October Investment News from Sumner Wealth Management

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Wealth Management Newsletter

Volume:  1

Issue:  10

October 21, 2013

 
 

Dear Visitor,

Stocks and   Bonds Rally as Debt Breach Avoided

Stocks   and bonds rose this week as Congress was able to come to an agreement to end   the US government shutdown and extend the debt ceiling. With the uncertainty  created by the government discord resolved for the time being, investors   pushed the S&P 500 index to close at an all time high on Friday. In addition,   as the threat of an imminent default receded, the price of U.S. Treasury   bonds moved higher as interest rates fell. By the end of the week, investor  attention began to turn to corporate earnings announcements and anticipation   of the release of economic data which had been disrupted during the   government shutdown.

Index Returns (%) 

Source:  Bloomberg

                                                                                                                                                         
   

Index

   
   

 1 Week

   
   

YTD

   
   

1     Year

   
   

Dow Jones 30

   
   

1.07

   
   

17.52

   
   

    15.41

   
   

S&P 500

   
   

     2.42

   
   

22.32

   
   

21.72

   
   

Russell 2000

   
   

2.81

   
   

31.25

   
   

35.78

   
   

MSCI EAFE

   
   

2.57

   
   

16.89

   
   

20.92

   
   

S&P GS Commodities

   
   

     0.22

   
   

     0.39

   
   

-1.61

   
   

U.S. Trade-Weighted $

   
   

-0.92

   
   

-0.65

   
   

0.00

   

Index Levels

Source:  Bloomberg

                                                                                                                                                                                                               
   

Index

   
   

 Current Week (10/18/13)

   
   

Prior     Week (10/11/13)

   
   

Year     End (12/31/12)

   
   

Year     Ago

   

(10/19/12)

   
   

Dow Jones 30

   
   

15,400

   
   

15,237

   
   

13,104

   
   

13,344

   
   

S&P 500

   
   

1,745

   
   

1,703

   
   

1,426

   
   

1,433

   
   

Russell 2000

   
   

1,115

   
   

1,084

   
   

849

   
   

821

   
   

MSCI EAFE

   
   

1,875

   
   

1,828

   
   

1,604

   
   

1,550

   
   

S&P GS Commodities

   
   

4,908

   
   

4,897

   
   

4,889

   
   

4,988

   
   

U.S. Trade-Weighted $

   
   

79.62

   
   

80.36

   
   

79.77

   
   

79.62

   
   

U.S. 10Yr Treasury Yield(%)

   
   

2.59

   
   

2.68

   
   

1.71

   
   

1.77

   

Government Reaches Agreement to   "Kick the Can" Again

For much of the week, investor attention   was focused on Washington as the Senate and House struggled to come to an   agreement that would reopen the government from its 16-day closure and raise   the debt ceiling. Finally, on Wednesday evening the Senate and House agreed   to measures to fund the government through January 15th and suspend the debt   ceiling until February 7th. In the meantime, legislators are planning to  restart negotiations immediately with the goal of identifying a longer-term   solution by mid-December. While most are skeptical that these negotiations   will yield far-reaching reforms to the tax code or major entitlement   programs, there is some hope that both sides will be more willing to   compromise given the political damage incurred as a result of this most   recent crisis. However, if recent history is any precedent, it is probable   that the markets will experience periods of politically-induced anxiety as we  approach the end of this year and the beginning of   2014.    

Earnings for Q3 2013 are Being   Reported

This week, a   significant number of U.S. corporations released their quarterly earnings   reports for the period ended September 30, 2013.   Reporting   companies include blue-chip names such as Coca-Cola, Johnson & Johnson,   Intel, Pepsi, Bank of America, IBM, Verizon, Google, and General Electric. Of   the 88 companies reporting, 62 (70 percent) had earnings-per-share numbers   that exceeded consensus analyst estimates, one company reported in-line with   expectations, and 25 (28 percent) reported earnings that were below   forecasts. In aggregate, the median earnings number was 2.3 percent above the   level forecast by Wall Street Analysts. It is encouraging that U.S.   corporations continued to generate strong results during the third quarter.   In addition, quarterly earnings reports indicate that balance sheets remain   quite healthy.

Economic Reports are Resuming with Re-Opened Government

As   discussed last week, one of the side-effects of the government shutdown is   that there was a delay in the release of official economic reports. Now that   the economists and statisticians are back to work, markets can expect a   higher-than-normal volume of as past-due data becomes available. For example,   on Monday alone, markets will digest over 30 different economic data points,   an unusually large number. That said, it will likely be a number of weeks  before all of the postponed publications are released. The shutdown also   impacted the collection of data for this month so it is likely that some of   October's reports will be released later in November than is typical. Most   investors expect the reports to indicate continued modest growth and tame   inflation.

Mark Sumner

 

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