Wealth Management Weekly Update March 28, 2013

U.S. and World News

  • Hours before a potential financial meltdown in Cyprus, the Eurozone agreed to a €10 billion bailout in which the country’s second largest bank, Laiki, will be shut down and its operations will be folded into the Bank of Cyprus. Deposits of over €100,000 will be hit with a large tax that has yet to be determined (likely 40% or more), while deposits below that threshold will be left untouched.
    • After nearly two weeks of being closed, banks in Cyprus finally reopened on Thursday but not before strict capital control measures were put into place in order to avert a run on the nation’s banks. Cash withdrawals have been limited to €300 per day, time deposits cannot be withdrawn until maturity, check-cashing has been banned and anyone leaving the country may only take €1,000 with them. Officials say that these restrictions could remain in place for up to a month.
  • President Obama signed the fiscal 2013 funding bill into law after it had passed through Congress last week. The package includes the $85 billion in sequestration cuts and ensures that the government will be financed until the end of the fiscal year in September.
  • Leaders in Brazil, China, Russia and India are exploring establishing a new development bank that would have a sharper focus on funding the advancement of the emerging markets. The bank would take on some of the roles currently held by the International Monetary Fund (IMF) and the World Bank.

Markets

  • The first quarter of 2013 came to a close with the S&P 500 and Dow Jones closing at all-time record highs. Markets again shrugged off the news in Cyprus this week with the S&P 500 Index rising by 0.8%, closing at 1,569. The Dow Jones Industrial Average ended the week with a gain of 0.4% and closed at 14,578. A strong 1st quarter is in the books with the S&P and the Dow up 10.0% and 11.3% respectively year to date.
  • Treasury yields fell again this week as the 5 year and 10 year treasury finished the week at 0.76% and 1.85% respectively. Treasury rates seem to be reacting to the uncertainty in Cyprus/Europe much more so than the stock markets.
  • The spot price of WTI Crude Oil spiked this week by 3.7%, closing at $97.15 per barrel. So far in 2013 oil prices have fallen 4.3%.
  • The spot price of Gold was slightly lower for the week, falling 0.7% and closing at $1595.95/ounce. Year to date in 2013, gold is down 4.7%.

Economic Data

  • Weekly Initial Jobless Claims rose this week by 21,000 and came in higher than expected at 357,000 vs. consensus expectations of 340,000. The 4-week moving average of jobless claims ticked up to 343,000.
  • The Conference Board measure of Consumer Confidence fell sharply in March to 59.7 vs. consensus expectations of 67.5. The drop echoes the large decline in the University of Michigan consumer sentiment index for March. Administrators pointed to the sequester as a likely cause of reduced future confidence.

Fact of the Week

  • The over 11% gain in the 1st quarter of 2013 is the best Q1 for the Dow Jones since 1998 when members of the index included Eastman Kodak, General Motors, Goodyear and Sears.

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

Visit Old Second Wealth Management

Wealth Management Weekly Update March 22, 2013

U.S. and World News

  • Economic crisis has hit the small island Eurozone nation of Cyprus this week as the country’s massive banking system (compared to the size of the country) is insolvent. Seeking a bailout from the European Central Bank, Cyprus has been pressed to come up with a solution that would be acceptable for all parties involved. One option that has since been shot down is a one-time tax on the country’s deposit accounts, which are largely made up of money that wealthy Russians have invested there as a sort of off shore tax haven similar to the Cayman Islands. This proposal has been met with protests, long lines at Cyprus ATMs and fears of bank runs in other struggling European countries. The European Central Bank has set a deadline of Monday for Cyprus to devise a satisfactory bailout deal or else emergency funding to the country’s banks will be cut off.
  • A government funding bill that would finance the government through the end of September and put off fears of a government shutdown passed easily through the Senate and House this week. The bill awaits Presidential approval and will most certainly be signed. The package includes the $85 billion in sequestration cuts, but allows the Pentagon more leeway to decide on where to cut spending.
  • The Federal Open Market Committee met this week and remains committed to its $85 billion per month quantitative easing program. Statements from the Fed said that the economy has returned to moderate growth even as fiscal policy has become more restrictive (higher taxes).

 

Markets

  • Markets largely shrugged off the news in Cyprus this week with the S&P 500 Index down by 0.3% closing at 1,557. The Dow Jones Industrial Average ended the week with a small loss of 0.1% and closed at 14,512. Equity markets paused this week but still have had impressive 2013 returns; the S&P and the Dow are up 9.2% and 10.8% respectively year to date.
  • Treasury yields fell this week as the 5 year and 10 year treasury finished the week at 0.80% and 1.92% respectively.
  • The spot price of WTI Crude Oil was flat this week, closing at $93.74 per barrel. So far in 2013 oil prices have risen 0.6%.
  • The spot price of Gold was higher for the week rising 1.0% closing at $1608.05/ounce. Year to date in 2013, gold is down 4.0%.

 

Economic Data

  • Weekly Initial Jobless Claims rose this week by 4,000 and came in lower than expected at 336,000 vs. consensus expectations of 340,000. The 4-week moving average of jobless claims decreased to 340,000, and this figure continues to improve upon its lowest level since February 2008.
  • Contraction in Eurozone manufacturing activity deepened unexpectedly this month with the region’s PMI falling to 46.6 from 47.9 in February. With even German manufacturing activity shrinking, the fear is that the economic downturn in Europe is gaining pace and could intensify in the coming months.

Fact of the Week

  • The New York Stock Exchange lists more than 8,500 individual securities, trading an average of 2.4 billion shares per day, having a collective market value of approximately $12 trillion.

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

Visit Old Second Wealth Management

Wealth Management Weekly Update March 15, 2013

U.S. and World News

  • China is wrapping up the once per decade transfer of power in the country as Xi Jinping was officially elected as the new president, taking over for Hu Jintao. China also elected Li Keqiang to replace Wen Jiabao as Premier and will be the first in this position to hold a doctorate in economics.
  • Illinois has become only the second state to be accused of securities fraud by the SEC. The Commission says that the state misled bond investors from 2005-2009 about the ever worsening condition of its public workers’ pension plans by claiming that it was being properly funded when it was not. However, while Illinois has agreed to a cease and desist order, it has escaped any fines and hasn’t had to admit any wrongdoing for the time being.
  • The upper house of Japan’s parliament approved the appointment of Haruhiko Kuroda as the Governor of the Bank of Japan. His first major task will be to persuade the bank’s board to back his plans for further easing in an attempt to spur inflation in the country.

 

Markets

  • Markets posted positive gains again this week with the S&P 500 Index up by 0.6% closing at 1,561. The Dow Jones Industrial Average ended the week with a gain of 0.8% and closed at 14,514. Equity markets continued to add to their impressive 2013 returns; the S&P and the Dow are up 9.4% and 10.8% respectively year to date.
  • Treasury yields fell this week as the 5 year and 10 year treasury finished the week at 0.84% and 2.00% respectively.
  • The spot price of WTI Crude Oil rose this week by 1.7%, closing at $93.52 per barrel. So far in 2013 oil prices have risen 0.8%.
  • The spot price of Gold was slightly higher for the week rising 0.8% closing at $1591.55/ounce. Year to date in 2013, gold is down 5.0%.

 

Economic Data

  • Weekly Initial Jobless Claims fell again this week by 8,000 and came in lower than expected at 332,000 vs. consensus expectations of 350,000. The 4-week moving average of jobless claims decreased to 347,000, and this figure continues to improve upon its lowest level since March 2008.
  • Consumer sentiment fell in March to a reading of 71.8 (vs. consensus expectations of 78.0). The decline was mainly accounted for by a worsening in future expectations as concerns about a dysfunctional government weigh heavily on consumers. Despite the decline in sentiment, it appears that the damage to overall buying plans so far has been minimal.
  • The headline Consumer Price Index (used to measure inflation) rose by 0.7% month over month which was higher than consensus expectations of 0.5%. This was largely driven by a 9.1% increase in seasonally adjusted gas prices. The report points to continued moderate core inflation.

Fact of the Week

  • The first publicly traded securities in the United States were $80 million in U.S. government bonds, issued in 1790 to refinance Revolutionary War debt.

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 March 8, 2013

U.S. and World News

  • China has begun a week and a half process of political pageantry that will complete the handover of power to new leadership. Xi Jinping is set to replace Hu Jintao as President and Li Keqiang to take over for Wen Jiabao as Premier. Observers and market participants will be watching the extent of any bureaucratic reorganization as an indicator of Beijing’s appetite for reforms.
  • The House of Representatives passed a stop-gap measure that would fund the government until the end of the fiscal year in September. The vote came well ahead of the deadline of March 27th and averts the possibility of a government shutdown. The measure, which does not change the $85B in sequestration cuts, is expected to be voted on by the Senate next week.
  • The Federal Housing Finance Agency is working on a plan to merge some of the operations of Fannie Mae and Freddie Mac. The new venture would be separate from the two firms and could be the initial stages for eventually replacing them. Initially, the plan would consolidate some of the back-office operations that Fannie and Freddie duplicate.
  • Venezuelan President Hugo Chavez died of cancer this week. The country will hold elections within 30 days to select a new president. Chavez’s passing leaves major uncertainty, especially over the country’s oil fields, whose capacity has been declining due to chronic under-investment and hostility towards foreign firms.

 

Markets

  • Markets posted positive gains again this week with the S&P 500 Index up by 2.17% closing at 1,551. The Dow Jones Industrial Average ended the week with a gain of 2.18% and closed at 14,397. Equity markets continued to add to their impressive 2013 returns; the S&P and the Dow are up 8.76% and 9.87% respectively year to date.
  • Treasury yields rose this week on positive job reports as the 5 year and 10 year treasury finished the week at 0.88% and 2.04% respectively.
  • The spot price of WTI Crude Oil rose this week by 1.3%, closing at $91.87 per barrel. So far in 2013 oil prices have fallen 0.9%.
  • The spot price of Gold was slightly higher for the week rising 0.2% closing at $1578.90/ounce. Year to date in 2013, gold is down 5.7%.

 

Economic Data

  • Weekly Initial Jobless Claims fell by 4,000 and came in lower than expected at 340,000 vs. consensus expectations of 355,000. The 4-week moving average of jobless claims decreased to 349,000, which is its lowest level since March 2008.
  • The February employment report came in better than expected, showing the addition of 236,000 nonfarm payrolls vs. consensus expectations of 165,000.  Job gains were particularly strong in construction and professional services.
    • The unemployment rate unexpectedly ticked down by 0.2% to 7.7% vs. consensus expectations of 7.9%. However, part of this decrease can be attributed to the labor force participation rate falling more than expected.

Fact of the Week

  • Fees on 401(k)’s can add up; a study by Demos found that the average couple will pay $155,000 in 401(k) fees over their careers, reducing an average account balance from $510,000 to $355,000.

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

Visit Old Second Wealth Management

Wealth Management Weekly Update March 1, 2013

U.S. and World News

  • The Italian election last week provided about the worst outcome possible after an inconclusive election gave none of the parties a parliamentary majority. Surprising gains by former Prime Minister Silvio Berlusconi, who has been convicted of multiple crimes and whose policies are a main cause of Italy’s current economic woes, as well as Beppe Grillo, a professional stand-up comedian, are what caused the stalemate. The headline of the Roman newspaper, Il Messaggero, following the election read, “The Winner is: Ingovernability,” reflecting the deadlock the country will have to confront in the next few weeks as sworn enemies are forced to work together to form a government.
  • President Obama is due to meet with Congressional leaders today to discuss the $85B of automatic sequester cuts that are due to take effect at midnight tonight. The strong assumption of many is that sides won’t find a way to delay the reductions. The impact of the cuts won’t likely be known for some time and there is hope that even if a resolution isn’t met before the deadline, one can be reached in a few weeks and much of the damage caused can be erased.
  • The Senate confirmed Jacob Lew as Treasury Secretary by a vote of 71-26. Lew faces a challenging start to his tenure: $85B of automatic spending cuts are due to take effect tomorrow, then on March 27th a funding measure for U.S. agencies expires and then two months after that, the temporary suspension of the government’s borrowing limit is set to end.

 

Markets

  • Markets posted modest gains this week with the S&P 500 Index up by .17% closing at 1,518. The Dow Jones Industrial Average ended the week over the 14,000 level, posting a gain of 0.64% and closed at 14,089. Equity markets added to their impressive 2013 returns; the S&P and the Dow are up 6.45% and 7.52% respectively.
  • Treasury yields fell this week as the 5 year and 10 year treasury finished the week at 0.74% and 1.84% respectively.
  • The spot price of WTI Crude Oil fell this week by 2.4%, closing at $90.90 per barrel. So far in 2013, oil prices fell 2.0%. Oil had its first monthly decline since October.
  • The spot price of Gold was relatively flat for the week falling 0.3% this week and closed at $1576.23/ounce. Year to date in 2013, gold is down 5.9%.

 

Economic Data

  • Weekly Initial Jobless Claims fell by 18,000 and came in lower than expected at 344,000 vs. consensus expectations of 360,000. The 4-week moving average of jobless claims decreased to 355,000. Claims numbers remain volatile, but the Labor Department reports that seasonal adjustment issues should mostly be a non-factor at this point.
  • The Eurozone unemployment rate hit a new record and increased to 11.9% in January vs. expectations of 11.8%. Youth unemployment in the region stands at 24.2%, and is significantly worse in Spain where the rate is more than double that at 55.5%.
  • The Case-Shiller home price index rose more than expected in December at 0.88% vs. expectations of 0.65%. For the year 2012, the index rose 6.84% which was its first calendar year gain since 2007. This data continues to point in the direction of a steady recovery in the housing market.

Fact of the Week

  • The S&P 500 has returned about 9% a year over the long run, but few years see returns even close to that. Since 1871, the index has risen or fallen more than 20% in one out of every three years. Less than one out of every five years sees a gain of between 1% and 9%.

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