year to date, Oil prices have risen 4.51%.
  • The spot price of Gold ended the week off by 0.65%, closing at $1,279.96 per ounce. Year to date, Gold prices are up 11.54%.

 Economic Data

  • Initial jobless claims dropped 2,000 from last week, coming in at 238,000. Filings continued to fall from 10 year highs in Puerto Rico, which continues to deal with the aftermath of Hurricane Maria.  The four week moving average for claims rose to 242,000.
  • The headline PCE index (measure of inflation) rose by 0.1% in October, in line with forecasts. Headline inflation as measured by the PCE index has risen 1.6% over the last 12 months.
    • Core PCE (excludes food and energy, Fed’s preferred inflation measure) rose 0.2% in October, also in line with expectations. Over the last 12 months, Core PCE is up 1.5%, still short of the Federal Reserve’s long range target of 2%.
  • The Case-Shiller home price index rose by 0.5% in September, beating consensus expectations of 0.4%. Prices rose in all 20 cities measured, with Atlanta (+1.3%), San Francisco (+1.1%), Las Vegas (+1.0%) and Tampa (+1.0%) showing the largest monthly increases. Home prices as measured by the index have risen 6.2% over the last 12 months.

Fact of the Week

  • Adobe Analytics reports that U.S. retailers saw record online sales to start the holiday shopping season. The totals for Thanksgiving and Black Friday are reportedly $7.9 billion in sales, a 17.9% increase from a year ago. Cyber Monday sales also impressed, coming in at $6.6 billion and becoming the largest U.S. online sales day ever.

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

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Fed Chair, Germany, Zimbabwe: Wealth Economic Update Nov. 24, 2017

U.S. and World News

  • germany-619762776_360In one of her last appearances as Fed Chairman, Janet Yellen discussed the direction of policy and Wall Street oversight at NYU Stern School of Business.  The scheduled discussion comes after Yellen stated her resignation from the Fed’s Board of Governors once Jerome Powell is sworn into the office.  Her departure will leave yet another vacancy at the central bank.
  • Germany  has been pushed into political uncertainty due to Angela Merkel’s failure to form a three-way coalition government.  The news dropped the euro as much as 0.7% to $1.1720 overnight. Immigration, climate change, Europe, and taxation were stated to be the irreconcilable differences that caused the Free Democrats to pull out unexpectedly, despite more than four weeks of negotiations. After the formation of the coalition collapsed, Angel Merkel stated she would prefer fresh elections to reigning with a minority government.  It is the worst governing crisis in the history of Germany’s post-WWII democracy according to President Frank-Walter Steinmeier. He has compelled all parties in the parliament “to serve our country” and form a government.
  • Vice President Emmerson Mnangagwa will be replacing President Robert Mugabe as leader of Zimbabwe’s ruling ZANU_PF party.  The dismissal follows a de facto military coup and will likely send political shockwaves across Africa.  Mnangagwa will focus on rebuilding ties with the outside world and stabilizing an economy in free fall.

Markets

  • Markets were up for the week with the S&P up 0.93% reaching a record high of 2,602. The Dow Jones rose 0.89% for the week and closed at 23,558. Year to date, the S&P is up 18.36% and the Dow is up 21.83%.
  • Interest rates were flat for the week with the 5 year and 10 year U.S. Treasury Notes yielding 2.06% and 2.34%, respectively.
  • The spot price of WTI Crude Oil increased by 3.93% this week, closing at $58.95 per barrel. Year to date, Oil prices have risen 3.44%.
  • The spot price of Gold ended the week off by 0.30%, closing at $1,288.58 per ounce. Year to date, Gold prices are up 12.29%.

 Economic Data

  • Initial jobless claims dropped 13,000 from last week, coming in at 239,000. Filings also fell for Puerto Rico’s 10-year high, which continues to deal with the aftermath of Hurricane Maria.  The four week moving average for claims rose to 240,000.
  • Existing Home sales rose 2.0% in October, beating consensus expectations of 0.2%. Sales increases were broad-based across property types with single family sales +2.1% and condos and co-ops +1.7%.

Fact of the Week

  • Over $40 Billion of gift cards value has gone unused.  With over $150 Billion in gift card sales projected in 2017, it is estimated that over $1 Billion of value will again go unused.
    • Gift cards are the #1 requested gifts, preferred by over 60% of gift recipients.
    • 93% of consumers will buy or receive a gift card this year.
    • 72% of customers will spend more than the value of their card.
    • 10% of gift cards will be e-gifted digital cards in 2017.

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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Tax Reform: Wealth Economic Update Nov. 17, 2017

U.S. and World News

  • iStock-611086620_360The House of Representatives has passed a tax reform bill that would result in the biggest overhaul of the U.S. tax system in 31 years. Among some of its provisions, it would reduce the number of individual tax brackets, increase the child tax credit, abolish the estate tax by 2025, cut the corporate tax rate to 20% and make other tweaks aiming to make U.S. businesses more competitive. All is not clear though as attention moves to the Senate’s version which has significant differences such as a one year delay for corporate cuts, eliminating the deduction for state and local taxes and not fully repealing the estate tax.

Markets

  • Markets marginally fell this week in choppy trade. The S&P fell 0.06% and closed at 2,579. The Dow Jones dipped 0.19% for the week and closed at 23,358. Year to date, the S&P is up 17.27% and the Dow is up 20.76%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.05% and 2.34%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.26% this week, closing at $56.59 per barrel. Year to date, Oil prices have risen 6.30%.
  • The spot price of Gold ended the week higher by 1.47%, closing at $1,293.86 per ounce. Year to date, Gold prices are up 12.76%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 249,000. The Labor Department did not note any distortions to this week’s data. The four week moving average for claims rose to 238,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.1% in October, in line with consensus expectations. Over the last 12 months, headline CPI has increased 2.1%.
    • Core CPI (excludes food and energy) rose 0.2% in October, also in line with expectations. Over the last year, Core CPI has risen 1.8%.
  • Housing starts rose 13.7% in October. The increase was led by a sharp 36.8% rise in the more volatile multifamily starts category. However, single family starts moved higher as well, rising 5.3% in the month. While hurricane rebound effects may explain some of the strength in the South region (+17.2%), starts also moved higher in the Midwest (+18.4%) and the Northeast (+42.2%), but edged lower in the West (-3.7%).

Fact of the Week

  • According to the Energy Information Administration, American exports of natural gas will exceed its imports of natural gas in 2017, the first year in which that has happened since 1958.

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

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Tax Reform, Fed Chair: Wealth Economic Update Nov. 10, 2017

U.S. and World News

  • Roiling equity markets a bit this week, the Senate Republicans released their tax reform plan which differs from the House of Representative’s version that was revealed last week. Among the key differences are the timing of reduced corporate tax rates (Senate plan included a 1 year delay to the cuts), deductions for state and local taxes (Senate plan eliminates the deduction for those taxes) and the estate tax (Senate plan does not fully repeal it unlike the House). The House is set to vote on its measure next week, but the Senate’s timetable is less clear at this time.
  • The U.S. Senate Banking Committee has scheduled a November 28th confirmation hearing for Jerome Powell, President Trump’s candidate for Janet Yellen’s replacement as Chair of the Federal Reserve. Despite the usual gridlock in Washington, Powell’s nomination is expected to receive bipartisan support. Powell has been through the Senate confirmation process before, most recently in 2012 and 2014 when he was nominated to join the Fed board.

Markets

  • Markets dipped this week following reports on the differences between the House and Senate tax plans. The S&P fell 0.14% and closed at 2,582. The Dow Jones dipped 0.35% for the week and closed at 23,422. Year to date, the S&P is up 17.33% and the Dow is up 20.99%.
  • Interest rates broadly rose this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.06% and 2.40%, respectively.
  • The spot price of WTI Crude Oil increased by 2.14% this week, closing at $56.83 per barrel. Year to date, Oil prices have risen 6.59%.
  • The spot price of Gold ended the week higher by 0.48%, closing at $1,276.00 per ounce. Year to date, Gold prices are up 11.20%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 239,000. The four week moving average for claims fell to 231,000. Overall, the report suggests continued post-hurricane normalization to a trend of low job losses.
  • The University of Michigan consumer sentiment index moved lower by 2.9 points to 97.8 in the preliminary November report. Despite the small drop, the index remains close to the October cycle highs. Both the survey’s measures for expectations of the future and assessment of current conditions declined during the month.

Fact of the Week

  • A child born in 2017 would presumably attend college between the years of 2035 and 2039. If that child attended an average public in-state 4 year college and the annual price increases for in-state schools continued at their prior 30 year pace (+5.5% per year), the total cost of that 4 year education (including tuition, fees, room & board) would be $235,264, or $58,816 per year. (Source: College Board)

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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
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.

Economy, Fed Chair: Wealth Economic Update Nov. 3, 2017

U.S. and World News

  • commerce-639109564_360The Federal Reserve met this week and left interest rates unchanged, as was widely anticipated. The assessment for growth was upgraded to “solid” for the first time since January 2015, despite some lingering effects from the recent hurricanes. No other major changes were made to their assessment of the economy, paving the way for a December rate hike for which the market is currently pricing in a 92% probability.
  • President Trump has nominated Jerome Powell to become the Fed Chairman when current Chair Janet Yellen’s term expires in February. He is seen by many as the “safe choice” because he’s not expected to veer to far from current Fed policy. It’s expected that Powell will continue on the path of gradual interest rate increases and balance sheet reduction.

Markets

  • Markets climbed higher this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.29% and closed at 2,588. The Dow Jones rose 0.45% for the week and closed at 23,539. Year to date, the S&P is up 17.50% and the Dow is up 21.41%.
  • Interest rates pulled back this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.99% and 2.33%, respectively.
  • The spot price of WTI Crude Oil increased by 3.32% this week, closing at $55.69 per barrel. Year to date, Oil prices have risen 4.41%.
  • The spot price of Gold ended the week lower by 0.27%, closing at $1,269.98 per ounce. Year to date, Gold prices are up 10.67%.

 Economic Data

  • Initial jobless claims decreased by 5,000 from last week, coming in at 229,000. The four week moving average for claims fell to 233,000. Overall, the report suggests continued post-hurricane normalization to a trend of low job losses.
  • The October employment report showed a gain of 261,000 jobs in the month, rebounding from last month’s hurricane affected number. However, this was below expectations of 313,000 jobs gained. The prior two months’ figures were revised up by 90,000 which brings the three month average for job gains to 163,000.
    • The headline unemployment rate dipped to 4.1% from 4.2% in September which was the result of the labor force participation rate decreasing by 0.1% to 62.7%.
    • Average hourly earnings were flat for the month, disappointing against expectations of 0.2% growth. Wages have grown 2.4% over the last 12 months.
  • The Employment Cost Index increased by 0.7% in the 3rd quarter, in line with expectations. On a year over year basis, both total compensation (+2.5% from +2.4%) and wage growth (+2.5% from +2.3%) accelerated during the quarter.
  • The Case-Shiller home price index rose by 0.5% in August, in line with expectations. Prices rose in 19 of the 20 cities surveyed, with Atlanta (-0.2%) seeing the only decline. Over the last 12 months, home prices have risen by 5.9%.

Fact of the Week

  • The National Retail Federation estimates that over 179 million Americans celebrated Halloween this week and spent over $9.1 billion on costumes, candy and parties.

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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
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.

 

Catalonia Independence, ECB: Wealth Economic Update Oct. 27, 2017

U.S. and World News

  • catalonia-659592784_360The Catalonia crisis intensified as the Catalan Parliament officially declared the region’s independence from Spain in a 70 to 10 vote on Friday, following weeks of demonstrations by its citizens. In response, Spanish Prime Minister Mariano Rajoy dismissed Catalonia’s president Carles Puigdemont and dissolved its Parliament hours after the independence vote. Rajoy called for new elections and fired the Catalan police chief as part of the series of measures aimed at seizing control of the revolting regime in Barcelona. Rajoy remarked, “In this moment, we need to be serene and careful, but we also need to have confidence that the state has the tools, backed by the law and reason, to peacefully and reasonably go back to legality and take away threats to democracy.”
  • The European Central Bank held a widely anticipated meeting this week. While there was no change in interest rates made, there was an announcement that the ECB’s bond buying program would be reduced by half to €30 billion per month starting in January. The ECB’s quantitative-easing program was also extended through September 2018 as anticipated. ECB President Mario Draghi emphasized the commitment to an “open-ended program” that will “not stop suddenly.”

Markets

  • Markets climbed higher this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs on Friday. The S&P rose 0.23% and closed at 2,581. The Dow Jones rose 0.45% for the week and closed at 23,434. Year to date, the S&P is up 17.16% and the Dow is up 20.87%.
  • Interest rates rose marginally this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.03% and 2.41%, respectively.
  • The spot price of WTI Crude Oil increased by 5.29% this week, closing at $54.16 per barrel. Year to date, Oil prices have risen 0.89%.
  • The spot price of Gold ended the week lower by 0.56%, closing at $1,273.35 per ounce. Year to date, Gold prices are up 10.97%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 233,000 after reaching its lowest level since 1973 last week. The four week moving average for claims fell to 240,000.
  • New home sales increased 18.9% in September to a seasonally adjusted annualized rate of 667,000 units which represents a new cycle high. A rebound in home sales in the hurricane-affected South region contributed over 75% of the overall increase.
  • Real GDP increased by 3.0% in the 3rd quarter, above consensus expectations of 2.6%. The year over year rate of Real GDP growth now stands at 2.3%, the highest since 2015. The Bureau of Economic Analysis noted that the hurricanes that occurred during the quarter disrupted production activity and consumer spending but was unable to estimate the impact on growth.

Fact of the Week

  • The United States has suffered 218 weather and climate disasters since 1980 in which the cost of damages exceeded an inflation-adjusted $1 billion, which is an average of 6 separate $1 billion+ disasters per year. (Source: National Centers for Environmental Information)

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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
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.

 

Fed Chair Finalists, Catalonia: Wealth Economic Update Oct. 20, 2017

U.S. and World News

  • fed_chair-104257649As Fed Chair Janet Yellen’s term expiration date nears, the finalists for the next Fed Chair are beginning to narrow. The decision between finalists Janet Yellen, Jerome Powell, Kevin Warsh, Gary Cohn, and John Taylor is expected to be made by President Trump before November 3rd. On Thursday, President Trump met with the five candidates and Fed Governor Jerome Powell is leading the pack as he appears to favor no change from current Fed policy and is favored by Treasury Secretary Steven Mnuchin.
  • The crisis in Catalonia rose to higher levels today as the possibility of the government losing power over the region has become very real after the process to suspend government powers in the region has made further progress and Regional President Carles Puigdemont continues his push for independence. The Regional President is persistently asking to meet with Prime Minister Mariano Rajoy to begin discussing the future of Catalonia while the Prime Minister has vowed to force the region to obey the law.

Markets

  • Markets surged higher this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs once again during the week. The S&P rose 0.88% and closed at 2,575. The Dow Jones rose 2.04% for the week and closed at 23,329. Year to date, the S&P is up 16.75% and the Dow is up 20.10%.
  • Interest rates also dramatically increased this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.02% and 2.38%, respectively.
  • The spot price of WTI Crude Oil increased by 0.44% this week, closing at $51.96 per barrel. Year to date, Oil prices have fallen 3.28%.
  • The spot price of Gold ended the week lower by 1.75%, closing at $1,280.95 per ounce. Year to date, Gold prices are up 11.63%.

 Economic Data

  • Initial jobless claims decreased by 22,000 from last week, coming in at 222,000, reaching its lowest level since 1973 and no state’s claims increased by more than 1,000. The decline in claims in hurricane affected states attributed to the overall decline in the month. The four week moving average for claims fell to 248,000.
  • Housing starts fell by 4.7% in September to 1,127k while August’s numbers were revised up. The decline affected both single-family and multi-family homes and the month’s weakness is likely to be explained by the hurricanes in the South region.
  • Existing home sales increased by 0.7% in September to a seasonally adjusted rate of 5.39 million units versus consensus expectations of a -0.9% decline. Declines in the South region were more than offset by other regions in the country.

Fact of the Week

  • The New York stock market crash of 1987 happened 30 years ago this week, on October 19, the Dow Jones Industrial Average (DJIA of the Dow) plunged by a then-record 508 points-a 22% decline in the index.
    • Currently, a 500-point down day would only amount to a 2.2% drop in the Dow Jones Industrial Average. It has happened 17 times since 1987.
    • Today, it is not uncommon for 1-1.5 billion shares to be traded on a given day.
    • On October 19, 1987, Apple was only 6% of the size of IBM, then the largest company in the nation. Presently, Apple Inc.’s market capitalization is 6X (or 600%) that of IBM’s.

(Source: Oppenheimer)

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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
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.

 

Interest Rates, Catalonia, Hurricanes: Wealth Economic Update Oct. 13, 2017

U.S. and World News

  • Minutes from the September Federal Reserve meeting were released this week and included comments about the near-term effects from Hurricanes Harvey, Irma and Maria but generally expressed unchanged views on underlying growth and inflation conditions. Many participants thought that another rate increase this year was likely warranted “if the medium term outlook remained broadly unchanged,” and consensus views continue to call for three rate hikes in 2018. The Fed will meet twice more in 2017, in November and in December, and the market is currently pricing in a 73% probability of a rate hike in December.
  • Catalonia-579153418_360The Catalonia saga continued on this week, though tensions have somewhat eased. Catalan President Carles Puigdemont, declared independence for the region but then halted the separation process to instead propose talks with the Spanish government. With the act, Puigdemont and his team remain in danger of being arrested for sedition, and Spanish President Mariano Rajoy had previously rejected any talks until secession plans were abandoned. Spanish and other European markets experienced a relief rally as a result of Catalonia choosing the more diplomatic option.

Markets

  • Markets grinded higher with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.17% and closed at 2,553. The Dow Jones rose 0.43% for the week and closed at 22,872. Year to date, the S&P is up 15.86% and the Dow is up 17.92%.
  • Interest rates pulled back this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.90% and 2.27%, respectively.
  • The spot price of WTI Crude Oil increased by 4.20% this week, closing at $51.36 per barrel. Year to date, Oil prices have fallen 4.26%.
  • The spot price of Gold ended the week higher by 2.09%, closing at $1,303.41 per ounce. Year to date, Gold prices are up 13.59%.

 Economic Data

  • Initial jobless claims decreased by 15,000 from last week, coming in at 245,000, only modestly above its pre-hurricane level. Jobless claims continued to normalize in the hurricane-affected states. The four week moving average for claims fell to 258,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.5% in September, slightly missing expectations of 0.6%. Headline CPI was boosted by a 6.1% increase in energy prices during the month. Over the last 12 months, the CPI is up 2.2%.
    • Core CPI (excludes food and energy prices) increased 0.1% in the month, missing forecasts of 0.2%. Over the last year, core inflation has risen 1.7%.
  • Retail sales rose 1.6% for September, just below the forecast of 1.7%. After seeing weakness in August due to the hurricanes, September’s sales bounced back with auto sales rising 3.6% and gas station sales rising 5.6%.

Fact of the Week

  • It was 10 years ago this week (10/9/07) that the S&P 500 peaked at a then all-time high of 1,565. The very next day, the index began a substantial 17 month slide that dragged the S&P down 57%, its worst bear market loss in the last 80 years. With the S&P closing at 2,553 on Friday, even if an investor had bought the 2007 market top on 10/9/07, they would have still experienced a 7.3% annualized total return (includes dividends) over the last 10 years. (Source: BTN Research)

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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
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.