Wealth Management Weekly Update April 26, 2013

Italy

U.S. and World News

  • In Italy, Giorgio Napolitano has been reluctantly reelected as president and is now tasked with trying to end the nation’s political gridlock. The 87 year old will be sworn in for a second seven year term and has tabbed center-left Democratic Party member Enrico Letta as the new Italian Prime Minister. Letta has started talks about forming a grand coalition with Silvio Berlusconi’s center-right group as well as made mention of altering the government’s Eurozone-inspired austerity program.
  • The Senate and House pushed through a bill this week that allows the Department of Transportation to bypass the impact of sequestration by using unspent funds to cover the costs of air traffic controllers and end the furloughs that have caused widespread flight delays. The bill now goes to President Obama who is expected to sign off on it.
  • A bogus tweet from the Associated Press on Tuesday reported two explosions at the White House and said that the President had been injured. Minutes later, the AP said its account had been hacked and the tweet was a fake. In the meantime, trading algorithms that scan news sources for tradable events sold heavily on the erroneous reports and sent the Dow down 145 points in less than one minute. Within minutes, stocks recovered and held their gains that day. The Syrian Electronic Army, which has recently targeted other media groups, took responsibility for the hack.
  • The Bank of Japan held off from adding to the country’s easing program despite the fact that the country remains firmly stuck in deflation as March’s Consumer Price Index fell by 0.5%. In its semi-annual economic outlook, the BOJ forecast that inflation won’t hit the target of 2% in the next two years, but could reach that level by March 2016.

 

Markets

  • Stock markets bounced back from their worst week of 2013 with the S&P 500 Index gaining 1.7%, closing at 1,582. The Dow Jones Industrial Average also rose and was up 1.1% to close at 14,713. Following the rebound this week, the S&P and the Dow up 10.9% and 12.3% respectively year to date.
  • Despite the gains in the equity markets, treasury yields fell a bit this week, as the 5 year and 10 year treasury finished the week at 0.69% and 1.67% respectively.
  • The spot price of WTI Crude Oil rebounded this week, rising by 5.1%, closing at $92.74 per barrel. On the year, oil prices are down 0.8%.
  • Gold and precious metals also bounced back this week with the spot price of Gold rising 4.0% and closing at $1460.05/ounce. Despite this week’s gains, gold is down 12.9% for the year.

 

Economic Data

  • Weekly Initial Jobless Claims fell by 13,000 this week and came in lower than expected at 339,000 vs. consensus expectations of 350,000. The 4-week moving average of jobless claims moved down to 357,500. The Labor Department noted that we are still in a seasonally volatile period of the year but did not point to any major factors that would distort claims numbers.
  • Real GDP grew at a slower than expected 2.5% annual rate in the 1st quarter vs. consensus expectations of 3.0%. Government spending was a large subtraction for the second consecutive quarter, shaving 0.8% off of Q1 growth. The unexpectedly large drag from defense spending was likely due to the first effects of the sequestration cuts.
  • 1st quarter earnings season continues on, with 271 companies in the S&P 500 having reported. Some of the takeaways so far:

o   1st quarter earnings have beat consensus expectations by an average of 3%. However, estimates for the rest of the year fell by 1% as roughly 75% of managements guided below 2nd quarter consensus expectations.

o   More than 40% of firms in the Industrials and Materials sectors missed revenue expectations as global demand weakened, led by Europe.

 

Fact of the Week

  • The International Labour Organization estimates a record 200 million people will be unemployed around the world in 2013. If you gave them their own country, it would be the fifth largest nation in the world.

 

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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