Oil price soar: Wealth Economic Update Oct 3, 2016

U.S. and World News

  • oil_440The price of oil soared this week reflecting a new cap on oil production of 32.5 million – 33 million barrels a day agreed upon by OPEC. That is a 750,000 barrel a day drop from August and the first time oil output has been capped since the financial crisis. This came as a surprise after most of the past OPEC meetings have resulted in no deal which also leads to some skepticism of the current deal.
  • In order to defend U.S. personnel overseas from the possibility of being sued by citizens of other countries, Barrack Obama has vetoed a bill that would allow Saudi Arabia to be sued for involvement in the September 11th terrorist attacks. The White House and Saudi Arabia have been lobbying to override the veto, but the effort did not pass congress.
  • After there were an insufficient amount of votes to pass a funding bill that would avoid a federal government shutdown, congress sent President Obama a bill to continue government operations until December 9th and $1.1 billion in long-delayed funding to help fight the Zika virus. Also included in the bill is $500 million to help restore Louisiana after they have endured mass flooding, and to assist the water crisis in Flint, Michigan.

Markets

  • This week the S&P 500 rose 0.20% and closed at 2,168. The Dow Jones rose 0.26% and closed at 18,308. So far in 2016, the S&P is up 7.73% and the Dow is up 7.10%.
  • Interest rates edged down slightly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.15% and 1.60%, respectively.
  • The spot price of WTI Crude Oil was up 7.87% this week to close at $47.98 per barrel. WTI Crude is up 10.78% in 2016.
  • The spot price of Gold declined 1.54% this week, closing at $1,317 per ounce. Year to date, gold prices are up 24.12%.

Economic Data

  • Pending home sales fell 2.4% in August. Pending home sales by region were down in the West (-5.3%), the South (-3.2%), and the Midwest (-0.9%) while they were up in the Northeast (+1.3%).
  • New single-family home sales declined by 7.6% in August which was better than consensus expectations for a decline of 8.6%. New home sales by region were a decline in the South (-48k), Northeast (-12k), and Midwest (-2k), and an increase in the West (+12k).
  • Top-line Q2 GDP growth was revised up by 30 basis points to +1.4%, more than consensus estimates. The revision reflected a smaller drag from inventories and trade, and higher business fixed investment than previously estimated.
  • The headline PCE (Personal Consumption Expenditures) price index rose by 0.14% in August and the core PCE index (excluding food and energy) was up 0.18%. This was a lower increase than expected as food an energy prices continued to fall.

Fact of the Week

  • 24% of 1,000 pre-retirees surveyed in the first quarter of 2016 believe they will need to accumulate at least $1 million in order to “live comfortably” during their retirement years, up from 15% in 2005 (source: Employee Benefit Research Institute Retirement Confidence Survey).

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
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.

 

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Wealth Management Economic Update February 23, 2016

U.S. and World News

  • Helping to at least stabilize the oil markets temporarily, top officials from Russia, Saudi Arabia and several key OPEC members have agreed to freeze crude oil output at January levels. Iran was notably absent from this agreement as the country is planning ramp up oil output to regain market share following years of international sanctions that limited the country’s production.
  • cuba_field_000015487392_320U.S. and Cuban officials have signed an agreement that will reopen airline services between the two nations for the first time in more than 50 years. Meanwhile, President Obama is planning a trip to the island nation next month; marking the first time in more than 80 years a sitting U.S. President will visit Cuba. The trip to Havana would cap off one of Obama’s foreign policy goals of normalizing relations with Cuba and moving toward expanded commercial relations after a 54 year hiatus.
  • Minutes from the Federal Reserve’s January meeting were released this week and were broadly in line with recent comments made by Fed officials. The minutes emphasized continued progress in labor market conditions and positive fundamentals but also noted increased downside risks associated with recent tightening of financial conditions and weaker growth abroad. Fed officials remain data dependent and would like to see more information in order to assess if further rate hikes are warranted.
  • Fears that Britain will leave the European Union had heightened as Prime Minister David Cameron has been engaging in tough negotiations to limit concessions necessary for Britain to stay in the bloc. Diplomats who have been negotiating around the clock during a two-day summit on issues such as welfare curbs and financial regulation have reached a deal late Friday afternoon and it appears now that Britain will remain in the EU.

Markets

  • Markets continued on from last Friday’s rally to finish up on the week. The S&P 500 gained 2.89% and closed at 1,918. Likewise, the Dow Jones rose 2.71% and closed at 16,392. So far in 2016, the S&P is down 5.87% and the Dow is down 5.50%.
  • Interest rates were little changed this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.20% and 1.74%, respectively.
  • The spot price of WTI Crude Oil gained 1.53% this week to close at $29.89 per barrel. WTI Crude has fallen 21.69% in 2016.
  • The spot price of Gold decreased 0.82% this week, closing at $1,227.77 per ounce. Year to date, gold prices are up 15.71%.

Economic Data

  • Initial jobless claims came in at 262,000 which was a decrease from last week’s reading of 269,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 273,250.
  • Housing starts unexpectedly declined by -3.8% in January, below expectations of a 2.0% gain. More severe weather in January compared to December may have been a factor. Both multi-family (-3.7%) and single family (-3.9%) housing starts were weaker than expected.
  • The Consumer Price Index (measure of inflation) was unchanged in January, more than expectations for a -0.1% decline in prices, despite a 2.8% decline in energy prices. Core CPI (excludes food and energy costs) increased by 0.3% in January, the largest gain since March 2006. This was better than expectations of a 0.2% gain. Over the last 12 months, CPI is up 1.4% and Core CPI is up 2.2%.

Fact of the Week

  • According to the Institute of Policy Studies, the 20 wealthiest Americans are worth a combined $732 billion. This is more than combined net worth of the bottom 50% of the U.S. population which stands at 323 million people.

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 February 15, 2016

U.S. and World News

  • mosquito_320President Obama has asked Congress for $1.8 billion in emergency funding to combat the Zika virus, the disease that is transmitted primarily from bites of Aedes mosquitoes, but has also been found to be passed through sexual contact or blood transfusion. The funds would be used for research for vaccines and diagnostics, as well as helping public health systems. Meanwhile, cases of Zika have been identified in 20 U.S. states and in addition to potential birth defects, the virus has caused two miscarriages in the U.S. according to the Center for Disease Control.
  • Federal Reserve Chair Janet Yellen conducted her regular testimony to Congress this week but did not clarify the Central Bank’s path for raising rates. While she did not take a March rate hike off the table, she did state that, “Financial conditions in the United States have recently become less supportive of growth.” Confusing markets further, Yellen stressed that the Fed was not on a preset path to interest rate normalization but also wouldn’t rule out negative rates at some point.
  • Sweden’s central bank has lowered key interest rates further into negative territory. The Swedish Central Bank said it’s prepared to use its full toolbox of measures as it battles to revive inflation and keep its currency from appreciating. Following Japan’s surprising move into negative rate territory last month, 25% of the world’s GDP now comes from countries with negative interest rates.

Markets

  • Markets continued their volatility and despite a rally on Friday ended the week in negative territory. The S&P 500 fell 0.73% and closed at 1,865. Likewise, the Dow Jones dropped 1.23% and closed at 15,974. So far in 2016, the S&P is down 8.53% and the Dow is down 8.00%.
  • Interest rates continued to slide lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.20% and 1.74%, respectively.
  • The spot price of WTI Crude Oil fell 5.57% this week to close at $29.17 per barrel. WTI Crude has fallen 25.58% in 2016.
  • The spot price of Gold advanced 5.55% this week, closing at $1,238.58 per ounce. Year to date, gold prices are up 16.73%.

Economic Data

  • Initial jobless claims came in at 269,000 which was a decrease from last week’s reading of 285,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 281,250.
  • Retail sales increased by 0.2% in January, beating expectations of 0.1%. Core retail sales (excludes autos and gas) were also strong, increasing 0.6% and beating forecasts of 0.3%.
  • The University of Michigan consumer sentiment index declined in the preliminary February estimate to a level of 90.7 from 92.0 in January. Both consumers’ assessment of current economic conditions and their expectations for the future declined during the month.

Fact of the Week

  • The face value for the most expensive ticket for Super Bowl 1 in Los Angeles in 1967 was $12. The face value for the most expensive ticket to Super Bowl 50 last Sunday was $1,800. This increase from 1967 to 2016 represents a 10.8% compounded annual increase, besting the return seen in the S&P 500 during that time frame of 10.1% total return per year. (Source: Super Bowl, 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
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 February 8, 2016

U.S. and World News

  • The first known case of Zika virus transmission in the U.S. was reported this week by the Centers for Disease Control and Prevention. This follows the World Health Organization’s declaration that the outbreak of the virus in South and Central America, which has caused serious birth defects, is an international health emergency. This was the fourth time the WHO has proclaimed a global health threat since 2007. Previously thought to only be transmitted by certain mosquitoes, the discovery that the U.S. case of the virus was sexually transmitted is an alarming development. Several large pharmaceutical companies have announced projects to develop a vaccine against the Zika virus.
  • The United Nations has suspended Syria peace talks in Geneva until later this month, after Syrian government forces (backed by Russian air strikes) escalated an offensive by cutting off rebel supply lines. The Syrian civil war has killed 250,000 people over five years and forced millions of other to flee their homes, creating a growing migrant crisis in Europe.
  • new_zealand_aukland_320The monumental Trans-Pacific Partnership was signed in New Zealand this week by ministers from its 12 member nations. However, the massive trade pact will still require years of negotiations before it becomes a reality as the deal will undergo a two year ratification period in which the final text must be agreed upon before implementation. The deal faces challenges in the U.S. as more members of Congress have pulled support for the deal as a way to strengthen their re-election bids. A vote on the deal in Congress isn’t expected to take place until after the elections in November.

Markets

  • Markets continued their volatility this week, reacting particularly poorly to the monthly jobs report. The S&P 500 fell 3.04% and closed at 1,880. Likewise, the Dow Jones dropped 1.54% and closed at 16,205. So far in 2016, the S&P is down 7.85% and the Dow is down 6.84%.
  • Interest rates continued to slide lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.25% and 1.85%, respectively.
  • The spot price of WTI Crude Oil fell 7.70% this week to close at $31.03 per barrel. WTI Crude has fallen 16.23% in 2016.
  • The spot price of Gold advanced 4.97% this week, closing at $1,173.83 per ounce. Year to date, gold prices are up 10.62%.

Economic Data

  • Initial jobless claims came in at 285,000 which was an increase from last week’s reading of 278,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 284,750.
  • The January non-farm payrolls report showed a gain of 151,000 in the month, lower than consensus estimates of 190,000. December and November’s figures were revised down a combined 2,000 jobs, bringing the 3 month average job gains to 231,000.
    • The headline unemployment rate fell to 4.9%, better than expectations that it would remain at 5.0%. However, the labor force participation rate ticked up to 62.7% from last month’s 62.6%.
    • Average hourly earnings showed an increase of 0.5% in January, beating estimates of 0.3% growth. This may reflect the effects of several states raising the minimum wage on January 1st. Wage growth over the last 12 months now stands at 2.5%.
  • The PCE price index (measure of inflation) fell -0.1% in December, lower than the forecast that prices would remain flat. The Core PCE (excludes food & energy, Fed’s preferred measure of inflation) only rose 0.04% compared to forecasts for 0.1% growth, continuing the trend of subdued inflation. Over the last 12 months, core PCE inflation has risen 1.4%.

Fact of the Week

  • The average price of gasoline nationwide as of 2/5/16 was $1.76 per gallon. The average price of gas in 1966 (50 years ago) was $0.32 per gallon. After adjusting for inflation over the last 50 years, the $0.32 price in 1966 is equivalent to $2.38 in 2016 dollars, meaning today’s real (inflation adjusted) price of gas is 26% cheaper than 50 years ago. (Sources: AAA, 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.