Wealth Management Weekly Update February 10, 2014

U.S. and World News

    • The suspension of the U.S. debt limit ended this week, leaving the Treasury a couple week window in which they can take measures to avoid a default. In the past, the debate over the debt ceiling has been extremely contentious, but at this time there seems to be little stomach for a new fight, so it is expected that Congress will increase the cap without too much theatrics.

Architecture in San Juan Old City

  • Rating agency S&P has cut Puerto Rico’s credit rating to BB+, or junk status, and maintained a negative outlook for the debt-laden commonwealth. They cited a reduced capacity to access to capital to fund its operating deficit as a reason for the negative outlook. Moody’s and Fitch, other rating agencies, are also contemplating dropping Puerto Rico to junk status as well.
  • A bipartisan group of Senate and House members has stepped up pressure on the White House to approve the controversial Keystone XL oil pipeline that would extend from Canada to the Gulf Coast. This follows an extensive State Department report filed last week that found that the proposed pipeline would have little to no negative environmental impact, which has been one of the primary concerns holding up approval.

Markets

  • Stock markets climbed higher this week as the S&P 500 ended up 0.90%, closing at 1,797 and the Dow Jones rose by 0.69%, closing at 15,794. So far in 2014, the S&P and Dow are down 2.78% and 4.72% respectively.
  • Treasury yields were largely flat this week with the 5 year and 10 year treasury now yielding 1.47% and 2.68% respectively.
  • The spot price of WTI Crude Oil increased this week by 2.64%, closing at $100.06 per barrel. Oil prices are now up 1.53% in 2014.
  • The spot price of Gold rose again this week, gaining 1.82% and closing at $1,267.17 per ounce. Year to date, Gold prices are up 5.45%.

Economic Data

  • Initial jobless claims fell 17,000 from last week, coming in at 331,000 vs. consensus estimates of 335,000. The four week moving average for claims rose to 334,000. The Labor Department noted that there were no special factors affecting last week’s claims.
  • The January employment report contained a confusing set of data, as payroll job growth significantly disappointed, but the unemployment rate fell by one tenth. Nonfarm payrolls rose by 113,000 vs. expectations of 180,000. Weather surprisingly didn’t appear to play too much of a role in this month’s numbers. The unemployment rate fell 0.1% to 6.6%. Labor force participation rate actually rose by 0.2% to 63.0% despite the expiration of Emergency Unemployment Compensation benefits which many believed would lead some unemployed workers to stop reporting that they were actively seeking employment.
  • The ISM manufacturing index was much weaker than expected in January with a reading of 51.3 vs. expectations of 56.0 and was a fall from 56.5 in December. Comments from several of the survey respondents pointed to poor weather as a reason for the weakness in January.

Fact of the Week

  • According to a Wall Street Journal report, 1 in 6 men in their prime working years of 25-54 don’t have jobs. The proportion is around 17%, or 10 million people, which compares with 6% in the early 70’s and 13% in 2007. Reasons cited by economists include the slow recovery from the recession and that many people are unable to keep up with the way that technology and globalization are changing the labor market.

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

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