Wealth Management Weekly Update May 17, 2013

Capital HillU.S. and World News

  • Bloomberg News was hit with controversy as it emerged that the news agency was using data from the company’s licensed computer research terminals in order to generate or get leads for news stories. Reports came in that news reporters monitored the computer terminal activity of such key policy makers as Federal Reserve Chairman Ben Bernanke and former U.S. Treasury Secretary Timothy Geithner. The organization apologized for the unscrupulous practices and has vowed to discontinue them.
  • Fed officials appear to be becoming increasingly divided over the efficacy and appropriate duration of the Federal Reserve’s monthly asset purchases. Speeches this week by the heads of the Philadelphia, Dallas and Richmond Federal Reserve Banks all suggested that bond buying should be tapered immediately. Complicating matters is economic data which at times seems to convey conflicting messages about the health of the economic recovery.
  • Acting IRS Chief Steven Miller resigned Wednesday in the wake of the agency’s admission it unfairly screened and scrutinized Tea Party groups seeking tax exempt status dating back to 2010. President Obama called the practices inexcusable and that the IRS was the last place where he would tolerate that kind of behavior.

Markets

  • Stock markets extended their rallies with the S&P 500 Index gaining 1.8%, closing at 1,667. The Dow Jones Industrial Average also rose and was up 1.6% to close at 15,354. Adding this week’s gains, the S&P and the Dow are up 16.9% and 17.2% year to date respectively.
  • Treasury yields continued to drift higher again this week, as the 5 year and 10 year treasury finished the week at 0.83% and 1.95% respectively.
  • The spot price of WTI Crude Oil edged higher this week, rising by 0.1%, closing at $95.99 per barrel. On the year, oil prices are up 2.6%.
  • The spot price of Gold plunged by 6.1% this week, closing at $1357.79/ounce. Continuing its slide, gold is down 18.9% for the year. Indications of the Fed reducing its asset purchases and lower than expected consumer prices likely contributed to the large drop.

Economic Data

  • Weekly Initial Jobless Claims unexpectedly spiked this week after recent weeks had shown significant improvement in this leading economic indicator. Claims rose by 37,000 this week and came in higher than expected at 360,000 vs. consensus expectations of 330,000. The 4-week moving average of jobless claims moved up to 339,000. The Labor Department noted that there was nothing unusual in the claims data so this is being viewed as a somewhat troubling report if claims continue to rise.
  • Housing starts declined more than expected in April, falling by 16.5% vs. consensus expectations of a drop of 6.4%. Most of this drop came from the volatile multi-family category so this report isn’t quite as negative as the headline numbers indicate. Over the last 12 months, housing starts are up 13.1%, with single family housing starts up 20.8%.

Fact of the Week

  • The actual total cost of four years of college education (tuition, fees, room and board) at an average public in-state university 30 years ago was $10,945, or when adjusted for inflation $29,324 in today’s dollars. That same education currently costs an average of $69,291, thus the cost of obtaining a four year degree has increased 136% over that last 30 years after adjusting for inflation.

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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