Wealth Management Economic Update May 31, 2016

U.S. and World News

  • While there weren’t many resolutions reached at last weekend’s G7 summit of finance ministers and central bankers in Japan, the U.S. issued a fresh warning to the host country against intervening in the currency markets. Japan has been very active in trying to devalue their Yen currency in an attempt to boost growth, a practice that has been frowned upon by the country’s trading partners.
  • medical_000071969633_320Having been hit with substantial losses in Obamacare’s first few years, major health plans are looking for premium boosts of 10% to 20% or more in many states. Proposals for increases need to be approved by state regulators before they can be passed on to customers. In addition to higher than expected costs and a population of new enrollees skewing towards the unhealthy end of the spectrum, many of the relief programs in place to cushion insurers’ losses will come to an end in 2017. While some state insurance commissioners are taking a tough public stance in regard to approving increases, experts say that they will unlikely be able to deny the requests because the losses being sustained are legitimate and they are required by law to ensure plans have funds to pay out claims.

Markets

  • Equity markets moved higher this week. The S&P 500 gained 2.32% and closed at 2099. The Dow Jones rose 2.15% and closed at 17,873. So far in 2016, the S&P is up 3.61% and the Dow is up 3.74%.
  • Interest rates did not move much this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.39% and 1.85%, respectively.
  • The spot price of WTI Crude Oil gained 3.75% this week to close at $49.54 per barrel. WTI Crude is up 21.72% in 2016.
  • The spot price of Gold lost 3.22% this week, closing at $1,212.38 per ounce. Year to date, gold prices are up 14.26%.

Economic Data

  • Initial jobless claims came in at 268,000 which was a decrease from last week’s reading of 278,000. State-level details noted that prior increases in Missouri and Michigan, which were due to temporary auto plant shutdowns, reversed this week. The four week moving average for claims moved up to 278,500.
  • Pending home sales increased by 5.1% during the month of April, much higher than expectations of 0.7%. This was the largest monthly increase in pending home sales since October 2010. By region, sales rose in the West (+11.4%), South (+6.8%) and Northeast (+1.2%), but declined in the Midwest (-0.6%)
  • 1st quarter GDP was revised up to 0.8% from an initial reading of 0.5%. Most of the upward revision was due to larger inventory accumulation and a narrower trade deficit than was reported in the first estimates.

Fact of the Week

  • May 26th marked the 120th Anniversary of the opening of the Dow Jones Industrial Average in 1896. Of the original 12 members of the index, only General Electric remains in the index today. Rounding out the other 11 original companies which were the economic stalwarts of its time were: The American Cotton Oil Company, The American Sugar Refining Company, American Tobacco Company, Chicago Gas Light & Coke Company, Distilling & Cattle Feeding Co., The Laclede Gas Company, National Lead Company, North American Company, Tennessee Coal, Iron & Railroad Company, The United States Leather Company and The United States Rubber Company.

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
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.

 

What You Need to Know When Starting Your Own Business

Jane Miller, Vice President—Business Banking

Miller, JaneWhen you’re ready to talk about making the leap from dreaming about starting your own business to the reality of having one, so are we. And, talking is exactly where we’ll start.

Because, this is about more than helping you open a checking account and advising you on how to get your documentation in order. It’s about really getting to know your business, your potential target market and your goals so we show you the right mix of products and services to help you grow.

Get Services Matched to Your Anticipated Needs
Unlike many banks, we make all of our services available to business customers, regardless of their size, as long as it makes sense. This means you don’t have to achieve certain revenue levels to gain access to what you need, when you need it. For instance, if your business is to be a one-person operation, we want to make sure you have access to all of our online and mobile services—from deposit to payment services. Because when you are doing it all, the last thing you need is to spend time away from serving your customers to do your banking.

Find Affordable Borrowing Options
The trickiest part about a small business owner is often financing—making sure you have sufficient funding and additional sources lined up to ensure ongoing liquidity. Many new business owners assume they’ll need to seek alternative online financing sources to do this. But, as a full-service bank, we will work with the business owner to provide options for them to make funds available at a lower interest rate and with more convenient repayment terms than many of the newer alternatives.

Also, unlike many larger banks that require business owners to take on personal loans to fund their businesses, we can structure nearly any size financing. We can even transition a business owner who has already borrowed elsewhere into a more stable lending structure to arrange a more affordable payment and ease stress on their liquidity.

Start Thinking Like an Owner
Once you become a small business owner, our full-service bank offerings can also help you by addressing more than your immediate cash management needs. We can also work with you to set up the type of employee benefits you’ll need to attract and retain quality workers and to secure your own future.

From retirement plans to payday services and cash management tips, we’re here to help you become the business you want to be.

Start-Up Resources for Sole Proprietors
While we’re always ready to serve as a support and sounding board, here are some other resources you may want to take a look at to make sure you are in compliance with state and local regulations:

Wealth Management Economic Update May 16, 2016

U.S. and World News

  • President Dilma Rousseff has been suspended from office after an overwhelming 55-22 senate vote to start an impeachment trial and Vice President Michel Temer will assume the role as President for up to six months while the trial is ongoing. Former Central Bank Chief Henrique Meirelles who is liked among investors, will assume the role as Finance Minister. Despite the majority, Rousseff continues to ignore calls to resign and states that she will prevail in the trial.
  • The U.S congress continues to work towards a solution to fix Puerto Rico’s debt situation after the U.S territory released its fiscal 2017 forecast which indicated that their economy would likely contract for the fifth year in a row. The House of Representatives will reveal a plan in the near future that will stipulate how Puerto Rico’s many creditors will be prioritized.
  • oil_drill_saudi_000023179128_320Saudi Arabia has named Khalid al-Falih as the new oil minister, replacing Ali al-Naimi who has been oil minister since 1995. Khalid al-Falih is currently the chairman of Aramco, a state owned oil company. Al-Falih stated that he does not intend to bring changes to Saudi Arabia’s current strategy of defending market share and maintaining stable petroleum policies.

Markets

  • Equity markets declined this week. The S&P 500 fell 0.51% and closed at 2047. Likewise, the Dow Jones dipped 1.16% and closed at 17,535. So far in 2016, the S&P is up 0.13% and the Dow is up 0.63%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.21% and 1.70%, respectively.
  • The spot price of WTI Crude Oil gained 3.61% this week to close at $46.27 per barrel. WTI Crude is up 13.66% in 2016.
  • The spot price of Gold lost 1.16% this week, closing at $1,274.06 per ounce. Year to date, gold prices are up 20.07%.

Economic Data

  • Initial jobless claims came in at 294,000 which was an increase from last week’s reading of 274,000. The increase was expected and is estimated to be attributed to seasonal factors in New York State. The four week moving average for claims ticked up to 268,000.
  • Retail sales increased 1.3% (mom) in April and beat expectations for the month. The gain reflected both higher energy prices and department store sales. Non-store retailers (online shopping) grew at a rapid monthly pace of 2.1%.
    • The Producer Price Index (PPI) increased by 0.2% (mom) in April which was supported by higher energy prices as food prices were down (-0.4%). PPI excluding food and energy rose 0.1% for the month.
  • The University of Michigan Sentiment Index preliminary release for May climbed to 95.8 from 89.0 with expectations of only a small increase. The rise in the index was driven by a rise in forward-looking consumer expectations.

Fact of the Week

  • According to the National Endowment for Financial Education, 45% of the 118 million households in the United States live “paycheck-to-paycheck”.

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
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 May 9, 2016

U.S. and World News

  • Puerto Rico missed a $422 million bond payment due to its Government Development Bank this week, pushing the island’s debt crisis to a new level. The missed payment is the largest so far by Puerto Rico and is believed by many analysts to be a precursor to additional defaults this summer, when more than $2 billion in bonds come due. U.S. Treasury Secretary Jack Lew warned in a letter to Congress that a U.S. “taxpayer-funded bailout may become the only course available” if the proposed restructuring legislation on the table is not approved.
  • politician_podium76797371_320Texas Senator Ted Cruz and Ohio Governor John Kasich have both officially suspended their presidential campaigns following large losses in the Indiana primary this week. This leaves Donald Trump as the presumptive Republican nominee for the 2016 Presidential Election. Trump’s next step seems to be the selection of a running mate for which he reportedly has a short list. On the Democratic side, Bernie Sanders won the Indiana primary and remains in the race with Hilary Clinton, though his path to nomination is a very narrow one.

Markets

  • Equity markets were down marginally this week. The S&P 500 fell 0.33% and closed at 2,057. Likewise, the Dow Jones dipped 0.10% and closed at 17,741. So far in 2016, the S&P is up 1.37% and the Dow is up 2.67%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.23% and 1.78%, respectively.
  • The spot price of WTI Crude Oil dropped 2.81% this week to close at $44.63 per barrel. WTI Crude is up 9.63% in 2016.
  • The spot price of Gold lost 0.38% this week, closing at $1,288.60 per ounce. Year to date, gold prices are up 21.44%.

Economic Data

  • Initial jobless claims came in at 274,000 which was an increase from last week’s reading of 257,000. The Labor Department noted no special factors in the data. The four week moving average for claims ticked up to 258,000.
  • The monthly non-farm payrolls report showed an increase of 160,000 jobs in April, below expectations of 200,000 jobs. With 19,000 of negative revisions to the prior two months’ figures, the three month average of job gains stands at 200,000.
    • The headline unemployment rate remained at 5.0%, missing expectations of 4.9%. The miss was largely due to a 0.2% decline in the labor force participation to 62.8%.
    • Average hourly earnings rose 0.3% in April, in line with expectations. Over the last 12 months, wages have grown 2.5%.

Fact of the Week

  • Of the 5.26 million existing home sales in 2015, 30% (1.58 million) were completed by first-time home buyers. (Source: National Association of Realtors)

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
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 May 2, 2016

U.S. and World News

  • Federal_Reserve_340The Federal Reserve kept interest rates at their current levels following their April policy meeting this week. Kansas City Fed President Esther George lodged his dissent of the decision, favoring a rate increase at this meeting. The post-meeting statement was little changed from the March statement, though the portion about global economic risks was dropped, showing an improvement in developments abroad. The statement’s tone, while dovish, leaves the door open for a rate hike at the next meeting in June.
  • The Bank of Japan also had a policy meeting this week but disappointed markets by holding off on increasing its already massive monetary easing program. After instituting negative interest rates on depositors, the Japanese central bank stated that they preferred to take more time to understand this policy’s effect before taking further action. Japan continues to struggle to achieve its growth and inflation targets, causing the expectation for action at this meeting.
  • Saudi Arabian Prince Mohammed bin Salman unveiled what he calls “Saudi Vision 2030” this week. It is a plan to overhaul the kingdom’s economy in order to reduce its massive reliance on oil revenues, which currently make up 80% of its income. Salman, who is age 31, intends to create the world’s largest sovereign-wealth fund with over $2 trillion in assets; to be partially funded by selling 5% of state controlled Saudi Aramco in an IPO.

Markets

  • Equity markets retreated this week. The S&P 500 fell 1.24% and closed at 2,065. Likewise, the Dow Jones dipped 1.28% and closed at 17,774. So far in 2016, the S&P is up 1.70% and the Dow is up 2.77%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.29% and 1.83%, respectively.
  • The spot price of WTI Crude Oil rose 5.17% this week to close at $45.99 per barrel. WTI Crude is up 12.97% in 2016.
  • The spot price of Gold gained 4.91% this week, closing at $1,293.53 per ounce. Year to date, gold prices are up 21.91%.

Economic Data

  • Initial jobless claims came in at 257,000 which was an increase from last week’s reading of 247,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 256,000.
  • The Case-Shiller home price index rose 0.7% in February, slightly below expectations of 0.8%. All of the 20 cities making up the index saw home price gains. On a year over year basis, home prices as measured by Case-Shiller have risen 5.4%.
  • The headline Personal Consumption Expenditures index (PCE, measure of inflation) rose by only 0.05% in March, below expectations of 0.1%. On a year over year basis, headline PCE has increased by 0.8%.
    • Core PCE (excludes food and energy and is the preferred inflation measure of the Fed) also rose only 0.05% in March, below a 0.1% forecast. Over the last 12 months, core prices have risen only 1.6%, well below the Fed’s 2% inflation target.
  • Real GDP for the 1st quarter of 2016 increased by 0.5% in the initial estimate, below expectations of 0.7%. The report was mixed with consumer spending rising by 1.9% and private investment falling by -3.5%.

Fact of the Week

  • According to an April 2016 Gallup poll, 37% of college graduates surveyed believe that stocks are the top “long-term investment” available to them, beating out bonds, real estate, gold or CDs. By contrast, only 17% of non-college graduates believe that stocks are the best investment.

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
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.