Wealth Management Weekly Update March 1, 2013

U.S. and World News

  • The Italian election last week provided about the worst outcome possible after an inconclusive election gave none of the parties a parliamentary majority. Surprising gains by former Prime Minister Silvio Berlusconi, who has been convicted of multiple crimes and whose policies are a main cause of Italy’s current economic woes, as well as Beppe Grillo, a professional stand-up comedian, are what caused the stalemate. The headline of the Roman newspaper, Il Messaggero, following the election read, “The Winner is: Ingovernability,” reflecting the deadlock the country will have to confront in the next few weeks as sworn enemies are forced to work together to form a government.
  • President Obama is due to meet with Congressional leaders today to discuss the $85B of automatic sequester cuts that are due to take effect at midnight tonight. The strong assumption of many is that sides won’t find a way to delay the reductions. The impact of the cuts won’t likely be known for some time and there is hope that even if a resolution isn’t met before the deadline, one can be reached in a few weeks and much of the damage caused can be erased.
  • The Senate confirmed Jacob Lew as Treasury Secretary by a vote of 71-26. Lew faces a challenging start to his tenure: $85B of automatic spending cuts are due to take effect tomorrow, then on March 27th a funding measure for U.S. agencies expires and then two months after that, the temporary suspension of the government’s borrowing limit is set to end.

 

Markets

  • Markets posted modest gains this week with the S&P 500 Index up by .17% closing at 1,518. The Dow Jones Industrial Average ended the week over the 14,000 level, posting a gain of 0.64% and closed at 14,089. Equity markets added to their impressive 2013 returns; the S&P and the Dow are up 6.45% and 7.52% respectively.
  • Treasury yields fell this week as the 5 year and 10 year treasury finished the week at 0.74% and 1.84% respectively.
  • The spot price of WTI Crude Oil fell this week by 2.4%, closing at $90.90 per barrel. So far in 2013, oil prices fell 2.0%. Oil had its first monthly decline since October.
  • The spot price of Gold was relatively flat for the week falling 0.3% this week and closed at $1576.23/ounce. Year to date in 2013, gold is down 5.9%.

 

Economic Data

  • Weekly Initial Jobless Claims fell by 18,000 and came in lower than expected at 344,000 vs. consensus expectations of 360,000. The 4-week moving average of jobless claims decreased to 355,000. Claims numbers remain volatile, but the Labor Department reports that seasonal adjustment issues should mostly be a non-factor at this point.
  • The Eurozone unemployment rate hit a new record and increased to 11.9% in January vs. expectations of 11.8%. Youth unemployment in the region stands at 24.2%, and is significantly worse in Spain where the rate is more than double that at 55.5%.
  • The Case-Shiller home price index rose more than expected in December at 0.88% vs. expectations of 0.65%. For the year 2012, the index rose 6.84% which was its first calendar year gain since 2007. This data continues to point in the direction of a steady recovery in the housing market.

Fact of the Week

  • The S&P 500 has returned about 9% a year over the long run, but few years see returns even close to that. Since 1871, the index has risen or fallen more than 20% in one out of every three years. Less than one out of every five years sees a gain of between 1% and 9%.

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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