Wealth Management Weekly Update October 7, 2013

iStock_000016726121XSmallU.S. and World News

  • The U.S. government is partially shut down for the first time in 17 years after the House and Senate failed to come to an agreement on a budget to fund the federal government. Equity markets did not react as negatively as many had expected and actually rose on the first day of the shutdown. The expectation was that the shutdown will have a relatively short life, but with no evidence of compromise at the moment, that timetable is in doubt. Both sides appear to be digging in with some Republicans demanding that Obamacare be repealed and President Obama’s statement that there will be no negotiations about Republican demands during the shutdown.
  • There’s also the matter of the October 17th debt ceiling deadline which is fast approaching with the Treasury taking its final extraordinary measures this week to enable the U.S. to avoid breaching its borrowing limit until that date. House Speaker John Boehner has reportedly told Republicans that he won’t allow the U.S. to default, and if necessary, will use GOP and Democratic votes to increase the debt ceiling. He is also looking to negotiate a combined deal for passing a budget (and ending the shutdown) and raising the debt ceiling. One compromise proposal that is making the rounds is for Congress to pass a budget in return for a repeal of the medical-device tax but no delay for the implementation of Obamacare. Stay tuned.
  • The first government run insurance exchanges opened up for business on Tuesday and unsurprisingly ran into several problems. Technical glitches, site crashes due to high traffic in addition to the Spanish-language website not being set up yet have marred the first few days of this important aspect of Obamacare,. It remains to be seen how effectively these exchanges will be as a marketplace for health insurance.
  • China has officially opened the Shanghai Free Trade Zone, which the government sees as a major step in liberalizing the country’s economy and enacting other reforms. The Free Trade Zone will be used as a place to test economic reforms, such as the convertibility of the Yuan currency.

 

Markets

  • Stock markets fell modestly this week amid turmoil in Washington D.C. as the S&P 500 Index dropped by 0.07%, closing at 1,690. The Dow Jones Industrial Average was down 1.22% to close at 15,073. The S&P and the Dow respectively are up 18.53% and 15.02% year to date.
  • Treasury yields remained relatively unchanged this week on the back of the Fed’s decision to delay tapering of asset purchases with the 5 year and 10 year treasury yielding 1.41% and 2.65% respectively.
  • The spot price of WTI Crude Oil rose this week by 0.75%, closing at $103.64 per barrel. Year to date, oil is up 10.87%.
  • The spot price of Gold fell this week, dropping by 1.95% and closing at $1,310.87/ounce. Gold is now down 21.76% this year.

 

Economic Data

  • Weekly Initial Jobless Claims came in low again this week, rising by 3,000 and coming in at 308,000 vs. expectations of 315,000. This week, the Labor Department noted that there were no special factors affecting claims following the distortions in the last couple of weeks so this is being viewed as a positive report.
  • Monthly jobless data and unemployment rates for September have not been published as the Labor Department is not issuing a Nonfarm Payrolls report due to the government shutdown. They have yet to set a new release date.

 

Fact of the Week

  • According to the Wall Street Journal, the U.S. is on track to pass Russia as the world’s biggest producer of oil and gas by the end of the year. The amount of crude from the Bakken oil field in North Dakota and the Eagle Ford shale in Texas continues to rise rapidly, while Russian output is expected to remain flat through 2016.

 

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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