Fed Chair, Germany, Zimbabwe: Wealth Economic Update Nov. 24, 2017

U.S. and World News

  • germany-619762776_360In one of her last appearances as Fed Chairman, Janet Yellen discussed the direction of policy and Wall Street oversight at NYU Stern School of Business.  The scheduled discussion comes after Yellen stated her resignation from the Fed’s Board of Governors once Jerome Powell is sworn into the office.  Her departure will leave yet another vacancy at the central bank.
  • Germany  has been pushed into political uncertainty due to Angela Merkel’s failure to form a three-way coalition government.  The news dropped the euro as much as 0.7% to $1.1720 overnight. Immigration, climate change, Europe, and taxation were stated to be the irreconcilable differences that caused the Free Democrats to pull out unexpectedly, despite more than four weeks of negotiations. After the formation of the coalition collapsed, Angel Merkel stated she would prefer fresh elections to reigning with a minority government.  It is the worst governing crisis in the history of Germany’s post-WWII democracy according to President Frank-Walter Steinmeier. He has compelled all parties in the parliament “to serve our country” and form a government.
  • Vice President Emmerson Mnangagwa will be replacing President Robert Mugabe as leader of Zimbabwe’s ruling ZANU_PF party.  The dismissal follows a de facto military coup and will likely send political shockwaves across Africa.  Mnangagwa will focus on rebuilding ties with the outside world and stabilizing an economy in free fall.

Markets

  • Markets were up for the week with the S&P up 0.93% reaching a record high of 2,602. The Dow Jones rose 0.89% for the week and closed at 23,558. Year to date, the S&P is up 18.36% and the Dow is up 21.83%.
  • Interest rates were flat for the week with the 5 year and 10 year U.S. Treasury Notes yielding 2.06% and 2.34%, respectively.
  • The spot price of WTI Crude Oil increased by 3.93% this week, closing at $58.95 per barrel. Year to date, Oil prices have risen 3.44%.
  • The spot price of Gold ended the week off by 0.30%, closing at $1,288.58 per ounce. Year to date, Gold prices are up 12.29%.

 Economic Data

  • Initial jobless claims dropped 13,000 from last week, coming in at 239,000. Filings also fell for Puerto Rico’s 10-year high, which continues to deal with the aftermath of Hurricane Maria.  The four week moving average for claims rose to 240,000.
  • Existing Home sales rose 2.0% in October, beating consensus expectations of 0.2%. Sales increases were broad-based across property types with single family sales +2.1% and condos and co-ops +1.7%.

Fact of the Week

  • Over $40 Billion of gift cards value has gone unused.  With over $150 Billion in gift card sales projected in 2017, it is estimated that over $1 Billion of value will again go unused.
    • Gift cards are the #1 requested gifts, preferred by over 60% of gift recipients.
    • 93% of consumers will buy or receive a gift card this year.
    • 72% of customers will spend more than the value of their card.
    • 10% of gift cards will be e-gifted digital cards in 2017.

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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.

 

Tax Reform: Wealth Economic Update Nov. 17, 2017

U.S. and World News

  • iStock-611086620_360The House of Representatives has passed a tax reform bill that would result in the biggest overhaul of the U.S. tax system in 31 years. Among some of its provisions, it would reduce the number of individual tax brackets, increase the child tax credit, abolish the estate tax by 2025, cut the corporate tax rate to 20% and make other tweaks aiming to make U.S. businesses more competitive. All is not clear though as attention moves to the Senate’s version which has significant differences such as a one year delay for corporate cuts, eliminating the deduction for state and local taxes and not fully repealing the estate tax.

Markets

  • Markets marginally fell this week in choppy trade. The S&P fell 0.06% and closed at 2,579. The Dow Jones dipped 0.19% for the week and closed at 23,358. Year to date, the S&P is up 17.27% and the Dow is up 20.76%.
  • Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.05% and 2.34%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.26% this week, closing at $56.59 per barrel. Year to date, Oil prices have risen 6.30%.
  • The spot price of Gold ended the week higher by 1.47%, closing at $1,293.86 per ounce. Year to date, Gold prices are up 12.76%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 249,000. The Labor Department did not note any distortions to this week’s data. The four week moving average for claims rose to 238,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.1% in October, in line with consensus expectations. Over the last 12 months, headline CPI has increased 2.1%.
    • Core CPI (excludes food and energy) rose 0.2% in October, also in line with expectations. Over the last year, Core CPI has risen 1.8%.
  • Housing starts rose 13.7% in October. The increase was led by a sharp 36.8% rise in the more volatile multifamily starts category. However, single family starts moved higher as well, rising 5.3% in the month. While hurricane rebound effects may explain some of the strength in the South region (+17.2%), starts also moved higher in the Midwest (+18.4%) and the Northeast (+42.2%), but edged lower in the West (-3.7%).

Fact of the Week

  • According to the Energy Information Administration, American exports of natural gas will exceed its imports of natural gas in 2017, the first year in which that has happened since 1958.

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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.

 

Getting the Most from Holiday Shopping

Jodi McKinley, Branch Manager—Oswego 

Spending during the holidays can be both freeing and terrifying at the same time. It’s nice being preoccupied with thoughts of what others might enjoy and need, but it tends to feel like money is leaking from your wallet. To help you maintain a sense of control, here are seven tips to keep your spending and holiday enjoyment on track.

  1. Have a total figure in mind. When you know how many gifts you need to get and how much you want to spend on each one, it’s easier to afford your own generosity.
  2. Work those discounts and promos. Study the Black Friday promo flyers, which many stores release weeks in advance, and check for promo codes and in-store coupons either before shopping or while you wait in the register line. Researching purchases before you leave home can pay in another way in that many stores will price match.
  3. Remember to redeem. The holidays are also a good time to see if any of your loyalty programs allow you to turn points into gift cards. You can redeem the cards at stores you’ll be shopping at or give them as gifts.
  4. Stay safe. You may want to rely more heavily on your credit card during the shopping season and carry less cash than usual. With a credit card, if something were to go wrong, such as your wallet being stolen, your liability would be zero, provided you report the occurrence to the issuer promptly. With cash, there is no recourse.
  5. Freeze right there! Old Second debit cardholders can also download the SecurLOCK™ Equip app. At the first sign of trouble, you can lock your debit card down while you determine if it is misplaced, stolen or comprised. If you find it later, you have the option of unlocking it again.
  6. Add up the “damage.” When the bills come in, take a moment to add up what you spent and use this total to help budget for the 2018 holiday season. Options like the Old Second Club Savings Account can help. This is a limited-duration account that pays out your accumulated balance once a year in time for holiday spending. It is available through our branches and enables you to use automatic transfers to put aside money for use next year.
  7. Be careful about your credit limits. Spending up to your limit on a credit card may make sense to you, but it can lower your credit score. It’s best not to use more than 35%–50% of your available credit in any one month, especially prior to an anticipated big purchase like a car or a home that will involve a loan request.

Whether today finds you in a spending or saving mode, we have the strategies and services that can help you do both well! Give us a call at 1-877-866-0202 or visit any Old Second Bank branch to talk about what we can do to help you achieve your spending and savings goals.

 Holiday Shopping Stats

Consumers expect to spend as much or more in 2017 as they did in 2016, when they spent an average of $1,189 each.Source: PwC 2017 Holiday Outlook Report, page 6, Viewed 10/09/2017 https://www.pwc.com/us/en/consumer-markets/2017-holiday-outlook.html

Tax Reform, Fed Chair: Wealth Economic Update Nov. 10, 2017

U.S. and World News

  • Roiling equity markets a bit this week, the Senate Republicans released their tax reform plan which differs from the House of Representative’s version that was revealed last week. Among the key differences are the timing of reduced corporate tax rates (Senate plan included a 1 year delay to the cuts), deductions for state and local taxes (Senate plan eliminates the deduction for those taxes) and the estate tax (Senate plan does not fully repeal it unlike the House). The House is set to vote on its measure next week, but the Senate’s timetable is less clear at this time.
  • The U.S. Senate Banking Committee has scheduled a November 28th confirmation hearing for Jerome Powell, President Trump’s candidate for Janet Yellen’s replacement as Chair of the Federal Reserve. Despite the usual gridlock in Washington, Powell’s nomination is expected to receive bipartisan support. Powell has been through the Senate confirmation process before, most recently in 2012 and 2014 when he was nominated to join the Fed board.

Markets

  • Markets dipped this week following reports on the differences between the House and Senate tax plans. The S&P fell 0.14% and closed at 2,582. The Dow Jones dipped 0.35% for the week and closed at 23,422. Year to date, the S&P is up 17.33% and the Dow is up 20.99%.
  • Interest rates broadly rose this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.06% and 2.40%, respectively.
  • The spot price of WTI Crude Oil increased by 2.14% this week, closing at $56.83 per barrel. Year to date, Oil prices have risen 6.59%.
  • The spot price of Gold ended the week higher by 0.48%, closing at $1,276.00 per ounce. Year to date, Gold prices are up 11.20%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 239,000. The four week moving average for claims fell to 231,000. Overall, the report suggests continued post-hurricane normalization to a trend of low job losses.
  • The University of Michigan consumer sentiment index moved lower by 2.9 points to 97.8 in the preliminary November report. Despite the small drop, the index remains close to the October cycle highs. Both the survey’s measures for expectations of the future and assessment of current conditions declined during the month.

Fact of the Week

  • A child born in 2017 would presumably attend college between the years of 2035 and 2039. If that child attended an average public in-state 4 year college and the annual price increases for in-state schools continued at their prior 30 year pace (+5.5% per year), the total cost of that 4 year education (including tuition, fees, room & board) would be $235,264, or $58,816 per year. (Source: College Board)

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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.

Economy, Fed Chair: Wealth Economic Update Nov. 3, 2017

U.S. and World News

  • commerce-639109564_360The Federal Reserve met this week and left interest rates unchanged, as was widely anticipated. The assessment for growth was upgraded to “solid” for the first time since January 2015, despite some lingering effects from the recent hurricanes. No other major changes were made to their assessment of the economy, paving the way for a December rate hike for which the market is currently pricing in a 92% probability.
  • President Trump has nominated Jerome Powell to become the Fed Chairman when current Chair Janet Yellen’s term expires in February. He is seen by many as the “safe choice” because he’s not expected to veer to far from current Fed policy. It’s expected that Powell will continue on the path of gradual interest rate increases and balance sheet reduction.

Markets

  • Markets climbed higher this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.29% and closed at 2,588. The Dow Jones rose 0.45% for the week and closed at 23,539. Year to date, the S&P is up 17.50% and the Dow is up 21.41%.
  • Interest rates pulled back this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.99% and 2.33%, respectively.
  • The spot price of WTI Crude Oil increased by 3.32% this week, closing at $55.69 per barrel. Year to date, Oil prices have risen 4.41%.
  • The spot price of Gold ended the week lower by 0.27%, closing at $1,269.98 per ounce. Year to date, Gold prices are up 10.67%.

 Economic Data

  • Initial jobless claims decreased by 5,000 from last week, coming in at 229,000. The four week moving average for claims fell to 233,000. Overall, the report suggests continued post-hurricane normalization to a trend of low job losses.
  • The October employment report showed a gain of 261,000 jobs in the month, rebounding from last month’s hurricane affected number. However, this was below expectations of 313,000 jobs gained. The prior two months’ figures were revised up by 90,000 which brings the three month average for job gains to 163,000.
    • The headline unemployment rate dipped to 4.1% from 4.2% in September which was the result of the labor force participation rate decreasing by 0.1% to 62.7%.
    • Average hourly earnings were flat for the month, disappointing against expectations of 0.2% growth. Wages have grown 2.4% over the last 12 months.
  • The Employment Cost Index increased by 0.7% in the 3rd quarter, in line with expectations. On a year over year basis, both total compensation (+2.5% from +2.4%) and wage growth (+2.5% from +2.3%) accelerated during the quarter.
  • The Case-Shiller home price index rose by 0.5% in August, in line with expectations. Prices rose in 19 of the 20 cities surveyed, with Atlanta (-0.2%) seeing the only decline. Over the last 12 months, home prices have risen by 5.9%.

Fact of the Week

  • The National Retail Federation estimates that over 179 million Americans celebrated Halloween this week and spent over $9.1 billion on costumes, candy and parties.

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
Steve Meves, CFA® – (630) 801-2217 – smeves@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.

 

Is a Home Equity Line of Credit Right for You?

Jackie Link, Branch Manager—Sugar Grove (NMLS# 996284)

Unless you’ve bought or sold your home recently or know someone in your area who has, you may be pleasantly surprised by its current market value. In fact, selling prices have been on a multiyear rise.

While the added appreciation in home equity is nice, it also means you may have additional borrowing power. That’s something you may want to gain access to through a home equity line of credit. (HELOC).

How a HELOC Works

A HELOC is a tool that allows homeowners to borrow a percentage (typically 70%- 90%) of the difference between the amount they have outstanding on their mortgage—if they have one—and the current market value of their home. As a revolving line of credit, it bears resemblance to a credit card but with a much higher borrowing limit.

Unlike most credit cards, the interest rate you are charged on a HELOC is lower since the line is secured by a home. For most homeowners, the interest is typically tax deductible, making it even more cost effective. However, you will want to verify with your own tax professional to make sure you qualify to take this deduction.

The rate on a HELOC will vary with the general level of interest rates. At Old Second, we use the U.S. Prime Rate as our benchmark and then add a fixed-margin rate to that, based on your financial information. We make the process easy and walk you through every step.

Although HELOCs are offered on a variable-rate basis, our clients can always switch to a fixed-rate option if they are concerned interest rates will rise. Instead of having the flexibility of paying only interest each month, payments under the fixed-rate option will include a specific amount of principal as well.

While different lenders offer different structures, Old Second’s HELOC provides 10 years of access. You can borrow and repay as often as you want during that time. If the line isn’t renewed after 10 years, it converts into a loan with a 20-year repayment plan, behaving like a second mortgage.

Qualifying for a HELOC is like qualifying for a mortgage, though a little less intense. There are no upfront fees and we charge a $50 annual fee (with the first year waived) as long as it remains open along with a pre-payment fee when applicable.

When to HELOC

As a personal cash management tool, you can access your line pretty much whenever you want by writing a check or calling to arrange a transfer. We see our clients using them to:

  • Spend before receiving, such as taking a vacation before receiving a year-end bonus.
  • Fund remodeling and home repair expenses.
  • Repay higher interest loans or credit card balances.
  • Cover large or unexpected expenses, from weddings and college tuition to replacing a car or paying medical bills.
  • Make a down payment on a vacation property.

Because HELOCs are both flexible and reusable, many homeowners take them out before they have an actual need. That way, they have a ready source of funding whenever the need arises.

To talk about how you might benefit from adding a HELOC to your financial toolkit, give us a call at 1-877-866-0202 or visit any Old Second Bank branch. Let’s talk about what we can do to help you achieve your goals.