Wealth Management Weekly Update July 26, 2013

U.S. and World Newsfederal_reserve_260px

  • The race to replace Ben Bernanke as Fed chief when his term runs up at the end of the year looks increasing to be down to current Fed governor Janet Yellen and former Clinton administration Treasury Secretary Larry Summers. This revelation comes as a surprise as Yellen has been regarded as the front runner for the position and Summers isn’t very well liked in Washington D.C. circles.
  • U.S Bankruptcy Judge Steven Rhodes held hearings this week regarding whether to allow the Detroit bankruptcy to proceed amid lawsuits filed by workers, unions and pension funds seeking to halt proceedings in order to protect obligations they have been promised. Judge Rhodes ruled that the city at large would suffer irreparable harm if its bankruptcy were to be delayed and struck down the lawsuits. Bankruptcy proceedings will now move forward in federal court without getting slowed down by law suits filed in state court.

 

Markets

  • Stock markets were flat this week as the S&P 500 Index was unchanged, closing at 1692. The Dow Jones Industrial Average was up 0.1% to close at 15,559. The S&P and the Dow respectively are up 18.61% and 18.73% year to date.
  • Treasury yields rose a bit this week with the 5 year and 10 year treasury finishing at 1.37% and 2.57% respectively. Interest rates continue to be quite volatile and are swinging on nearly every comment about the Fed tapering their asset purchases.
  • The spot price of WTI Crude Oil fell this week by 3.0%, ending a nearly month long rally, and closed at $104.68 per barrel. Year to date, oil is up 11.7%.
  • The spot price of Gold continued to recover this week, rising by 2.9% and closing at $1,333.18/ounce. Despite the gains, gold is still down 20.4% this year.

 

Economic Data

  • Weekly Initial Jobless Claims rose this week, increasing by 9,000 and came in at 343,000 vs. expectations of 340,000. However, the Labor Department continues to note that seasonality factors may have distorted the data. The 4-week moving average of jobless claims moved down to 345,000.
  • Second quarter earnings announcements continued this week with a large amount of companies reporting. With 265 of the S&P 500 firms having reported, 69% have exceeded earnings estimates with financial stocks boasting the biggest beats. Top line revenue numbers have been somewhat subpar as many industries are struggling to boost sales amid sluggish demand.
  • Over 306,000 of the 1.2 million delinquent homeowners who have received loan modifications under the Home Affordable Modification Program (HAMP) since it was introduced in 2009 have re-defaulted. An audit of the program showed that the cost to the taxpayer has been $815 million.

 

Fact of the Week

  • According to the Federal Reserve Bank of New York, 33% of all the outstanding student loans nationwide are held by Americans 40 years of age or older.

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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Wealth Management Weekly Update July 19, 2013

U.S. and World News

  • Once an economic powerhouse due to the auto industry, Detroit has filed for bankruptcy. It is the largest municipal Chapter 9 filing in U.S. history and occurred after emergency manager Kevyn Orr failed to strike a deal with creditors over restructuring up to $20B in debt. Orr wrote that following “decades of fiscal mismanagement, plummeting population and employment and a decaying city infrastructure, Detroit today is a shell of the thriving metropolis that it once was.”
  • The fiscal situation locally doesn’t appear to be rosy either as the City of Chicago had its general-obligation debt rating cut by Moody’s by three notches with a negative outlook. Contributing to the rating cut was a retirement fund deficit north of $36 billion and unrelenting public safety demands on the budget. Moody’s went on to state, “Absent significant growth in the city’s operating revenues, escalating pension funding requirements will increasingly strain the city’s operating budget, as pension outlays compete with other spending priorities, including debt service and public safety.”
  • Greece’s parliament narrowly approved the latest set of Troika-mandated austerity plans, paving the way for the country to receive the next tranche of its bailout. Happening against the background of a general strike and nationwide protests, the program includes wage cuts for civil servants and putting them into a “mobility plan” prior to forced transfers or layoffs.

Markets

  • Stock markets posted another positive week as the S&P 500 Index rose 0.71%, closing at 1692. The Dow Jones Industrial Average was up 0.51% to close at 15,543. After this week’s rally, the S&P and the Dow respectively are up 18.64% and 18.62% year to date.
  • Treasury yields fell again this week on continued dovish comments by Fed Chairman Ben Bernanke. The 5 year and 10 year treasury finished the week at 1.30% and 2.48% respectively. Interest rates continue to be quite volatile and are swinging on nearly every comment about the Fed tapering their asset purchases.
  • The spot price of WTI Crude Oil continued its summer surge as prices increased by 2.3%, closing at $108.37 per barrel. Year to date, oil is up 15.6%.
  • The spot price of Gold continued to recover this week, rising by 0.7% and closing at $1295.17/ounce. Despite the gains, gold is still down 22.7% this year.

Economic Data

  • Weekly Initial Jobless Claims dropped this week, falling by 26,000 and came in at 334,000 vs. expectations of 345,000. However, the Labor Department noted that seasonality factors may have distorted the data. The 4-week moving average of jobless claims moved down to 346,000.
  • Second quarter earnings announcements have begun with 82 companies in the S&P 500 having reported. Thus far, 77% of them have exceeded expectations for bottom line earnings while only 55% have beat expectations for top line sales. So far the disappointing revenue numbers have been the result of a number of factors including currency effects for multinational companies and weak demand. Next week is the biggest reporting week of the 2nd quarter season with 157 firms representing 27% of the size of the S&P 500 reporting.

Fact of the Week

  • The proposed Keystone XL Pipeline that would allow oil to travel from Alberta to Nebraska could result in significant savings at the pump if it is approved and constructed. The Financial Times estimates that the cost of moving oil from Canada across the USA to refineries on the Gulf of Mexico costs $5 per barrel if moved via pipeline but costs $20 per barrel if moved by rail.

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

Wealth Management Weekly Update July 12, 2013

U.S. and World NewsMONEY7

  • During a press conference this week, Federal Reserve Chairman Ben Bernanke set out to soothe market fears of asset purchase tapering by saying “that highly accommodative monetary policy for the foreseeable future is what’s needed for the U.S. economy.” There wasn’t anything in the comments that deviated too far from previous statements but markets rallied on the clarification of intended policy.
  • After almost two years of preparation, the U.S. and Europe have begun talks on what would be the world’s largest free-trade agreement. Should a deal be struck, the regions could see its economies boosted by an estimated $100 billion a year.
  • Portugal’s government is looking more secure after Paulo Portas, the head of the junior partner in the government’s coalition, returned to the cabinet as Deputy Prime Minister. Portas’ austerity induced resignation as Foreign Minister last week, along with that of Finance Minister Vitor Gaspar, had helped to roil global markets.

Markets

  • Stock markets posted another strong week as the S&P 500 Index rose 2.96%, closing at 1680. The Dow Jones Industrial Average was up 2.17% to close at 15,464. After this week’s rally, the S&P and the Dow respectively are up 17.81% and 18.01% year to date.
  • Treasury yields fell this week following Ben Bernanke’s dovish comments calmed fixed income markets. The 5 year and 10 year treasury finished the week at 1.42% and 2.59% respectively. Interest rates continue to be quite volatile and are swinging on nearly every comment about the Fed tapering their asset purchases.
  • The spot price of WTI Crude Oil rose this week, continuing the upward trend that started with last week’s unrest in Egypt. Prices increased by 2.76%, closing at $106.07 per barrel. Year to date, oil is up 13.10%.
  • The spot price of Gold bounced this week, rising by 5.0% and closing at $1284.22/ounce. Despite the gains, gold is still down 23.3% this year.

Economic Data

  • Weekly Initial Jobless Claims rose unexpectedly this week, rising by 17,000 and came in at 360,000 vs. expectations of 340,000. However, the Labor Department noted that seasonality factors may have distorted the data. The 4-week moving average of jobless claims remained at moved up to 352,000.
  • Trade data out of China was much worse than expected this week as China’s exports fell 3.1% in June vs. expectations of a GAIN of 4%. Imports also disappointed, falling 0.7% in June vs. forecasts of +8%. A stronger Chinese currency and rising wages were cited as reasons for the big miss.
  • Foreclosure activity dropped in June to the lowest level since December 2006, falling 35% on the year to 127,790 properties according to RealtyTrac.

Fact of the Week

  • Employees that obtain health insurance coverage through their employer do not pay taxes on the economic benefit on the part of their coverage paid for by their employer. This exclusion from taxation saves U.S. taxpayers $164 billion a year, the largest tax expenditure in the U.S. tax code.

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

Wealth Management Weekly Update July 5, 2013

medical_000009719993_250pxU.S. and World News

  • The Treasury Department will delay penalties for large employers who fail to provide workers with health insurance. The requirements were initially scheduled to begin when the bulk of the law takes effect at the start of next year, but the administration will now wait until 2015 before enforcing mandatory employer and insurer reporting guidelines. The delay comes after businesses inundated the department with questions regarding the 2,700 page healthcare overhaul that continues to struggle getting off the ground.
  • Political unrest has sprung up in Egypt again as Egypt’s army removed President Mohammed Morsi and appointed Adly Mansour. Mr. Mansour is a judge who had been named head of the Supreme Constitutional Court on Monday. International leaders expressed concerns about the democratic future of the largest country in the Arab world.
  • Conflict has also arisen in Portugal as many are protesting austerity measures in the economically troubled country. Finance Minister Vitor Gaspar resigned amid pressure on Monday and many other high level political officials appear ready to follow him out the door.
  • Croatia has become the 28th member of the European Union after over a decade of working to fulfill the membership requirements. With the country’s economy in recession, large amounts of debt and high unemployment, Croatia has a lot in common with much of the EU already.

 

Markets

  • Stock markets posted strong gains as the S&P 500 Index rose 1.16%, closing at 1631.89. The Dow Jones Industrial Average was up 0.74% to close at 15135. After this week’s bounce, the S&P and the Dow respectively are up 14.42% and 15.50% year to date.
  • Treasury yields soured higher this week after a better than expected employment report fueled speculation that the Fed would begin to taper asset purchases this year. The 5 year and 10 year treasury finished the week at 1.60% and 2.73% respectively.
  • The unrest in Egypt is having an effect on the oil markets, sending prices higher. While the country isn’t an oil producer, it controls the Suez Canal which is one of the world’s most important shipping lanes. The spot price of WTI Crude Oil rose this week, increasing by 7.1%, closing at $103.40 per barrel. Year to date, oil is up 10.3%.
  • The spot price of Gold fell this week, dropping by 1.0% and closing at $1222.10/ounce. Gold is now down 27.1% this year.

 

Economic Data

  • Weekly Initial Jobless Claims fell this week as claims decreased by 3,000 and came in in-line with expectations at 343,000. The 4-week moving average of jobless claims remained at 346,000.
  • Monthly non-farm payrolls exceeded expectations posting an increase of 195,000 payrolls for June vs. an increase of 165,000 payrolls economists projected. The unemployment rate was 7.6%. Revisions for April and May added 70,000 jobs to the employment counts.

 

Fact of the Week

  • The estimated Social Security shortfall today (present value) between the future taxes anticipated being collected and the future benefits expected to be paid out in the next 75 years is $9.6 trillion. This entire deficit could be eliminated by either an immediate 2.66% increase in the Social Security payroll tax rate (ie. From 12.40% to 15.06%) or an immediate 16.5% reduction in Social Security benefits that are paid out.

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