Investors Pause as Government Shutdown Looms

Weekly Advisor Analysis
                                                                              October 1, 2013
Investors Pause as Government Shutdown Looms
Once again, the United States government has the investing public on its toes. As we approach
the conclusion of 2013’s third quarter, in which stocks have notched solid gains as evidenced by
the S&P 500 increasing 5.32 percent, the U.S. is facing its first government shutdown since
1995. Also this week, several other reports updating the status of the U.S. consumer confirmed
the same hesitant activity and worrisome outlook the Federal Reserve described two weeks ago
in their decision to maintain its $85 billion monthly asset purchasing program.

           Source: Yahoo! Finance

Congressional Cliffhanger Threatens Shutdown
The 2013 fiscal year in Washington ends Monday, September 30th at midnight, and, unless the
House of Representatives and the Senate reach an agreement on a bill that would, once again,
temporarily raise the U.S. debt ceiling, the U.S. government could shut down for the first time
since 1995. While certainly severe, and estimated by Moody’s to potentially reduce fourth
quarter U.S. economic growth by 1.4 percent, this wouldn’t be the first government shutdown
we’ve faced. In fact, since 1976 there have been 17 shutdowns with the last one lasting 21 days
from December 15, 1995 until January 6, 1996, according to USA Today. As the chart depicts
below, the last time we had a government shutdown, it negatively impacted economic growth.
Furthermore, given the current fragile state of the U.S. economy, disruption caused by a
government shutdown this time around has the potential to be even more damaging than the
previous incident.

Consumer Spending Sputters
Earlier this year, consumer spending began to show signs of renewed vigor that even had the
Federal Reserve considering a reduction in monetary stimulus. However, the most recent data
continues to show that U.S. spending is growing only at a moderate pace. According to a report
from the Commerce Department last week, household purchases advanced 0.3 percent in August.
While it was encouraging to see a bounce from some of the much lower gains seen in the second
quarter of this year, there appears to be a lack of momentum that may indicate a significant
future acceleration in spending, according to Bloomberg.

Consumer Sentiment Reaches Multi-Month Low
In conjunction with the moderate gains in consumer spending reported by the Commerce
Department, the University of Michigan consumer-confidence index also showed Americans
became less optimistic in regards to their level of future spending last month. The Thomson
Reuters/University of Michigan index of consumer sentiment declined to 77.8 in early
September, down from 82.1 in August and was the lowest level since April. Also, the
Conference Board’s reading of consumer confidence plunged to a two-year low of 86.6 in
September, as depicted below, marking the largest monthly decline since October 1990.
Furthermore, holiday sales forecasts are beginning to be released and early estimates are
predicting the weakest growth in holiday season spending since 2009. U.S. spending monitoring
firm ShopperTrak is forecasting sales at U.S. stores will increase only 2.4 percent this November
and December, compared to 3 percent growth last year, 4 percent growth in 2011, and a 3.8
percent advance in 2010. In other words, right now seems to be a pretty poor time for a
government shutdown.

Best regards,

Capital Planning

Securities offered through LPL Financial, Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the
named broker/dealer.

* 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 DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance
of the global equity securities that have readily available prices.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the
U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark
for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market
Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the
commodity futures market. The Index is composed of futures contracts on 19 physical commodities and
was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of
the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific
periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to
predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

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Sources:
http://www.cnbc.com/id/101068420
http://chart.finance.yahoo.com/z?s=%5eGSPC&t=5d&q=&l=&z=l&a=v&p=s&lang=en-US&region=US
(Chart)
http://www.bloomberg.com/news/2013-09-27/shutdown-would-shave-fourth-quarter-u-s-growth-as-much-
as-1-4-.html
http://www.mcclatchydc.com/2013/09/28/203539/house-maintains-stand-against.html#.Ukgcy4brxyV
http://www.usatoday.com/story/news/politics/2013/09/28/government-shutdown/2885749/
http://www.foreffectivegov.org/files/chart_4-1995_96_government_shutdown_hurt_growth.png (Chart)
http://www.cnbc.com/id/101068185
http://www.bloomberg.com/news/2013-09-27/consumer-spending-climbed-0-3-in-august-as-u-s-incomes-
rose.html
http://ei.marketwatch.com/Multimedia/2013/09/27/Photos/MG/MW-
BM022_PCE_20130927102615_MG.png?uuid=cb4c8c60-2780-11e3-bb56-00212803fad6 (Chart)
http://www.forbes.com/sites/chrisversace/2013/09/26/2013-a-not-so-merry-christmas-for-the-consumer-
and-retailers/
http://blogs.marketwatch.com/behindthestorefront/2013/09/17/retail-experts-foresee-weakest-holiday-
sales-since-2009/
http://www.reuters.com/article/2013/09/17/us-usa-retail-shoppertrak-idUSBRE98G05E20130917

http://bigpicture.typepad.com/photos/uncategorized/wsj_economy09272005184148.gif (Chart)