Broker Check
181 East Main Street, Suite 7 Hendersonville, TN
545 N. Mt. Juliet Road, Mt. Juliet, TN

615-826-5749

Contact Us Today

 


February 25, 2013: Markets Decline Ahead of Sequestration

| February 26, 2013
Share |

Markets slid last week as fears surrounding sequestration, Fed policy, and disappointing economic reports finally drained investor optimism. The S&P 500 snapped its seven-week winning streak, ending the week with a 0.28% loss; the Dow edged back into positive territory, closing up 0.13%, and the Nasdaq trimmed 0.95%.[i]

On the sequestration front, President Obama phoned up Speaker of the House John Boehner and Republican Senate Leader Mitch McConnell, but no announcement was forthcoming, indicating that the two sides are still at an impasse with just a few days remaining before the March 1 sequestration deadline.[ii] While it’s possible that both sides may come to an agreement before mandatory spending cuts strike, it's too early to know what the outcome will be. 

Spending cuts would cause major disruptions to government activities and stop payments to some government-funded organizations (many of whom are in the defense sector.) While the total economic cost of sequestration is difficult to calculate, some analysts estimate that sequestration would contribute to the loss of 700,000 jobs (including drawdowns in the armed forces,) and shave 0.6% off of GDP this year.[iii] While these losses may not be catastrophic in terms of the overall economy, slower growth, increased unemployment, and reduced consumer confidence certainly won't help the economic recovery. 

Investors also reacted negatively to last week’s Federal Open Market Committee (FOMC) January meeting minutes, which indicated that Fed stakeholders are concerned about the potential costs and risks of future assets, meaning that the Fed may be cutting short its quantitative easing initiative. Hopefully, we’ll find out more when Ben Bernanke speaks before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.[iv] Applications for jobless claims increased for the first time in three weeks, returning to pre-holiday season levels and showing little improvement.[v] While employment appears to be stable, some analysts have expressed concern that the pace of hiring is not picking up.

Bottom line: Equity markets may continue to respond nervously to the upcoming sequestration deadline, though a deal could lead to a market rally. As lawmakers tackle the countrys spending issues and the Fed clarifies future actions, we won't be surprised by continued volatility. In the meantime, well keep you updated with news on sequestration talks and related issues. Should you have questions about how these matters affect your long-term financial plans, please feel free to reach out to us. We hope you have a great week!

 

ECONOMIC CALENDAR:

Monday: Dallas Fed Mfg. Survey
Tuesday: S&P Case-Shiller HPI, New Home Sales, Consumer Confidence, Ben Bernanke Speaks: 10:00am
Wednesday: Durable Goods Orders, Ben Bernanke Speaks: 10:00 AM ET, Pending Home Sales Index, EIA Petroleum Status Report
Thursday: GDP, Jobless Claims, Chicago PMI
Friday: Motor Vehicle Sales, Personal Income and Outlays, PMI Manufacturing Index, Consumer Sentiment, ISM Mfg. Index, Construction Spending


 

 Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.



The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. 

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. 

The Nasdaq is a computerized system that facilitates trading and provides price quotations on some 5,000 of the more actively traded over-the-counter stocks


[i] http://www.briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-february-19-2013.htm

[ii] http://news.yahoo.com/obama-calls-boehner-mcconnell-budget-cuts-loom-190326094.html

[iii] http://www.ibtimes.com/cost-sequestration-700000-jobs-may-be-lost-across-board-budget-cuts-through-2014-gdp-growth-may-slow

[iv] http://www.cnbc.com/id/100484108

[v] http://www.bloomberg.com/news/2013-02-21/jobless-claims-in-u-s-increase-for-first-time-in-three-weeks.html

Share |

Check the background of your financial professional on FINRA's BrokerCheck.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Danny Prestage, a registered representative, offers securities through Triad Advisors, LLC. Member FINRA & SIPC. Wesley Wood and Danny Prestage (Investment Advisor Representatives) offer Investment advisory services through Key Capital Management, Inc. Key Capital Management, Inc. and Triad Advisors, LLC. are not affiliated.

We currently have individuals licensed to offer securities in the states of; Arizona, Florida, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, West Virginia, Wisconsin. This is not an offer to sell securities in any other state or jurisdiction.

Wood Financial Group, LLC is also a tax preparation business, performed by Wesley Wood and Danny Prestage. This activity is separate from and independent of Triad Advisors and its affiliates.

Triad Advisors and its affiliates are not in the business of giving tax advice, consultation and/or tax preparation services and are not responsible for any outside businesses or persons providing such services.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher, and host are not providing legal, accounting or specific advice to your situation.