Wealth Management Weekly Update August 23, 2013

safemoneybwU.S. and World News

  • The Nasdaq stock exchange, which controls the trading of most of the biggest technology companies like Apple and Google, suffered a three hour outage on Thursday which saw all trading in stocks listed on that exchange grind to a halt. Nasdaq cited “connectivity issues” as the reason for the “Flash Freeze”, but no other details have been made available. Trading resumed later in the day without incident but SEC boss Mary Jo White says the exchanges need extra scrutiny and will push to implement rules that would require them to add testing requirements and safeguards for their trading software.
  • Federal Open Market Committee minutes from this week confirmed the Federal Reserve’s intention to start winding down its QE program, but provided little clarity about the timetable and scale of the tapering of asset purchases. Some committee members appear to favor beginning this process next month, while others state that they’d like to see more economic data confirming the U.S. recovery before pulling back.
  • Labor unions, pension funds and individuals have submitted their objections to Detroit’s request for bankruptcy protection. Notably missing from the groups submitting an objection were Detroit bondholders and bond insurers who have billions of dollars at stake. The arguments against the city’s Chapter 9 filing are that it breaches state and national constitutions, that the city didn’t negotiate in good faith and that it hasn’t proven that it’s insolvent.

Markets

  • Stock markets were mixed this week on light trading volume, Fed tapering concerns and unrest in the Middle East. The S&P 500 Index rose by 0.46%, closing at 1,663. The Dow Jones Industrial Average was down 0.47% to close at 15,010. The S&P and the Dow respectively are up 16.64% and 14.55% year to date.
  • Treasury yields were volatile this week with the 10 year treasury ending the week where it did last week at 2.82% but not before climbing to a high of 2.92% in the middle of the week. Meanwhile, the 5 year treasury continued to rise and ended the week at 1.63%.
  • The spot price of WTI Crude Oil dipped this week by 0.91%, and closing at $106.31 per barrel. Year to date, oil is up 13.58%.
  • The spot price of Gold continued its recent climb higher this week, increasing by 1.49% and closing at $1,397.14/ounce. Gold is now down 16.61% this year.

Economic Data

  • Weekly Initial Jobless Claims rose a bit this week, increasing by 16,000 and coming in at 336,000 vs. expectations of 330,000. Despite the uptick in claims this week, the 4-week moving average of jobless claims moved down to 331,000, a new post-recession low.
  • New home sales numbers strongly disappointed as they dropped 13.4% in July vs. expectations of a decline of only 2.0%. This was the largest single month drop since the end of the first-time homebuyer tax credit in 2010. Based on contract signings instead of closings, new home sales are a more timely indicator of activity than the stronger than expected existing home sales figure from July also released this week. This steep drop is concerning in light of the rise in mortgage rates in recent months and the drop in new purchase mortgage applications.
  • The value of U.S. petroleum and coal exports has more than doubled to $110 billion year over year as of June 2013 from $51.5 billion three years ago. This makes the category the fastest growing in U.S. for sales abroad. Oil and gas exports showed the second fastest expansion with an increase of 68.3%, further demonstrating how the country’s energy boom is boosting the economy.

Fact of the Week

  • According to a study by the Department of Agriculture, a child born in 2012 will cost a higher-income family (defined as pre-tax household income of at least $105,000) $399,780 in unadjusted 2012 dollars and $501,250 in inflation adjusted dollars over the first 17 years of the child’s life (ie. not including any college costs).

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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