Wealth Management Weekly Update January 25, 2013

U.S. and World News

  • As expected, the Bank of Japan has announced further easing measures designed to pull the country out of deflation and doubled their inflation to 2%. What wasn’t expected was that the plan to start open ended asset purchases of ¥13T ($145B) would not begin until January 2014.
  • The House of Representatives approved of a bill to suspend the nation’s $16.4 trillion debt ceiling through May 18 to avert a U.S. default on its legal obligations and buy Washington more time to negotiate budget issues. Both Senate Majority Leader Harry Reid and President Obama have indicated their approval of the measure as well. The bill requires both chambers of Congress to pass a budget by April 15th and if they do not, members’ salaries will be withheld.
  • Treasury Secretary Timothy Geithner left office on Friday and will be replaced temporarily by his deputy, Neal Wolin. The Senate still needs to confirm a permanent replacement, which is likely to be Obama’s selection Jack Lew. Geithner entered office in 2009 at the height of the financial crisis, and oversaw TARP and the bailout of companies such as Citigroup and General Motors.

 Markets

  • The S&P 500 Index rose by 1.1% this week and closed at 1,503. The Dow Jones Industrial Average also rose on the week, posting a gain of 1.8% and closed at 13,895. To start out 2013, the S&P and the Dow are up 5.4% and 6.0% respectively.
  • Yields moved higher this week as the 5 year and 10 year treasury finished the week at 0.85% and 1.94% respectively.
  • The spot price of WTI Crude Oil was flat this week, closing at $96.00 per barrel. So far in 2013, oil prices are up 4.0%.
  • The spot price of Gold fell by 1.5% this week and closed at $1658.65/ounce. Year to date in 2013, gold is down 1.0%.

 Economic Data

  • Weekly Initial Jobless Claims sustained their sizable drop from last week and fell by 5,000 and came in lower than expected at 330,000 vs. consensus expectations of 355,000. The 4-week moving average of jobless claims fell to 351,750. The Labor Department noted that part of this large drop in initial claims may be due to an issue with the seasonal adjustment of the data, in addition to the unusually warm weather we’ve experienced.
  • Data out of China continues to strengthen as the country’s Flash PMI reading increased to 51.9 from 51.5 in December. Flash PMI gives a first look at the levels manufacturing activity in an economy. This was the 5th consecutive rise for the index and is at its highest level in two years.
  • Japan remains in a state of deflation as core CPI, a measure of the purchasing power of consumers, came in at -0.2% year over year in December. The drop in prices was the seventh time in eight months that it has happened and demonstrates the challenge that Japan faces in trying to reach its 2% inflation target.

Fact of the Week

  • The Federal Reserve’s prodigious asset purchasing has pushed its balance sheet over the $3 Trillion mark. The extremely accommodative stance of the Fed has led to an expansion of its balance sheet of more than 300% since September 10, 2008, the week before Lehman Brothers collapsed.

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

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

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