Wealth Management Weekly Update November 4, 2013

iStock_000015914958XSmallU.S. and World News

  • The Fed held a meeting this week which was largely uneventful. The committee’s assessment of the economy was only marginally changed in the face of recent events. The committee did note that fiscal policy issues surrounding the debt ceiling could have a negative impact on economic growth. They also did not give any more indication as to when a tapering of asset purchases may begin, although most analysts have pushed back their forecasts into early 2014.
  • The People’s Bank of China has injected 13 billion yuan ($2.13 billion) into the country’s money markets this week, resuming such liquidity actions for the first time in two weeks. However, despite the move that was designed to ease fears that the bank was planning to dramatically tighten monetary policy, short term interest rates remain at very high levels.
  • The amount that people can receive in food stamps is due to fall on Friday, following the expiration of a 13.6% increase in the program that the government introduced in 2009 as part of its stimulus plan. That increase, as well as the great recession, has helped send spending on the Supplemental Nutrition Assistance Program to a record $78.4 billion in the fiscal year ending September 30.

 

Markets

  • Stock markets set new record highs again this week as the S&P 500 Index increased by 0.13%, closing at 1,762. The Dow Jones Industrial Average was up 0.29% to close at 15,615. The S&P and the Dow respectively are up 23.52% and 19.17% year to date.
  • Treasury yields ticked back up this week with the 5 year and 10 year treasury now yielding 1.38% and 2.62% respectively.
  • The spot price of WTI Crude Oil continued its extended fall this week, dropping by  3.28%, closing at $94.64 per barrel. Lower oil prices are being reflected at the pump as nationwide gas prices have been falling as well. Year to date, oil is now only up 1.36%.
  • The spot price of Gold fell this week, dropping by 2.60% this week and closing at $1315.55/ounce. Gold is now down 21.48% this year.

 

Economic Data

  • Weekly Initial Jobless Claims declined this week, coming in at 340,000 vs. expectations of 338,000. The Labor Department stated that the processing issues they had been experiencing that were distorting claims numbers have been cleared up so this can be taken as a real data point this week. The level of claims stands above the pre-distortion 4 week moving average of 329,000.
  • Core Consumer Price Index, a common measure for inflation, rose less than expected at 0.1% vs. expectations of 0.2%. Core CPI is up 1.7% on a year over year basis, still well below the Fed’s threshold to begin tightening measures.
  • Pending home sales declined more than expected in September, falling by 5.6% vs. consensus expectations of 0.0%. This is seen as an unfavorable indicator for existing home sales in the coming months.

 

Fact of the Week

  • According to the College Board, the average cost for one year of college education at an in-state public college is $18,391 for the 2013-14 school year (including tuition, fees, room and board). The total 1-year cost has increased +5.8% per year over the last 30 years. If that same rate of inflation continues, a child who is a 1st grader today will pay $156,868 for his/her 4-years of education at an in-state public college during the years 2025-29.

 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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