Weekly Update – July 20, 2012

European worries, particularly related to Spain, pushed markets lower on Friday and the Dow, after three healthy mid-week trading sessions, fell 121 points, or .9%. For the week, the Dow was up .4 % and for the year, the index is now up 4.9%.

European finance ministers finalized Spain’s bank bailout, but it was not enough to overcome news of another bailout request, this time by the Spanish region of Valencia. In reaction to the news, Spanish bond yields climbed above 7%, a level considered unsustainable. Also weighing heavily was a report announcing that Spain’s 2013 GDP is likely to fall .5% instead of rising .2%, and unemployment will remain above 24% into 2014.

In the US, retail sales, weekly jobless claims and existing home sales data all disappointed, while corporate earnings reports came in mixed. The yield on the five-year Treasury note fell to a record low on Friday, indicating a flight to safety and a cautious stance toward equities.

Our trust preferred portfolios have performed well in the first days of the third quarter, producing returns of approximately 2% versus .49% for the Dow through yesterday, July 19. Year to date through the same date, the trust preferred portfolios are returning over 11% on average versus 5.9% for the Dow. Though oil fell $1.22 to $91.44 on Friday, it was still up 5% for the week on fears that the civil unrest in Syria could further degenerate.

Economic data of interest next week include June new home sales on Wednesday, weekly jobless claims on Thursday and the first estimate of second quarter GDP on Friday. Expect new home sales to increase slightly from May, initial claims to report in the 370,000 range and the GDP number to show growth of approximately 2% in the second quarter.

Have a good weekend,

James Skjong