Wealth Management Weekly Update March 10, 2014

U.S. and World Newsukraine_map

  • Russian forces took control of Crimea and threatened a full-scale invasion of Ukraine early this week, causing markets to fall drastically on Monday. Russian President Vladimir Putin then calmed markets by ordering some military units back to their bases and claiming that the country has no intention of using military force in the Ukraine. However, in a bit of a surprising twist, the Crimean parliament has voted unanimously for the province to become a part of Russia. The parliament’s vote is not binding in any way but this action will now go to a referendum vote by the citizens of Crimea that is scheduled for March 16th, where a “Yes” vote to join Russia could put the U.S. and the European Union in a bit of a democratic bind.
  • The crisis in Ukraine has renewed calls among Republicans and energy state Democrats for an easing of restrictions on foreign sales of natural gas. With Russia supplying Europe with 30% of its natural gas, there are many nations who are wary of imposing major sanctions on the country. By increasing U.S. gas exports, that sort of reliance on Russia could be reduced and give the U.S. and E.U. a freer hand when dealing with Russia, particularly in the long term.
  • President Obama unveiled his $3.9 trillion budget for fiscal year 2015 this week. His budget includes tax hikes for the wealthy and energy companies, as well as increased spending on infrastructure and education. Many of the proposals included in his budget stand little chance of passing but will provide fodder for the upcoming mid-term elections.

Markets

  • Stock markets shrugged off losses on Monday due to the tensions in Ukraine and rallied to end the week. The S&P 500 again closed at an all-time high, ending up 1.04% for the week, closing at 1,878. The Dow Jones rose by 0.82%, closing at 16,453. So far in 2014, the S&P is up 2.01% and the Dow Jones is now down 0.26%.
  • Treasury yields rose this week following an easing of tensions overseas with the 5 year and 10 year U. S. Treasury Notes yielding 1.64% and 2.79%, respectively.
  • The spot price of WTI Crude Oil ended the week flat, closing at $102.55 per barrel.  Year to date, Oil prices have risen 4.16%.
  • The spot price of Gold increased this week, gaining 1.05% and closing at $1,340.32 per ounce. Year to date, Gold prices are up 11.54%.

Economic Data

  • Initial jobless claims dropped by 26,000 from last week, coming in at 323,000 vs. consensus estimates of 335,000. The four week moving average for claims fell to 336,500. The Labor Department noted that there were no special factors affecting last week’s claims.
  • The monthly non-farms payroll employment figure came in higher than expected, showing a gain of 175k jobs vs. estimates of 149k. The negative impact from weather ended up being smaller than anticipated. The previous two months numbers were revised up by 25k, bringing the three month average gain to 129k.
    • The unemployment rate ticked up to 6.7% from 6.6%, while the labor force participation rate held steady at a very low 63.0%.
    • Also in the report, average hourly earnings unexpectedly rose 0.4% for the month, the strongest gain in eight months and have risen 2.2% over the last 12 months. This could perhaps be the early signs of a more normal inflationary environment.

Fact of the Week

  • Sunday marks the 5 year anniversary of the stock market recession low (3/9/2009), which was famously called by late CNBC anchor Mark Haines when he proclaimed, “I’m going to go out on a limb here…I think we are at a bottom. I really do.” On that date, the     S&P 500 traded at 676 and has since gained 208.75% total return (including dividends) to close today at an all-time high of 1,878. In that same time frame, the Dow Jones has risen from 6,547 to 16,453, a total return of 187.55%.

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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