China tariffs, Iran: Wealth Economic Update June 29, 2018

U.S. and World News

  • china-468808340_370.jpgChinese stocks made their way into bear market territory this week as trade tensions continue to rise. According to reports, another trade initiative is currently being crafted that would restrict companies with at least 25% Chinese ownership from buying companies involved in industrially significant technology. President Trump tweeted earlier this week that “The U.S. is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the USA.”
  • As the U.S. continues to pressure Iran after pulling out of the Iran Nuclear Deal, the United States has asked its allies to stop importing oil from Iran, or face U.S. sanctions. This new development has sent the price of WTI crude oil over $70 per barrel as OPEC’s third largest producer is put under pressure. Saudi Arabia plans to pump more oil in July than ever before at 11 million barrels per day to respond to the supply gap and rising oil prices.

Markets

  • Stock markets fell again this week. The S&P 500 dropped 1.31% this week and closed at 2,718. The Dow Jones fell 1.26% and closed at 24,271. Year to date, the S&P is up 2.64% and the Dow Jones is down 0.71%.
  • Yields also declined this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.73% and 2.86%, respectively.
  • The spot price of WTI Crude Oil surged 8.36% this week and closed at $74.31 per barrel.. Year to date, Oil prices are up 23.62%.
  • The spot price of Gold decreased 1.39% this week, closing at $1,252.94 per ounce. Year to date, Gold prices are down 3.83%.

Economic Data

  • Initial jobless claims rose by 9,000 to 227,000 this week. The four-week moving average of claims edged up by 1,000 to 222,000. Jobless claims rose by 3,000 in California and Kentucky, and rose by 2,000 in Maryland.
  • The third estimate of first quarter GDP was revised down to 2.0% from 2.2% and the year-over-year rate was unchanged at 2.8%. The downward revision was led by a decline in the consumer spending component, net trade, and inventories.
  • Sales of new single-family homes rose by 6.7% month-over-month in May to a seasonally adjusted rate of 689,000 units, exceeding consensus expectations of 667,000. The rise in new single-family home sales were led by sales in the South.
  • The Conference Board index of consumer confidence fell to 126.4 from 128.8.
  • New orders for durable goods fell by 0.6% in May versus consensus expectations of a 1.0% decline.
  • Wholesale inventories rose by 0.5% in May versus expectations of a 0.2% increase.
  • Pending home sales fell 0.5% in May versus expectations of a 0.5% increase.
  • Personal income rose 0.4% in May, in line with expectations.
  • Personal spending rose 0.2% in May, versus expectations of a 0.4% increase.

Fact of the Week

  • An analysis by the ECB and Dutch central bank found that trading volume during the FIFA World Cup drops roughly 33% during the games from normal levels. Median trading volume was found to be 55% lower on a given exchange when the exchange’s home county was playing. (Source: Seeking Alpha)

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
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@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.

 

US-North Korea relations, China tariffs, California split: Wealth Economic Update June 15, 2018

U.S. and World News

  • US-NK-830925980_380On Tuesday night, the United States and North Korea signed a historic document that included establishment of new US-DPRK relations, building a lasting and stable peace regime, reaffirming commitments to work toward complete denuclearization and recovering POW/MIA remains. The United States will keep in place its tough sanctions on North Korea and keep U.S military forces on the Korean peninsula until there is a complete, verifiable, and irreversible dismantlement of the nuclear weapons program. Secretary of State Mike Pompeo stated that the United States would resume joint military exercises with South Korea if the talks stall.
  • The United States announced today that it will move forward with $50 billion in tariffs on a range of Chinese products, $34 billion of that amount going into effect on July 6th. Shortly afterwards, China responded stating, “We will immediately introduce taxation measures of the same scale and with the same intensity”. The imposed tariffs do not include commonly purchased goods by Americans such as cell phones and TV’s. This was announced following months of trade negotiations between the two countries.
  • The plan to split California into three separate states, also known as the Cal3 initiative, has gained enough votes to make it onto the November 6th ballot. The new states would be named North California, California, and South California. Political experts say that Congress is unlikely to approve this plan.

Markets

  • After rising for much of the beginning of June, the markets fell slightly this week. The S&P 500 gained 0.06% this week and closed at 2,779.42. The Dow Jones fell 0.84% and closed at 25,090.48. Year to date, the S&P is up 4.89% and the Dow Jones is up 2.61%.
  • Yields were mixed this week with shorter term yields rising more than longer term yields (yield curve flattening) after the FOMC raised the fed funds rate. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.80% and 2.92%, respectively.
  • The spot price of WTI Crude Oil fell 1.81% this week and closed at $64.55 per barrel. Year to date, Oil prices are up 7.39%.
  • The spot price of Gold fell 1.39% this week, closing at $1,280.13 per ounce. Year to date, Gold prices are down 1.74%.

Economic Data

  • Initial jobless claims fell 4,000 this week to 218,000. The largest declines were in California and Florida. The four-week moving average moved lower by 1,000 to 224,000. The pace of layoffs still remains very low.
  • Retail sales rose by 0.8% in May versus consensus expectations of a 0.4% increase. The increase reflects an increase in gas station sales and an increase in auto sales. The largest increases were from miscellaneous retailers and building materials and supply dealers.
  • Import prices rose 0.6% in May versus consensus expectations of a 0.5% increase. The increase reflects an increase in fuel prices.
  • The consumer price index (CPI) increased by 0.21% in May versus expectations of a 0.2% increase. The increase largely reflected a rise in energy prices. The year-over-year rate rose 0.1% to 2.2%
    • Core CPI (ex-food and energy) rose by 0.17% in May versus expectations of a 0.2% increase.
  • The producer price index (PPI) rose by 0.5% in May versus expectations of a 0.3% increase. The increase reflects higher energy prices and higher retailer margins.
    • PPI (ex-food and energy) rose by 0.3% in May versus consensus expectations of a 0.2% increase.
  • Industrial Production fell 0.1% in May versus expectations of a 0.2% increase. The decline was led by a sharp drop in motor vehicle output.
  • The Federal Open Market Committee raised the target policy rate range to 1.75-2% on Wednesday. The meeting had a hawkish tone versus what expectations were and rate hike projections were increased to 4 this year, 3 next year, and 1 in 2020. The previous estimate was 3 this year, 3 next year, and 2 in 2020.

Fact of the Week

  • 22% of Americans at least age 85 need help with “personal care” daily. The number of Americans at least age 85 is projected to more than double from 6.4 million in 2016 to 14.6 million in 2040 (source: Administration for Community Living).

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
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@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.

Are You Ready for Prime Time?

Denise Rogers, Assistant Vice President—Senior Director

Being a community bank, we’re able to offer services that are just more personal. Offering our customers membership into our Prime Time Club is one of them. The membership not only provides access to a variety of free or discounted services, it can be your ticket to some truly memorable experiences.

Oh, the Places You’ll Go

We try to keep a balance in our group travel experiences. In addition to the trips that involve relying on coach services and flying, we accommodate members who are only interested in day trips and those who want to drive places on their own.

The Prime Time Club brings you together with others in the community who share similar financial, social and travel interests. We’re able to buy tickets and arrange transportation at group discount rates to and from a variety of local venues: Broadway show performances at the Paramount Theatre here in Aurora to baseball games in Chicago, Wisconsin and St. Louis, Mo.

Among our more popular events are the FREE Rules of Road refresher courses, which help members prepare for their written driver’s test, and our two-day, AARP Smart Driver program. This longer course leads to a certificate you can present to your insurance company in exchange for a discount on your premiums.

Where many of our members see the greatest value, however, is in the longer trips we plan. For instance, in 2019, we will be heading East for a weeklong “Chesapeake Bay Getaway” (April 24–May 1, 2019). The Prime Time Club will also be traveling to Iceland next summer (July 27–August 2, 2019) and in the fall experience a “Pacific Coastal Cruise” (October 12–21, 2019). As with the day trips, we make all the arrangements, including booking the transportation, accommodations and day tours. For members, it’s a worry-free way of seeing the best of what the world has to offer.

Fellow Travelers

For me, one rewarding aspect of being the director of the program goes beyond interacting with the travelers; also watching everyone enjoying themselves is fulfilling. It’s seeing those who’ve joined us for the first time without knowing anyone return home having made new acquaintances and connections within the community. Traveling beyond their daily routines literally makes the world a little smaller.

Whether you would benefit from the discounted banking services, are transitioning toward a life of increased leisure time or find yourself at a time in your life where you would like to meet new people, consider joining the Prime Time Club. The Club has been offered to customers for 36+ years. Currently, we are 6,200 members strong, and there is always room for one more.

Membership Details

  • Membership is open to any Old Second customer who:
    • Is 55 years or better.
    • Has a checking or Money Manager account
    • Has combined balances of $10,000 in Old Second Bank or trust accounts.
  • Prime Time checking with interest.
  • Debit card with rewards.
  • Free services include:
    • Money orders and cashier’s checks.
    • Signature guarantees and notary services.
    • A financial counseling session.
    • ATM withdrawals at all O2 ATMs and MoneyPass® ATMs (up to three free withdrawals at non-O2 and non-MoneyPass® ATMs).
    • No fee on gift cards.
    • Newsletter regarding upcoming events.
    • Annual member luncheon.
  • Discounts include:
    • Safe deposit box rental.
    • Extended tours and one-day trips.

To learn more about how Prime Time Club membership would benefit you, visit our website or give me a call at 630-365-5193. For an idea of what we’ve been up to and to review upcoming performances, seminars and road trips, check out our calendar.

China tariffs, Social security, Dimon & Buffett: Wealth Economic Update June 8, 2018

U.S. and World News

  • SHANGHAI-623208766_360The White House plans to move ahead with its goal of reducing the trade deficit with China by $200 billion by introducing trade tariffs by June 15th. In May, China’s trade surplus with the United States rose by 11.7% in the midst of tense trade negotiations, which is expected to increase Washington’s efforts with regard to trade with China. Trade tensions eased on Thursday after the U.S. decided to end the ban on Chinese company ZTE Corp’s ability to access U.S. companies.
  • Social Security will have to reach into its $3 trillion trust fund to cover benefits for the first time in 36 years. Income to fund these benefits comes from tax revenue and interest earned off of the trust fund. The program was not expected to tap into its trust fund for another three years, but as a result of economic projections, it was forced to do so sooner. The Trustees Report projects the trust fund balance will run out in 2034.
  • JPMorgan CEO Jamie Dimon and renowned billionaire investor Warren Buffett are forming a joint effort to convince public company CEO’s to stop providing quarterly earnings-per-share guidance. They stated that “It leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth, and sustainability”. Another point made was that as a result, corporations “frequently hold back on technology spending, hiring, and research and development” in order to meet guided earnings estimates.

Markets

  • The markets surged higher this week. The S&P 500 gained 1.66% this week and closed at 2,779.03. The Dow Jones rose 2.79% and closed at 25,316.53. Year to date, the S&P is up 4.82% and the Dow Jones is up 3.47%.
  • Yields rose slightly higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.78% and 2.94%, respectively.
  • The spot price of WTI Crude Oil fell 0.24% this week and closed at $65.65 per barrel. Year to date, Oil prices are up 9.22%.
  • The spot price of Gold increased 0.43% this week, closing at $1,298.97 per ounce. Year to date, Gold prices are down -0.29%.

Economic Data

  • Initial jobless claims fell 1,000 this week to 222,000. The largest decline of 6,000 in Michigan was offset by declines of a 6,000 increase in California and a 2,000 rise in Tennessee. The four-week moving average moved higher by 3,000 to 226,000. The pace of layoffs still remains very low.
  • Factory orders fell 0.8% in April versus expectations of a 0.5% decline.
  • The ISM non-manufacturing index rose 1.8 points to 58.6 versus expectations of 57.6. The increase was led by business activity, new orders, and employment.
  • The trade deficit fell to -$46.2 billion versus expectations of -$49 billion. Exports were slightly weaker than expected.
  • Wholesale Inventories rose 0.1% in April versus expectations of no change.

Fact of the Week

  • Next year an estimated 45% of 176.1 million tax returns (about 80 million) projected to be filed will legally pay zero federal income tax. (source: Tax Policy Center)

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
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@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.

Italy, China tariffs, North Korea: Wealth Economic Update June 4, 2018

U.S. and World News

  • italy-469253936_360Italian President Sergio Mattarella blocked the formation of an anti-establishment government earlier this week, sparking fears of a snap election and roiling European markets. The left-wing 5-Star Movement and the right-wing League tried to appoint economist and anti-European Union politician Paolo Savona as finance minister. The two eventually formed an agreement to form a new coalition government, appointing economics professor Giovanni Tria as finance minister. Italy’s departure from the European Union remains a possibility in the future as the 5-Star Movement and the League both want to leave the European Union.
  • Washington has moved forward with its proposal of 25% tariffs on $50 billion of Chinese goods and restrictions on Chinese investment in U.S. high-tech industries. The United States has also announced import tariffs on steel and aluminum from the European Union, Mexico, and Canada, which will be met with retaliatory tariffs on various U.S. goods including jeans, bourbon, motorcycles, whiskey, orange juice, metals, and other food products. Canada is challenging the U.S. tariffs under NAFTA Chapter 20 and the dispute settlement process through the World Trade Organization, which threatens the success of NAFTA negotiations.
  • President Trump stated that a summit with North Korean leader Kim Jon Un will take place, as previously scheduled, on June 12th in Singapore after a high level official from North Korea visited the White House today for the first time since 2000. The goal of the summit will be to rid North Korea of its nuclear arms, and what will be provided in exchange is up for negotiation. President Trump stated that he expects a number of summits to take place before all of the issues are settled.

Markets

  • The markets ended mixed this week. The S&P 500 gained 0.54% this week and closed at 2,734.62. The Dow Jones fell 0.38% and closed at 24,635.21. Year to date, the S&P is up 3.12% and the Dow Jones is up 0.69%.
  • Yields also experienced above average volatility this week and ended the week slightly lower. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.75% and 2.90%, respectively.
  • The spot price of WTI Crude Oil fell another 3.26% this week and closed at $65.67 per barrel. Year to date, Oil prices are up 9.25%.
  • The spot price of Gold fell by 0.66% this week, closing at $1,293.77 per ounce. Year to date, Gold prices are down -0.70%.

Economic Data

  • Initial jobless claims fell 13,000 this week to 2221,000. The largest declines were in California and Kentucky. The four-week moving average moved higher by 2,000 to 222,000. The pace of layoffs still remains very low.
  • Personal income rose 0.3% in April, meeting expectations• Consumer spending rose 0.6% in April, exceeding expectations of a 0.3% increase.
  • Consumer confidence rose to 128.0 in May, matching expectations.
  • Pending home sales fell 1.3% in April versus expectations of a 0.4% increase. The decline was led by sales in the Midwest region.
  • Nonfarm payroll growth rose by 223,000 in May versus expectations of a 190,000 increase. Job gains were led by the retail, construction, and leisure and hospitality sectors.
    • The unemployment rate ticked lower to 3.8% from 3.9%.
    • The labor force participation rate fell to 62.7%
    • Average hourly earnings increased 0.30% in May versus expectations of a 0.20% increase and the year-over-year rate increased to 2.7%.

Fact of the Week

  • 58 publicly-held US companies produced at least $1 billion of sales per week in 2017, up from 39 companies that accomplished that level of weekly sales in 2007. Just 1 domestic company generated more than $1 billion of sales per day during 2017 (source: Fortune).

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
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@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.