The Generation Gap in Wealth

Rich Gartelmann, CFP®, Senior Vice President and Head of Wealth Management Rich Gartlemann Bio Picture

Money may be ageless, but how it’s viewed, invested and spent can depend on when we were born. Attitudes toward money develop early and are influenced by our parents. They can also be shaped by the social and political events that affect “our” generation as we enter adulthood.

This combination can also affect how we plan our financial futures, the amount of risk we are willing to take and, ultimately, the types of investments that enable us to sleep well at night. If left unchallenged, some of these tendencies may also keep us from realizing our financial goals.

Looking Through Different Lenses

At a very high level, it helps to consider how financial experiences may have varied across the last several generations—generations to which many of our family members belong.

The Silent Generation

For many in this age group, their earliest memories involved economic hardship due to the Great Depression, followed by rationing during World War II. Their early adulthoods then coincided with more “war” years— Korean and Vietnam. It’s little wonder that these experiences seemed to find expression in a tendency to be conservative and save both cash and provisions for the next threat. Many ended up being able to retire early, supported by company pensions, Social Security benefits and interest on their savings, though perhaps they didn’t take the risks or have as many experiences as they would have liked.

Baby Boomers

Baby Boomers grew up under very different circumstances. Their childhoods coincided with a post-war boom, while their adulthood coincided with a time of high inflation. It conditioned many to buy what they wanted “now” since they might not be able to afford it later, which may have led to the material-driven lifestyle choices associated with this generation. As they head into their retirement years, some Baby Boomers may still focus more on enjoying what they have while they can. As a group, they tend to tolerate more risk and be more trusting of the stock market and of things working out. For many, retirement can be more about what they will do next than actually a time for slowing down.

Gen X

As teens and young adults, Gen Xers witnessed—and many have been victims of—multiple manias and crashes at key times in their financial lives. These include the 1987 market crash and subsequent recession as well as the bull market of the 1990s, followed by the dotcom debacle, not to mention the many Wall Street scandals. Then, they experienced the 2008 recession and housing crisis! Because of the timing, many in this generation have had a harder time accumulating wealth than those in the Baby Boomer and Silent generations. Overall, Gen Xers are often characterized as distrustful when it comes to wealth and investing. Some may even need to be convinced the future is something you really can successfully plan for.

Millennials

Millennials were children or just entering adulthood at the time of the September 11 attacks. They may have seen their parents and their friends’ parents struggle with unemployment and housing issues during the recession and housing crisis of the late-2000s. As young adults, many continue to deal with student loans. In general, they have been slower to reach traditional milestones—from marriage and starting families to buying a home. However, they are moving forward and seem focused on planning ahead and perhaps having a side gig, just in case.

Gen Z

Gen Z, today’s children and emerging adults, has never known an app-less life. Even more than Millennials, they trust technology and “off-the-grid” solutions, including cryptocurrencies, virtual payments and crowdsourced funding. They are also said to be savers and leery of debt, determined not to repeat the “mistakes” of generations before them.

Customized to You

When you look across generations from this very high level, what becomes clear is that aspirations, needs, comfort levels and attitudes toward risk can vary widely. While intentions may be good and accepted actions logical in the context of the times, each group can benefit from taking a broader perspective when planning ahead. Creating that broader perspective is what advisors do especially where multigenerational family wealth is involved.

While members of each generation may seek different things from their money, we know they all want the same thing from their advisors—sound advice customized to their unique circumstances, attitudes, aspirations and needs. That advice often needs adjusting for personal preferences and to create a shared appreciation of how different members’ perspectives factor into a family’s plan for the future.

For more information on our approach to delivering goal-driven wealth management services across all generations, visit us here or call 630-906-2000.

Fed meeting: Wealth Economic Update Feb. 26, 2018

U.S. and World News

  • Minutes from the January Federal Reserve meeting were released this week and indicated further improvement in the growth outlook and slightly more hawkish views on inflation. The Committee described growth as ‘above trend’ and cited the recent tax legislation, the global economic outlook, and easier financial conditions as being supportive of growth in the near term. Regarding inflation, the Committee did not change their outlook but did appear more confident that core inflation would return to their 2% target over the medium term. The market is currently pricing in a near 100% probability that the Fed hikes rates at their upcoming March meeting, the first under new Fed Chair Jerome Powell.

Markets

  • In continued intraday volatile trading, markets crept higher this week. The S&P 500 gained 0.58% and closed at 2,747. The Dow Jones followed suit by gaining 0.36% and closing at 25,310. Year to date, the S&P is up 3.04% and the Dow Jones has gained 2.74%.
  • Yields held relatively steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.62% and 2.87%, respectively.
  • The spot price of WTI Crude Oil rose 3.02% this week, closing at $63.54 per barrel. Year to date, Oil prices are up 6.18%.
  • The spot price of Gold decreased by 1.33% this week, closing at $1,329.08 per ounce. Year to date, Gold prices are up 2.02%.

Economic Data

  • Initial jobless claims decreased 7,000 from last week, coming in at 222,000, lower than consensus estimates. By state, the largest declines were in Michigan (-6k) and Illinois (-2k). The four week moving average for claims moved down to 226,000.
  • Existing home sales fell -3.2% in January, lower than expectations for a 0.5% increase. Sales declined in single-family homes by -3.8% but rose for condos/co-ops which increased 1.6%. Existing home sales decline in all four regions: Midwest (-6.0%), West (-5.0%), Northeast (-1.4%) and South (-1.3%).

Fact of the Week

  • The New York Stock Exchange, which was originally founded in 1792, has transformed greatly in recent history:
    • In 1980, there were 5,500 men and women who worked on the floor the NYSE. Only 205 people remain today.
    • Average daily volume on the NYSE peaked at 1.6 billion shares in 2006 and is down to 910 million today.
    • At its peak, the NYSE handled nearly 80% of the trading in its listed securities, today its market share is only 25%.

(Source: Strategas Research Partners)
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.

Budget, Infrastructure: Wealth Economic Update Feb. 19, 2018

U.S. and World News

  • traffic-637694576_400President Trump released a detailed outline of his long-awaited infrastructure proposal. The major aspects of the proposal are similar to the framework that had been leaked a few weeks ago. The overall amount of federal funding for the proposal would be $200 billion and this would be combined with private funding for a total package of $1.5 trillion spread over several years. There are four broad segments addressed in the proposal: Infrastructure Incentives Program (transportation, water/sewer), Rural Infrastructure Program (broadband, electrical power), Transformative Projects Program (commercially viable projects with high risk/reward), and Infrastructure Financing Programs (additional funding and broader eligibility). In addition, President Trump is calling for a $0.25/gallon hike to the federal gas tax in order to fund the federal portion that will upgrade roads, bridges and public works. The proposal faces strong challenges before it can be enacted due to the 60 votes needed to pass it in the Senate and a current lack of bipartisan consensus about the appropriate structure for federal infrastructure funds.

Markets

  • Markets rebounded from last week’s plunge, although trading was still relatively volatile. The S&P 500 gained 4.37% and closed at 2,732. The Dow Jones followed suit by also gaining 4.36% and closing at 25,219. Year to date, the S&P is up 2.45% and the Dow Jones has gained 2.37%.
  • Yields continued their upward trend this week, the 5 year and 10 year U.S. Treasury Notes are now yielding 2.64% and 2.88%, respectively.
  • The spot price of WTI Crude Oil rose 4.04% this week, closing at $61.61 per barrel. Year to date, Oil prices are up 3.11%.
  • The spot price of Gold increased by 2.30% this week, closing at $1,346.96 per ounce. Year to date, Gold prices are up 3.39%.

Economic Data

  • Initial jobless claims increase 7,000 from last week, coming in at 230,000, a bit above consensus estimates of a slight increase. The four week moving average for claims now stands at 229,000.
  • The headline Consumer Price Index (inflation) reading for January increased 0.5%, over expectations of 0.3%. This reflected a 3.0% rise in energy prices. Over the last 12 months, headline prices have risen 2.1%.
    • Core CPI (excludes food and energy) came in at 0.35%, also higher than expectations of 0.2%. Over the last 12 months, Core inflation has been 1.85%.
  • Retail sales declined -0.3% in January, a disappointing figure compared to +0.2% expectations. Excluding autos, retail sales were flat, also below expectations. The largest declines in January were in health and personal care (-1.2%), sporting goods, hobby, book and music (-0.8%), and furniture (-0.4%) retailers.

Fact of the Week

  • The National Retail Federation estimates that more than 55% of the U.S. population celebrated Valentine’s Day this week, and will have spent $19.6 billion on gifts for the holiday.

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.

 

Second to None By Putting Clients First

Juwana Zanayed – First Vice President – Director of Treasury Management Sales 

When the word “second” is in your name, it isn’t really a matter of trying harder—it’s about taking a “second-to-none” approach in everything you do. For this $2.3 billion bank, that means not just keeping pace with industry innovations, but also finding ways to get the latest products and services to our clients as soon as they emerge.

Local to You

This concept of timely delivery is a key component in serving as a niche provider for mid-market businesses. Old Second’s local executive management team helps deliver solutions when the client needs them. From Aurora to Chicago, from Elgin to Joliet, Old Second has provided timely solutions for our local clients.

Businesses also want an accessible treasury provider, not a distant figure you might expect from a large bank, headquartered far away. Availability is one of the hallmarks an Old Second client can depend on, year after year.

Being local to our clients also means our business operates in the same market their business operates. We understand market forces that are unique to our geographic footprint. That firsthand knowledge of the client’s immediate market puts us at an advantage over an out-of-state decision-maker.

Consistency Works

Over 50 percent of our current commercial banking clients have been with us for more than 10 years. Such continuity in a relationship means familiarity. As a business, you don’t want to retell your story over and over. You’d rather work with a bank that already knows you, where you’ve been, how you’ve grown and where you’re headed.

Lasting relationships also mean our clients like what we’ve done for them. We like to think of the longevity of our client relationships as a signpost to the effectiveness of our solutions. Think of a product you have used for years when you could have chosen an alternative. You stick with what gets the job done. Our years of client loyalty speak to the success of our business model.

Decisive and Customized

That’s why customization to the client’s business makes sense. Our loan officers and treasury management advisors are empowered to take direction from their clients. Because we are local, accessible and have a large suite of innovative solutions, we are equipped to provide fitted solutions.

We consider many aspects of a business, including cash flow, automation processes and mechanisms of fraud prevention. And, each aspect of the business is examined in light of maximizing the client’s bottom line.

Once a specialized product suite is assembled, each client is able to manage every aspect of their business via O2 Online Banking. It’s a one-stop-shop dashboard that puts control in the client’s hands. We consider it all part of our “second-to-none” approach.

For more information on our treasury management and commercial banking services, click here, or contact a Treasury Management Advisor directly at 877-866-0202. We can’t wait to talk to you about what we can do to keep your business growing.

Stock Market, Shutdown, North Korea: Wealth Economic Update Feb. 12, 2018

U.S. and World News

  • stock_market-533891962_370After a long period of calm markets, the U.S equity market posted its first correction (10% loss) in two years amid concerns over rising interest rates, an overheating economy, and complex leveraged funds driven by algorithms used to speculate on volatility. International stock indexes followed suit and are now about 10% off their highs.
  • The government briefly shut down late Thursday night following a failure to reach an agreement on a new budget deal, but was reopened early this morning after a major fiscal spending bill was passed. The bill includes an extension to the debt ceiling, a two-year increase in spending on military and domestic programs by $300 billion, and an additional $90 billion to help aid the disasters that occurred in 2017, extend the Children’s Health Insurance Program, and fight the opioid crisis. House Speaker Paul Ryan stated this morning, “Ultimately, neither side got everything it wanted in this agreement, but we reached a bipartisan compromise that puts the safety and well-being of the American people first.”
  • Vice President Mike Pence stated that “The United States of America will soon unveil the toughest and most aggressive round of economic sanctions on North Korea ever” as North Korea continues its nuclear and ballistic missile program despite numerous threats to terminate it. The Vice President did not give any details regarding the planned sanctions, but it is likely that they will target Chinese businesses that do business with North Korea.

Markets

  • In the most volatile week that we have seen in 2 years, the market has dipped into correction territory. The S&P 500 fell 5.10% and closed at 2,619. The Dow Jones followed suit by also plummeting 5.10% and closing at 24,191. Year to date, the S&P is down 1.83% and the Dow Jones is down 1.90%.
  • After trading in a wide range throughout the week, the 5 year and 10 year U.S. Treasury Notes are now yielding 2.54% and 2.85%, respectively.
  • The spot price of WTI Crude Oil fell 9.52% this week, closing at $59.22 per barrel. Year to date, Oil prices are down 1.48%.
  • The spot price of Gold decreased by 1.36% this week, closing at $1,315.21 per ounce. Year to date, Gold prices are up 1.00%.

Economic Data

  • Initial jobless claims fell 9,000 from last week, coming in at 221,000 vs. consensus estimates of a slight increase. The decline is largely attributed to a 6,000 decline in Missouri. The four week moving average for claims now stands at 225,000.
  • The trade balance came in at -$53.1 billion in December versus consensus expectations of -$52.1 billion.
  • Wholesale inventory growth increased 0.4% in December versus consensus expectations of a 0.2% increase.

Fact of the Week

  • The stock market, on average, has a correction every 357 days, or about once a year. (Source: Deutsche Bank)
  • Based on research conducted on the Dow between 1945 and 2013, the average correction (which worked out to 13.3%) lasted a mere 71.6 trading days, or about 14 calendar weeks. (Source: MarketWatch)

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.

 

Market Volatility Comment: Wealth Economic Update Feb. 6, 2018

stock_confusion-607878216_370An equity market sell off that began last week continued on Monday and futures are pointing to another starkly lower open on Tuesday. Volatility, which had been historically low prior, has spiked tremendously with the VIX index increasing over 100% since last Friday’s close. While pullbacks are fairly regular occurrences (5% S&P pullbacks happen 91% of all years, while 10% pullbacks occur in 54% of years), the speed with which the market has corrected has amplified its perceived impact. Through Monday’s close, the S&P now stands at -0.8% in 2018, wiping out January’s gains and returning the S&P to where it finished on December 7th. In addition to ‘being due’, the cause of the correction may be recent rapid rise in interest rates, in part spurred by last Friday’s employment report that showed wage growth accelerating. This wage acceleration in conjunction with new Federal Reserve leadership intent on 3 or 4 rate hikes this year may have contributed to the repricing. Despite the downturn in prices, the fundamental data underpinning the economy remains solid: Global earnings growth reported for the 4th quarter has been strong, credit spreads have remained in check despite the rise in yields and the full benefits from tax reform are just beginning to take shape in a backdrop of already improved consumer and business sentiment.

Market turmoil such as this can be a source of opportunity and highlights the importance of sound long term investment management based on your financial goals.

 

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.

SOTU, Fed Chair: Wealth Economic Update Feb. 2, 2018

U.S. and World News

  • podium-665421982_370President Trump delivered his first State of the Union address this week in which he touched on five major policy areas: the economy, infrastructure, immigration, trade and national security. On the economy, Trump said, “Since the election we have created 2.4 million jobs, we are seeing rising wages, unemployment claims have hit a 45-year low and the stock market has smashed one record after another.” Trump also announced the “end of the war on American energy…the time to rebuild our crumbling infrastructure…and finally turn the page on decades of unfair trade deals.”
  • As widely expected, the Federal Reserve left interest rates unchanged in Janet Yellen’s final meeting as Fed Chair. The post-meeting statement generally upgraded it descriptions of economic activity, noting gains in employment, consumption and investment. The Committee also noted an expectation for inflation to pick up from its currently low levels. Leadership of the U.S. Central Bank will now shift to incoming Chairman Jerome Powell. The market is currently pricing in a 93% probability of a rate hike at the March meeting.

Markets

  • Markets retracted significantly this week, capped off by a steep Friday sell-off. The S&P fell 3.82%, closing at 2,762. The Dow Jones lost 4.11% for the week, closing at 25,520. Since the beginning of 2018, the S&P is up 3.44% and the Dow is up 3.34%.
  • Interest rates spiked this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.58% and 2.84%, respectively.
  • The spot price of WTI Crude Oil dipped by 1.83% this week, closing at $65.02 per barrel. Oil has started 2018 with a gain of 7.62%.
  • The spot price of Gold fell by 1.34%, closing at $1,331.09 per ounce. In 2018, gold prices are up 2.17%.

Economic Data

  • Initial jobless claims declined 1,000 from last week, coming in at 230,000, lower than expectations. The largest decreases were in Michigan, New Jersey and Ohio which all fell -2K during the week. The four week moving average for claims fell to 235,000.
  • The January employment report showed a gain of 200,000 jobs during the month, more than the forecasted 180,000. The prior two months’ figures were revised down a total 24,000 which brings the three month average for job gains to 192,000.
    • The headline unemployment rate held at 4.1% as expected. The labor force participation rate also held steady at 62.7%.
    • Average hourly earnings rose 0.3% during the month, beating expectations of 0.2%. With revisions to the prior months, over the last 12 months wages have increased 2.9%.
  • The Case-Shiller home price index rose by 0.7% in November, slightly more than expectations of 0.6%. Prices rose in all 20 cities measured with San Francisco (+1.8%), Las Vegas (+1.1%), and Tampa  (+1.0%) saw the largest monthly increases. Over the last 12 months, home prices as measured by the index have risen by 6.4%.

Fact of the Week

  • The S&P 500 has now gone 404 trading days without a peak-to-trough 5% pullback (6/28/2016 through 2/2/2018), the longest run of this kind in the history of the index. The current run overtook the previous record of 394 trading days which went from 12/21/1994 to 7/12/1996. With the drop this week, the current pullback in the S&P 500 has amounted to 3.8%. (Source: Pension Partners)

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.