Wealth Management Weekly Update August 2, 2013

U.S. and World NewsHousehold-04

  • The Fed slightly downgraded its view of the U.S. economy during this week’s policy meeting, saying it’s expanding at a “modest” pace vs. the “moderate” pace it claimed last month. However, the Fed didn’t provide any hints about any alteration to the future course of Quantitative Easing.
  • President Obama revived a plan to cut the corporate tax rate to 28% from 35% and to overhaul the tax code. The plan would generate funds that would be used to finance infrastructure, education and promoting manufacturing. To limit tax evasion and the use of tax havens, Obama proposed a minimum tax on foreign earnings. Republicans are reportedly unimpressed with the plan, so it remains to be seen if it will make much headway in the House.

Markets

  • Stock markets set new all-time highs this week as the S&P 500 Index rose by 1.07%, closing at 1,709. The Dow Jones Industrial Average was up 0.64% to close at 15,658. The S&P and the Dow respectively are up 19.88% and 19.49% year to date.
  • Treasury yields rose a bit this week with the 5 year and 10 year treasury finishing at 1.37% and 2.60% respectively. Rates were volatile this week, rising substantially on Fed tapering fears before subsiding after a less than stellar employment report.
  • The spot price of WTI Crude Oil resumed its climb higher, rising by 1.95%, and closing at $106.74 per barrel. Year to date, oil is up 13.89%.
  • The spot price of Gold declined this week, falling by 1.87% and closing at $1,308.23/ounce. Gold is now down 21.91% this year.

 Economic Data

  • Weekly Initial Jobless Claims fell to a new post-recession low, declining by 17,000 and coming in at 326,000 vs. expectations of 345,000. However, the Labor Department continues to note that seasonality factors may have distorted the data. The 4-week moving average of jobless claims moved down to 341,000.
  • The July employment report was on balance disappointing as payrolls, income and hours worked grew less than expected. Payrolls grew by 162,000 vs. consensus expectations of 185,000 in July and the prior two months figures were revised down by a combined 26,000. There continued to be little impact from the sequester on federal jobs despite all of the commotion raised by the White House prior to its implementation.
    • The headline unemployment rate did decline more than expected, to a level of  7.4% from 7.6%. However, the decline in the unemployment rate was due in part to declining labor force participation as 240,000 people left the workforce.
  • ISM manufacturing data came in much stronger than expected in July with the index rising to 55.4 vs. expectations of 52. The details of the report showed even stronger improvement with indications of future growth in production.
  • Real GDP grew a stronger than expected 1.7% in the 2nd quarter vs. expectations of 1.0%. The report was neither particularly good nor bad with the current quarter exceeding expectations but the 1st quarter’s figure being revised down to 1.1% from 1.8%.

Fact of the Week

  • The average cost of winning a Senate race in 2012 was $10.35 million, while the average cost of winning a House race was $1.60 million. Both figures are all-time records on both a nominal and inflation adjusted basis. The largest amount ever spent on a congressional race was the $63.2 million spent by Jon Corzine during his successful senatorial race in New Jersey in 2000.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@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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