Wealth Management Weekly Update February 1, 2013

U.S. and World News

  • On Thursday, the Senate passed the suspension of the debt ceiling until May 19th after the House approved the bill last week. The bill will now go to President Obama for his signature. The bill also states that members of the House and Senate will have their pay withheld if they fail to pass a budget bill by April 15th.
    • Once passed, lawmakers will need to address the automatic sequester spending cuts that are set to take hold on March 1st. It is believed that Republicans will take a hard line stance on getting the country’s spending problems under control, even if it means letting the sequester kick in and allowing over $1.2 trillion of automatic cuts take place

Markets

  • The S&P 500 Index rose by 0.7% this week and closed at 1,513. The Dow Jones Industrial Average also rose on the week, posting a gain of 1.1% and closed at 14,010. This was the first time that the Dow closed above 14,000 since October 2007. Equity markets continues their great start to 2013, the S&P and the Dow are up 6.1% and 6.9% respectively.
  • Yields continued their climb higher this week as the 5 year and 10 year treasury finished the week at 0.90% and 2.04% respectively.
  • The spot price of WTI Crude Oil rose this week by 1.2%, closing at $97.65 per barrel. So far in 2013, oil prices are up 5.8% and oil has risen in price for 8 straight weeks and this has translated to higher prices at the pump.
  • The spot price of Gold rose by 0.5% this week and closed at $1667.10/ounce. Year to date in 2013, gold is down 0.4%.

Economic Data

  • Weekly Initial Jobless Claims ticked back up this week and rose by 38,000 and came in higher than expected at 368,000 vs. consensus expectations of 350,000. The 4-week moving average of jobless claims rose to 352,000. The Labor Department did not note any reasons that the data may have been distorted.
  • The Case-Shiller home price index rose 0.6% in November (month-over-month) which was roughly in line with expectations. Home prices are now up 5.5% on a year-over-year basis.
  • Real GDP growth in the 4th quarter was much weaker than expected and actually showed contraction, coming in at -0.1% vs. consensus expectations of 1.1%. The weak GDP number was accounted for primarily by reduction in federal defense spending which was likely the result of the uncertainty regarding the Fiscal Cliff and the sequester cuts on spending. We think that this report does not reflect the overall trend in the economy and should reverse once matters in Washington D.C. have been settled.
  • The monthly Bureau of Labor Statistics jobs report was released today and showed an increase of 157k nonfarm payrolls in January which was slightly below consensus expectations of 165k. The unemployment rate did rise in the month, up to 7.9% from 7.8%. Despite the tick up in the unemployment rate, the report overall was generally positive as there were some significant upwards revisions to the prior two month’s employment gains.

Fact of the Week

  • One of the stranger market prediction theories is what’s called the Super Bowl Indicator. It suggests that a Super Bowl win by a team from the old American Football League (now the AFC) foreshadows a down stock market for the remainder of the year, but a win by the NFC leads to an up year in the markets. While the two events seemingly have nothing to do with each other, since 1967 this dynamic has played out to be true about 75% of the time. If this indicator is to be believed, investors should be rooting hard for the San Francisco 49ers this Sunday.

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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