Wealth Management Economic Update February 29, 2016

U.S. and World News

  • britain_000085343391_320Despite last week’s report that an agreement between Britain and European Union was on track, British Prime Minister David Cameron has announced a historic referendum to decide whether the United Kingdom should remain in the EU. Though Cameron himself strongly favors remaining in the economic bloc, he lost the backing of London Mayor Boris Johnson, who became the most high profile supporter of a British exit, or Brexit. The referendum is set to take place on June 23rd and the announcement set off a plunge in the value of the British Pound.
  • Finance ministers and central bank governors from the world’s 20 leading economies have convened in Shanghai to discuss a response to the dim global economic landscape. G20 participants will discuss many issues including the plunge in commodity prices, increased market volatility, exchange rates and the slowdown of China’s economy.

Markets

  • Markets continued to gain back ground this week. The S&P 500 gained 1.61% and closed at 1,948. Likewise, the Dow Jones rose 1.52% and closed at 16,640. So far in 2016, the S&P is down 4.33% and the Dow is down 4.03%.
  • Interest rates rose modestly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.24% and 1.77%, respectively.
  • The spot price of WTI Crude Oil gained 3.43% this week to close at $32.43 per barrel. WTI Crude has fallen 16.08% in 2016.
  • The spot price of Gold decreased 0.27% this week, closing at $1,223.46 per ounce. Year to date, gold prices are up 15.30%.

Economic Data

  • Initial jobless claims came in at 272,000 which was an increase from last week’s reading of 262,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 272,000.
  • The Case-Shiller home price index rose 0.8% in December, slightly lower than expectations of 0.9%. Of the 20 city index, 19 showed price increases during the month. Over the last 12 months, home prices as measured by the index have risen 5.7%.
  • The headline PCE index (measure of inflation) rose by 0.1% in January, better than expectations of flat prices. Over the last 12 months, prices as measured by PCE have risen 1.3% vs. forecasts of 1.1%. Core PCE (excludes food and energy prices, preferred measure of inflation used by the Fed) was up 0.26% in January, narrowly beating expectations of 0.2%. Over the last 12 months, core PCE is up 1.7%, closer to the Federal Reserve’s goal of 2.0% inflation.
  • GDP growth in the 4th quarter of 2015 was revised up to 1.0% from the initial estimate of 0.7%. This was better growth than had been expected by the consensus (0.4%).

Fact of the Week

  • According to the National Association of Home Builders, over the last 30 years, the average size of a new single family home built in the U.S. has increased by 935 square feet to a total of 2,720 square feet. This is roughly the equivalent of adding a 30’ by 31’ room.

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 CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Wealth Management Economic Update February 23, 2016

U.S. and World News

  • Helping to at least stabilize the oil markets temporarily, top officials from Russia, Saudi Arabia and several key OPEC members have agreed to freeze crude oil output at January levels. Iran was notably absent from this agreement as the country is planning ramp up oil output to regain market share following years of international sanctions that limited the country’s production.
  • cuba_field_000015487392_320U.S. and Cuban officials have signed an agreement that will reopen airline services between the two nations for the first time in more than 50 years. Meanwhile, President Obama is planning a trip to the island nation next month; marking the first time in more than 80 years a sitting U.S. President will visit Cuba. The trip to Havana would cap off one of Obama’s foreign policy goals of normalizing relations with Cuba and moving toward expanded commercial relations after a 54 year hiatus.
  • Minutes from the Federal Reserve’s January meeting were released this week and were broadly in line with recent comments made by Fed officials. The minutes emphasized continued progress in labor market conditions and positive fundamentals but also noted increased downside risks associated with recent tightening of financial conditions and weaker growth abroad. Fed officials remain data dependent and would like to see more information in order to assess if further rate hikes are warranted.
  • Fears that Britain will leave the European Union had heightened as Prime Minister David Cameron has been engaging in tough negotiations to limit concessions necessary for Britain to stay in the bloc. Diplomats who have been negotiating around the clock during a two-day summit on issues such as welfare curbs and financial regulation have reached a deal late Friday afternoon and it appears now that Britain will remain in the EU.

Markets

  • Markets continued on from last Friday’s rally to finish up on the week. The S&P 500 gained 2.89% and closed at 1,918. Likewise, the Dow Jones rose 2.71% and closed at 16,392. So far in 2016, the S&P is down 5.87% and the Dow is down 5.50%.
  • Interest rates were little changed this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.20% and 1.74%, respectively.
  • The spot price of WTI Crude Oil gained 1.53% this week to close at $29.89 per barrel. WTI Crude has fallen 21.69% in 2016.
  • The spot price of Gold decreased 0.82% this week, closing at $1,227.77 per ounce. Year to date, gold prices are up 15.71%.

Economic Data

  • Initial jobless claims came in at 262,000 which was a decrease from last week’s reading of 269,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 273,250.
  • Housing starts unexpectedly declined by -3.8% in January, below expectations of a 2.0% gain. More severe weather in January compared to December may have been a factor. Both multi-family (-3.7%) and single family (-3.9%) housing starts were weaker than expected.
  • The Consumer Price Index (measure of inflation) was unchanged in January, more than expectations for a -0.1% decline in prices, despite a 2.8% decline in energy prices. Core CPI (excludes food and energy costs) increased by 0.3% in January, the largest gain since March 2006. This was better than expectations of a 0.2% gain. Over the last 12 months, CPI is up 1.4% and Core CPI is up 2.2%.

Fact of the Week

  • According to the Institute of Policy Studies, the 20 wealthiest Americans are worth a combined $732 billion. This is more than combined net worth of the bottom 50% of the U.S. population which stands at 323 million people.

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 CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

A Collection Option That Pays

Karen Nelson, Senior Vice President—Treasury Management

Karen Nelson, Senior Vice President—Treasury ManagementOur still relatively new Customer Payment Portal (CPP) service is proving very useful to a wide range of clients. From non-profits involved in fundraising activities for local causes and religious organizations to daycare centers, unions and medical practices, all have experienced improved collection efficiencies and cash flow.

The reason is simple. The service reduces the act of making a donation or payment to a single button for donors or customers. That single-button option automatically launches an online payment form. The actual processing of payment information is handled externally by a third-party payment processor. This removes the burden of collection from office staff, freeing them up for other activities.

CPP accommodates direct debit payments from checking and savings accounts, all major credit cards and payments made through PayPal. While convenient for our banking clients’ donors and customers, it also helps reduce the occurrence of returned checks or skipped payments. Recurring or installment payments can also be set up, a feature that has been particularly useful for bank clients like orthodontists whose patients may take years to pay for their services.

In addition to the convenience of enabling donors or customers to pay online—regardless of office hours—the service also gives users access to their payment or donation history for tax purposes directly through CPP.

As a software-based add-on to your website, the CPP button is customizable to whatever call-to-action you require. The process also assumes responsibility for PCI compliance, making it even easier to implement credit card payments for smaller organizations with volunteer staffs.

Basic Requirements

To implement CPP, your organization, practice or company needs to meet the basic requirements for credit card processing. These involve having a refund policy, a privacy policy and SSL certification for your website. If meeting these credit card processing requirements is not feasible, there is an option for just accepting direct debits from checking and savings accounts through CPP.

To discuss how to speed up the collection of your receivables and offer a secure, 24/7 payment option while improving reporting and operating efficiencies, contact us. We’d be happy to show you how this feature can make a difference for your office.

Wealth Management Economic Update February 15, 2016

U.S. and World News

  • mosquito_320President Obama has asked Congress for $1.8 billion in emergency funding to combat the Zika virus, the disease that is transmitted primarily from bites of Aedes mosquitoes, but has also been found to be passed through sexual contact or blood transfusion. The funds would be used for research for vaccines and diagnostics, as well as helping public health systems. Meanwhile, cases of Zika have been identified in 20 U.S. states and in addition to potential birth defects, the virus has caused two miscarriages in the U.S. according to the Center for Disease Control.
  • Federal Reserve Chair Janet Yellen conducted her regular testimony to Congress this week but did not clarify the Central Bank’s path for raising rates. While she did not take a March rate hike off the table, she did state that, “Financial conditions in the United States have recently become less supportive of growth.” Confusing markets further, Yellen stressed that the Fed was not on a preset path to interest rate normalization but also wouldn’t rule out negative rates at some point.
  • Sweden’s central bank has lowered key interest rates further into negative territory. The Swedish Central Bank said it’s prepared to use its full toolbox of measures as it battles to revive inflation and keep its currency from appreciating. Following Japan’s surprising move into negative rate territory last month, 25% of the world’s GDP now comes from countries with negative interest rates.

Markets

  • Markets continued their volatility and despite a rally on Friday ended the week in negative territory. The S&P 500 fell 0.73% and closed at 1,865. Likewise, the Dow Jones dropped 1.23% and closed at 15,974. So far in 2016, the S&P is down 8.53% and the Dow is down 8.00%.
  • Interest rates continued to slide lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.20% and 1.74%, respectively.
  • The spot price of WTI Crude Oil fell 5.57% this week to close at $29.17 per barrel. WTI Crude has fallen 25.58% in 2016.
  • The spot price of Gold advanced 5.55% this week, closing at $1,238.58 per ounce. Year to date, gold prices are up 16.73%.

Economic Data

  • Initial jobless claims came in at 269,000 which was a decrease from last week’s reading of 285,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 281,250.
  • Retail sales increased by 0.2% in January, beating expectations of 0.1%. Core retail sales (excludes autos and gas) were also strong, increasing 0.6% and beating forecasts of 0.3%.
  • The University of Michigan consumer sentiment index declined in the preliminary February estimate to a level of 90.7 from 92.0 in January. Both consumers’ assessment of current economic conditions and their expectations for the future declined during the month.

Fact of the Week

  • The face value for the most expensive ticket for Super Bowl 1 in Los Angeles in 1967 was $12. The face value for the most expensive ticket to Super Bowl 50 last Sunday was $1,800. This increase from 1967 to 2016 represents a 10.8% compounded annual increase, besting the return seen in the S&P 500 during that time frame of 10.1% total return per year. (Source: Super Bowl, BTN Research)

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 CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Mortgages Built to Order

Jeri Ott, Vice President/Mortgage Loan Originator

Jeri_OttWhen it comes to residential mortgages, most banks offer the same lineup. These off-the-shelf solutions are structured to conform to the mortgage agencies’ guidelines (Fannie Mae and Freddie Mac) so that they can be resold in the secondary market.

As a borrower, this means if your property or financial situation does not conform to these standards, your mortgage request will be denied.

We Do Things a Little Differently
Although we sell some of our conforming mortgages on the secondary market, Old Second actually holds many of the mortgages we originate for our own portfolio.

We do this, in part, because properties in this area tend to be larger and many are income producers, such as farms and equestrian estates. These types of properties don’t qualify for conforming mortgages.

Borrowers who buy vacant land with plans to build their dream home also have trouble obtaining conforming loans. In these situations, not only do we lend, we don’t require our borrowers to offer additional assets to collateralize the loan over the lot’s value. When it comes to construction loans, we’re able to lend 80 percent based on the appraisal of architectural plans. This opens up the option of new construction to more people. We also allow our borrowers to be their own general contractor, which can offer additional cost savings when building on a vacant lot.

Keeping It Local
When we do hold a mortgage for our portfolio, we also service the mortgage. While few borrowers still make their payments at the local branch, borrowing locally means if any questions or issues arise, you know exactly who to call. That accountability is extended to all of our customers, even if we didn’t originate the loan and don’t service it. Advocating on their behalf by jumping on a call with their servicer or escrow agent to clear up an issue—when asked and when appropriate—is just something we do.

While a portfolio loan can be suitable for some borrowers, it may not be the right choice for everyone. Applying for a mortgage just isn’t a situation where one size fits all. That’s why it’s important to sit down with a lender before making any decisions. We can look at your whole picture and help you choose the right mortgage type for you and your property. After all, the costs associated with each loan type can have a significant impact on your finances not only today but also for years to come.

Present at Closing
All of our residential closings are held in our local branches. This way we can literally stay with each mortgage until it’s completed and funded. If last-minute questions arise or documents need amending, we can address them within minutes.

For more information on the different types of loans we can offer, download this handy comparison chart. Then, call us. We look forward to sitting down with you and talking things through so that you choose the best loan structure for your situation.

 

Wealth Management Economic Update February 8, 2016

U.S. and World News

  • The first known case of Zika virus transmission in the U.S. was reported this week by the Centers for Disease Control and Prevention. This follows the World Health Organization’s declaration that the outbreak of the virus in South and Central America, which has caused serious birth defects, is an international health emergency. This was the fourth time the WHO has proclaimed a global health threat since 2007. Previously thought to only be transmitted by certain mosquitoes, the discovery that the U.S. case of the virus was sexually transmitted is an alarming development. Several large pharmaceutical companies have announced projects to develop a vaccine against the Zika virus.
  • The United Nations has suspended Syria peace talks in Geneva until later this month, after Syrian government forces (backed by Russian air strikes) escalated an offensive by cutting off rebel supply lines. The Syrian civil war has killed 250,000 people over five years and forced millions of other to flee their homes, creating a growing migrant crisis in Europe.
  • new_zealand_aukland_320The monumental Trans-Pacific Partnership was signed in New Zealand this week by ministers from its 12 member nations. However, the massive trade pact will still require years of negotiations before it becomes a reality as the deal will undergo a two year ratification period in which the final text must be agreed upon before implementation. The deal faces challenges in the U.S. as more members of Congress have pulled support for the deal as a way to strengthen their re-election bids. A vote on the deal in Congress isn’t expected to take place until after the elections in November.

Markets

  • Markets continued their volatility this week, reacting particularly poorly to the monthly jobs report. The S&P 500 fell 3.04% and closed at 1,880. Likewise, the Dow Jones dropped 1.54% and closed at 16,205. So far in 2016, the S&P is down 7.85% and the Dow is down 6.84%.
  • Interest rates continued to slide lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.25% and 1.85%, respectively.
  • The spot price of WTI Crude Oil fell 7.70% this week to close at $31.03 per barrel. WTI Crude has fallen 16.23% in 2016.
  • The spot price of Gold advanced 4.97% this week, closing at $1,173.83 per ounce. Year to date, gold prices are up 10.62%.

Economic Data

  • Initial jobless claims came in at 285,000 which was an increase from last week’s reading of 278,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 284,750.
  • The January non-farm payrolls report showed a gain of 151,000 in the month, lower than consensus estimates of 190,000. December and November’s figures were revised down a combined 2,000 jobs, bringing the 3 month average job gains to 231,000.
    • The headline unemployment rate fell to 4.9%, better than expectations that it would remain at 5.0%. However, the labor force participation rate ticked up to 62.7% from last month’s 62.6%.
    • Average hourly earnings showed an increase of 0.5% in January, beating estimates of 0.3% growth. This may reflect the effects of several states raising the minimum wage on January 1st. Wage growth over the last 12 months now stands at 2.5%.
  • The PCE price index (measure of inflation) fell -0.1% in December, lower than the forecast that prices would remain flat. The Core PCE (excludes food & energy, Fed’s preferred measure of inflation) only rose 0.04% compared to forecasts for 0.1% growth, continuing the trend of subdued inflation. Over the last 12 months, core PCE inflation has risen 1.4%.

Fact of the Week

  • The average price of gasoline nationwide as of 2/5/16 was $1.76 per gallon. The average price of gas in 1966 (50 years ago) was $0.32 per gallon. After adjusting for inflation over the last 50 years, the $0.32 price in 1966 is equivalent to $2.38 in 2016 dollars, meaning today’s real (inflation adjusted) price of gas is 26% cheaper than 50 years ago. (Sources: AAA, Department of Labor)

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 CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Wealth Management Economic Update February 1, 2016

U.S. and World News

  • tokyo_000048284428_320The Bank of Japan stunned financial markets this week by announcing negative interest rates for the first time in an effort to push Japan’s economy toward higher growth. BOJ Governor Haruhiko Kuroda slashed the deposit rate on excess reserves with the central bank from +0.1% to -0.1% and stated that the policy would remain in place “as long as it is necessary.” Many economists expected the BOJ to remain accommodative but the decision to push the deposit rate into negative territory was a big surprise.
  • Meanwhile, the Federal Reserve held a policy meeting this week and made no change to its monetary policy, leaving interest rates unchanged. Comments from the committee were ‘dovish’, saying they are monitoring current economic and financial developments closely. The statement acknowledged recent tightening of financial conditions and international risks. The committee made no comments regarding the future path of interest rate hikes so attention now turns to the March Fed meeting.

Markets

  • Markets finished the week positive, led by a strong rally on Friday. The S&P 500 gained 1.76% and closed at 1,940. Likewise, the Dow Jones rose 2.32% and closed at 16,466. So far in 2016, the S&P is down 4.97% and the Dow is down 5.39%.
  • Interest rates ended the week lower, despite the rally in equities. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.34% and 1.93%, respectively.
  • The spot price of WTI Crude Oil gained 4.63% this week to close at $33.68 per barrel. WTI Crude has fallen 11.76% in 2016.
  • The spot price of Gold advanced 1.84% this week, closing at $1,118.19 per ounce. Year to date, gold prices are up 5.38%.

Economic Data

  • Initial jobless claims came in at 278,000 which was a decrease from last week’s reading of 293,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 283,000.
  • The Case-Shiller home price index rose 0.9% in November, beating expectations of 0.8%. All 20 cities in the index showed price gains during the month. Over the last 12 months, home prices have risen 5.8% as measured by the index.
  • The Employment Cost Index (ECI, measures wage growth) increased by 0.6% in the 3rd quarter, in line with expectations. On a year over year basis, total compensation has increased 2.0%.
  • The first estimate of 4th quarter Real GDP showed growth of 0.7%, slightly below expectations of 0.8%. With this 4th quarter estimate, U.S. GDP growth was 2.4% in 2015.

Fact of the Week

  • With 2015 GDP coming in at 2.4%, this marks the 10th consecutive year of sub 3% growth in the United States. The next longest streak in U.S. history of sub 3% growth was the four years from 1930-1933 (during the Great Depression). (Source: Commerce Department)

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 CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.