Wealth Management Weekly Update February 22, 2013

U.S. and World News

  • Italy is due to hold elections for a new parliament this weekend. The vote comes at a crucial time for the country as it has been one of the hardest hit nations during the global financial crisis. The rest of the world will be watching too because they have a great deal at stake: if Italy gets this vote wrong, it may put back into question the future of its economy and the survival of the Euro.
  • The minutes from the January Federal Reserve meeting were released this week and they indicate that some members of the Committee don’t agree on the future plans for monetary policy. There was significant discussion of the risks around Quantitative Easing, which may prompt an early end to the easing monetary policy. The markets turned negative on the comments, perhaps worried about an earlier than anticipated end to QE.

 

Markets

  • Markets were relatively flat again this week with the S&P 500 Index down by -0.4% this week and closed at 1,521. The Dow Jones Industrial Average on the other hand was up on the week, posting a gain of 0.2% and closed at 13,973. Equity markets paused a bit this week but maintain their great start to 2013; the S&P and the Dow are up 6.3% and 6.8% respectively.
  • Treasury yields climbed a bit this week as the 5 year and 10 year treasury finished the week at 0.85% and 1.97% respectively.
  • The spot price of WTI Crude Oil fell this week by -3.1%, closing at $93.42 per barrel. So far in 2013, oil prices are up 0.7%.
  • The spot price of Gold fell by -1.9% this week and closed at $1580.05/ounce. Year to date in 2013, gold is down -5.7%.

 

Economic Data

  • Weekly Initial Jobless Claims rose by 21,000 and came in higher than expected at 362,000 vs. consensus expectations of 355,000. The 4-week moving average of jobless claims rose to 361,000. Volatility remains in the claims numbers, which may be the result of distortions caused by seasonal adjustments to the data.
  • Eurozone manufacturing PMI data slipped to a reading of 47.8 in February, from 47.9 in January. The data suggests that the Eurozone is on course to contract for the fourth consecutive quarter. Data out of France was particularly troubling as their downturn seems likely to deepen and they’re positioning themselves more in line with the troubled periphery countries of Europe, as opposed to the strong core countries like Germany.

Fact of the Week

  • In a case of investor psychology, a study by four economists from Cornell, Carnegie Mellon and Vanguard found that the number of investors who check their accounts each day drops by about 10% following a market decline compared to a market increase.

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

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@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

Wealth Management Weekly Update February 15, 2013

U.S. and World News

  • President Obama gave his State of the Union Address this week and there weren’t too many surprises contained in the speech and markets were generally unaffected. His initiatives (some of which will have a hard time passing through the Republican controlled House) include investing $50B on infrastructure, raising the minimum wage by 24% to $9/hour and launching free-trade talks with the European Union. His address, however, did not indicate much progress on averting the upcoming sequester spending cuts.
  • The G7 Finance Ministers and central banks governors issued a joint statement reaffirming their “longstanding commitment to market-determined exchange rates and to consult closely in regard to actions in the foreign-exchange markets.” The statement was an attempt to defuse growing fears about a global currency war in light of the currency devaluations that are taking place in countries like Japan.

 

Markets

  • Markets were relatively flat again this week with the S&P 500 Index rising by 0.1% this week and closed at 1,520. The Dow Jones Industrial Average on the other hand fell a bit on the week, posting a loss of 0.1% and closed at 13,982. Equity markets paused a bit this week but maintain their great start to 2013; the S&P and the Dow are up 6.6% and 6.7% respectively.
  • Treasury yields climbed a bit this week as the 5 year and 10 year treasury finished the week at 0.87% and 2.01% respectively.
  • The spot price of WTI Crude Oil rose this week by 0.2%, closing at $95.95 per barrel. So far in 2013, oil prices are up 4.0%.
  • The spot price of Gold fell by 3.5% this week and closed at $1608.80/ounce. Year to date in 2013, gold is down 4.0%.

 

Economic Data

  • Weekly Initial Jobless Claims fell by 24,000 and came in lower than expected at 341,000 vs. consensus expectations of 360,000. The 4-week moving average of jobless claims rose to 353,000. Volatility remains in the claims numbers, which may be the result of distortions caused by seasonal adjustments to the data.
  • Of the 338 S&P 500 companies to report 4th quarter earnings, 71% exceeded sales expectations, while 67% have beaten profit forecasts. The reporting companies have seen an average of only 3% year-over-year sales growth, while achieving 8.7% in year-over-year earnings growth.

Fact of the Week

  • China has surpassed the U.S. as the largest trading nation in the world for 2012. The total value of Chinese imports and exports hit $3.87T, while those of the U.S. reached $3.82T. Still, the U.S. total economy remains more than double the size of China’s.

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

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@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

Wealth Management Weekly Update February 8, 2013

U.S. and World News

  • The Department of Justice announced that they are filing civil charges against McGraw Hill Companies, the parent company of the S&P Ratings unit. The suit is seeking financial penalties for S&P’s role in the financial crisis as the DOJ alleges the ratings agency knowingly inflated the ratings of mortgage bonds, which misrepresented the riskiness of the products. Many of these mortgage bonds that had been rated AAA proved to be made up of subprime junk when home prices started to fall in 2007.
  • President Obama has asked Congress to craft a small package of short-term spending cuts and tax revenue increases in order to delay the automatic across-the-board spending cuts, known as the sequester, that are scheduled to kick in March 1st. The request appears to be another instance of lawmakers kicking the can down the road because they claim that they “haven’t had enough time” to achieve a bigger budget deal.
  • Japanese Finance Minister Taro Aso has said that the yen’s sharp decline in value since November has happened too quickly. His comments come amid international criticism of the falling yen and talk of “currency wars.” Japan’s monetary policy is sure to be a big issue next week when the G20 Finance Ministers meet in Moscow.  

 

Markets

  • The S&P 500 Index rose by 0.3% this week and closed at 1,518. The Dow Jones Industrial Average on the other hand fell a bit on the week, posting a loss of 0.1% and closed at 13,993. Equity markets paused a bit this week but maintain their great start to 2013; the S&P and the Dow are up 6.4% and 6.8% respectively.
  • Treasury yields backed off this week as the 5 year and 10 year treasury finished the week at 0.83% and 1.95% respectively.
  • The spot price of WTI Crude Oil fell this week by 2.0%, closing at $95.79 per barrel. So far in 2013, oil prices are up 3.8%. This week broke a string of 8 consecutive weeks that the price of oil had risen.
  • The spot price of Gold was essentially unchanged this week and closed at $1668.15/ounce. Year to date in 2013, gold is down 0.4%.

 

Economic Data

  • Weekly Initial Jobless Claims ticked down a bit this week and fell by 5,000 and came in higher than expected at 365,000 vs. consensus expectations of 360,000. The 4-week moving average of jobless claims fell to 350,500. Last week’s jump in claims was sustained this week and we’re starting to see a little bit of weakness in the labor markets as the payroll tax hike could be having an effect.
  • 4th Quarter earnings have been generally positive following some worries of a slowdown after a somewhat disappointing 3rd quarter. With 341 of 500 S&P 500 companies reporting, 75% exceeded profit projections and 67% have beaten sales estimates. It will be important for companies to keep growing the top line in an environment that includes some economic headwinds (sequester, troubles in Europe).

Fact of the Week

  • Including dividends, the S&P 500 gained 135% from March 2009 through January 2013, during what most people remember as the “Great Recession.” It gained the same amount from 1996 to 2000, during what people remember as the “greatest bull market in history.”

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

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@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

Wealth Management Weekly Update February 1, 2013

U.S. and World News

  • On Thursday, the Senate passed the suspension of the debt ceiling until May 19th after the House approved the bill last week. The bill will now go to President Obama for his signature. The bill also states that members of the House and Senate will have their pay withheld if they fail to pass a budget bill by April 15th.
    • Once passed, lawmakers will need to address the automatic sequester spending cuts that are set to take hold on March 1st. It is believed that Republicans will take a hard line stance on getting the country’s spending problems under control, even if it means letting the sequester kick in and allowing over $1.2 trillion of automatic cuts take place

Markets

  • The S&P 500 Index rose by 0.7% this week and closed at 1,513. The Dow Jones Industrial Average also rose on the week, posting a gain of 1.1% and closed at 14,010. This was the first time that the Dow closed above 14,000 since October 2007. Equity markets continues their great start to 2013, the S&P and the Dow are up 6.1% and 6.9% respectively.
  • Yields continued their climb higher this week as the 5 year and 10 year treasury finished the week at 0.90% and 2.04% respectively.
  • The spot price of WTI Crude Oil rose this week by 1.2%, closing at $97.65 per barrel. So far in 2013, oil prices are up 5.8% and oil has risen in price for 8 straight weeks and this has translated to higher prices at the pump.
  • The spot price of Gold rose by 0.5% this week and closed at $1667.10/ounce. Year to date in 2013, gold is down 0.4%.

Economic Data

  • Weekly Initial Jobless Claims ticked back up this week and rose by 38,000 and came in higher than expected at 368,000 vs. consensus expectations of 350,000. The 4-week moving average of jobless claims rose to 352,000. The Labor Department did not note any reasons that the data may have been distorted.
  • The Case-Shiller home price index rose 0.6% in November (month-over-month) which was roughly in line with expectations. Home prices are now up 5.5% on a year-over-year basis.
  • Real GDP growth in the 4th quarter was much weaker than expected and actually showed contraction, coming in at -0.1% vs. consensus expectations of 1.1%. The weak GDP number was accounted for primarily by reduction in federal defense spending which was likely the result of the uncertainty regarding the Fiscal Cliff and the sequester cuts on spending. We think that this report does not reflect the overall trend in the economy and should reverse once matters in Washington D.C. have been settled.
  • The monthly Bureau of Labor Statistics jobs report was released today and showed an increase of 157k nonfarm payrolls in January which was slightly below consensus expectations of 165k. The unemployment rate did rise in the month, up to 7.9% from 7.8%. Despite the tick up in the unemployment rate, the report overall was generally positive as there were some significant upwards revisions to the prior two month’s employment gains.

Fact of the Week

  • One of the stranger market prediction theories is what’s called the Super Bowl Indicator. It suggests that a Super Bowl win by a team from the old American Football League (now the AFC) foreshadows a down stock market for the remainder of the year, but a win by the NFC leads to an up year in the markets. While the two events seemingly have nothing to do with each other, since 1967 this dynamic has played out to be true about 75% of the time. If this indicator is to be believed, investors should be rooting hard for the San Francisco 49ers this Sunday.

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

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@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