Wealth Management Weekly Update April 5, 2013

U.S. and World News

  • President Obama will reportedly offer cuts in Social Security and Medicare in a budget he is due to propose next week in an effort to show he is prepared to compromise with Republicans on the topic of entitlements. The plan is reported to include a chained CPI method to calculate cost-of-living increases to the programs.
  • New Bank of Japan Governor Haruhiko Kuroda announced more significant measures that the bank will take in an effort to spur inflation in the country that has been in deflation for more than 20 years. This open-ended plan includes buying Japanese government bonds of all maturities, not just short-term debt as they had done in the past.

 

Markets

  • Markets again generally fell this week but there was a bit of divergence with the S&P 500 Index falling by 1.0%, closing at 1,553. The Dow Jones Industrial Average ended the week only down 0.1% and closed at 14,565. Both indices still have solid gains with the S&P and the Dow up 8.9% and 11.1% respectively year to date.
  • Treasury yields continued their plunge this week as the 5 year and 10 year treasury finished the week at 0.69% and 1.71% respectively. Treasury rates seem to be reacting to the uncertainty in global economy much more so than the stock markets.
  • The spot price of WTI Crude Oil dropped this week by 4.3%, closing at $93.01 per barrel. So far in 2013 oil prices have been volatile but are down only 0.1% on the year.
  • The spot price of Gold was lower for the week, falling 1.1% and closing at $1579.15/ounce. Year to date in 2013, gold is down 5.7%.

 

Economic Data

  • Weekly Initial Jobless Claims spiked this week by 28,000 and came in higher than expected at 385,000 vs. consensus expectations of 353,000. The 4-week moving average of jobless claims moved up to 354,000. The Labor Department noted that the claims number may have been affected by the Easter holiday and the timing of Spring Break.
  • The monthly non-farm payrolls number also came in worse than expected, showing the addition of only 88,000 jobs vs. consensus expectations of 190,000. The previous two months were revised up by a combined 61,000, softening the blow of the report a bit.
    • The unemployment rate did fall unexpectedly to 7.6% vs. consensus of 7.7% but this drop is not being viewed as a positive. The cause of the drop was a reduction in workforce participation by about 500,000 people, bringing the workforce participation rate down to 63.3%, the lowest level since May 1979. Record numbers of Americans are giving up on finding a job or finding the unemployment benefits provided to them preferable to jobs that may be available.

Fact of the Week

  • Over the past 16 years, the Dow Jones is up 42% on Mondays and a whopping 97% on Tuesdays. The other days returns are 1% on Wednesdays, -0.5% on Thursdays and -20% on Fridays. These numbers may show that maybe traders on Wall Street like to take long weekends and come back on Monday buying.

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

Visit Old Second Wealth Management

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