Wealth Management Weekly Update April 12, 2013

U.S. and World News

  • President Obama unveiled his fiscal 2014 budget plan that looks to cut the deficit to 2.8% of GDP by 2016 from a current level of 5.3%. The proposal included shutting down tax loopholes for the well-off but also included spending cuts and an offer to use chained CPI to limit the cost of living increases on welfare programs. The package has little chance of becoming law as is, but the White House is hopeful that it can kick start negotiations.
  • Eurozone finance ministers are meeting this weekend to discuss, among other issues, the €6B that Cyprus will need over and above the original €17B required for its bailout. Cyprus is requesting extra aid, but will be met with resistance as the bloc has made it clear it does not wish to provide any more than the €10B it has already pledged.
  • The Illinois Senate has begun a two month effort to introduce pension reform in an effort to address almost $100B in unfunded liabilities. One proposal is to place restrictions on cost of living increases on pension payments and another involves asking workers to forgo state-funded healthcare in retirement. The state’s unions are opposed of course and the state’s constitution makes it difficult to enact reform.

Markets

  • Stock markets rose this week, setting more all-time highs with the S&P 500 Index rising by 2.3%, closing at 1,589. The Dow Jones Industrial Average also rallied and was up 2.1% and closed at 14,865. Both indices added to their solid gains with the S&P and the Dow up 11.4% and 13.4% respectively year to date.
  • Despite the rally in equities, treasury yields ended the week relatively flat compared to last week, as the 5 year and 10 year treasury finished the week at 0.69% and 1.72% 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 again this week, falling by 1.9%, closing at $90.94 per barrel. On the year, oil prices are down only 2.4%.
  • The spot price of Gold was plunged lower this week, falling 5.8% and closing at $1488.60/ounce. Gold continued its slide in 2013 and is down 11.1% for the year.

 

Economic Data

  • Weekly Initial Jobless Claims came back down this week and fell by 39,000 and came in lower than expected at 346,000 vs. consensus expectations of 360,000. The 4-week moving average of jobless claims moved up to 358,000. The Labor Department noted that claims numbers this time of year may be affected by the Easter holiday and the timing of Spring Break.
  • Consumer sentiment was weaker than expected in April, falling to 72.3 vs. consensus expectations of 78.6, the lowest level in nine months. Surveys show that consumers remain pessimistic about government policies and are becoming increasingly pessimistic about the labor market after last week’s poor employment report.

Fact of the Week

  • The number of people receiving disability benefits has jumped from 7.1 million in December 2007 to an estimated 8.9 million in March, which is equal to 5.4% of the workforce. This compares with just 1.7% of the workforce in 1970 and has Congress looking at reforms to the programs because as currently administered, people on disability have little incentive to leave the program and find work.

 

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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