Wealth Management Weekly Update March 3, 2014

ukraine_moscow_mapU.S. and World News

  • Violent protests in Ukraine have escalated and the parliament has ousted President Viktor Yanukovych and put a warrant out for his arrest. Acting President Oleksandr Turchynov says that the country is close to default and is requesting $35 billion in foreign aid from the European Union, the United States and the International Monetary Fund over the next two years to say afloat. While they await response from these entities, Russian gunmen have reportedly seized government buildings in the Crimea region, including the two main airports, according to Ukraine officials. Russia is denying these reports.
  • Despite some opposition, the Japanese government disclosed in a draft regarding its long-term energy strategy that they intend to revive nuclear energy as a major source of electricity. Japan’s nuclear plants were idled following the Fukushima disaster that was caused by a tsunami almost three years ago. This has caused the country to significantly increase its energy imports and as a result, has been a drag on the country’s GDP.
  • Major bitcoin exchange Mt. Gox has gone offline and is filing for bankruptcy protection after the exchange said it may have lost 850,000 bitcoins due to hacking. The crypto-currency currently trades at around $575 per bitcoin, bringing the losses due to the bankruptcy and hacking to over $475 million.
  • David Camp, the Republican Chairman of the House Ways and Means Committee has introduced a proposal to overhaul and simplify the tax code. His plan reduces the seven individual tax brackets to two, a 10% and 25% bracket. The proposal also includes cutting the top corporate tax rate from 35% to 25%. Finally, the largest banks and insurers would have to pay a quarterly 0.035% tax on assets over $500 billion. The proposal faces many challenges before becoming a law.

Markets

  • Stock markets rose this week as the S&P 500 closed at an all-time high, ending up 1.30% for the week, closing at 1,859. The Dow Jones rose by 1.42%, closing at 16,322. So far in 2014, the S&P is now up 0.96% and the Dow Jones is now down 1.07%.
  • Treasury yields came down this week with the 5 year and 10 year U. S. Treasury Notes yielding 1.51% and 2.65%, respectively.
  • The spot price of WTI Crude Oil increased this week by 0.32%, closing at $102.53 per barrel.  Year to date, Oil prices rose 4.16%.
  • The spot price of Gold increased moderately this week, gaining 0.17% and closing at $1,326.26 per ounce. Year to date, Gold prices are up 10.37%.

Economic Data

  • Initial jobless claims rose by 12,000 from last week, coming in at 348,000 vs. consensus estimates of 335,000. The four week moving average for claims fell to 338,250. The Labor Department noted that there were no special factors affecting last week’s claims.
  • 4th quarter GDP growth was revised down to 2.4% from an initial estimate of 3.2%. Weather effects most likely had to do with the large negative revision. This revision brings total 2013 GDP growth down by 0.2% to 2.5%.
  • The Case-Shiller home price index rose 0.8% in December vs. consensus expectations of 0.6%. 19 out of the 20 cities part of the index saw price increases. In 2013, the index rose a strong 13.4%.
  • New home sales rose 9.6% in January vs. consensus estimates of them actually falling by 3.4%. This brings the level of new home sales up to a new post-recession high and is a positive surprise in light of recent downbeat data.

Fact of the Week

  • The average interest rate paid by the US government on the country’s interest-bearing debt has been more than cut in half over the last seven years. Benefitting from aggressive interest rate lowering policies by the Federal Reserve, the US government now pays an average of 2.406% on its debts, compared to 5.034% at the beginning of 2007.

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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