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 Cash withdrawals have been limited to €300 per day, time deposits cannot be withdrawn until maturity, check-cashing has been banned and anyone leaving the country may only take €1,000 with them.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

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