EU tariffs, Iran, Greek fire: Wealth Economic Update July 30, 2018

U.S. and World News

  • soybeans-802349002_370The United States and the European Union have agreed to work towards “zero tariffs, zero non-tariff barriers and zero subsidies for the non-auto industrial goods.” Additionally, the European Union will import more soybeans and liquefied natural gas from the United States. Earlier in June, a 25% tariff on steel and a 10% tariff on aluminum imported from the European Union was put in place by the United States, and soon after, the European Union imposed retaliatory tariffs on the United States. The planned 20% tariff on cars imported from Europe was put on hold this week as the two sides work towards zero tariffs.
  • Tensions with Iran continue to rise as Iran struggles with sanctions imposed by the United States. The United States will sanction any country that purchases Persian crude oil. Iran has threatened to halt all oil shipments through the Strait of Hormuz if the United States continues to pressure its oil exports. The Strait of Hormuz is an area where 30% of all seaborne-traded crude oil is carried and blocking it could send oil prices up near $90 per barrel.
  • In a city just northeast of Athens, Greece, a fire broke out that has killed at least 82 people and is said to be the worst in decades for the country. Public Order Minister Nikos Toskas stated “We have serious indications and significant findings of criminal activity concerning arson.” Satellite image analysis indicated that the fire broke out in multiple places within a short time frame. The fire tore through seaside resorts and vacation residences in an area popular for tourism.


Markets

  • Stocks rose higher this week. The S&P 500 increased by 0.61% and closed at 2,819. The Dow Jones rose 1.57% and closed at 25,451. Year to date, the S&P is up 6.51% and the Dow Jones is up 4.20%.
  • Yields also spiked this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.84% and 2.96%, respectively.
  • The spot price of WTI Crude Oil rose this week amidst higher tensions in the Mideast, gaining 1.07% and closing at $68.99 per barrel. Year to date, Oil prices are up 14.77%.
  • The spot price of Gold decreased 0.51% this week, closing at $1,223.24 per ounce. Year to date, Gold prices are down 6.11%.

Economic Data

  • Initial jobless claims rose by 9,000 to 217,000 this week. The four-week moving average of claims moved down by 3,000 to 218,000. Jobless claims rose by 4,000 in Kentucky, and 3,000 in Michigan.
  • Durable goods orders increased by 1.0% in June versus consensus expectations of a 3.0% increase, reflecting a decline in defense orders.
    • Durable goods ex-transports rose 0.4% in June versus expectations of a 0.5% increase.
  • Wholesale inventories were flat in June versus expectations of a 0.3% increase.
  • Existing home sales fell 0.6% month-over-month in June to a seasonally adjusted rate of 5.38 million units. Expectations were for a 0.2% increase.
  • Sales of new single-family homes fell 5.3% in June to a seasonally adjusted rate of 631k units, below expectations of 668k units. The decline was led by the Midwest region.
  • Real GDP rose by 4.1% in the second quarter, the fastest pace since 2014. Consensus expectations were for 4.2%. The strong quarter was led by stronger-than-expected growth in consumption and business investment.
    • Q1 GDP was revised up by 0.2% to 2.2%
  • The University of Michigan’s index of consumer sentiment increased by 0.8 points to 97.9 in July against expectations of a flat reading.


Fact of the Week

  • In a recently conducted British survey, 42% of respondents admit that they are not sure whether you can put an electric car through a car wash. (Source: Go Ultra Low)

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.

China tariffs, Gasoline: Wealth Economic Update July 23, 2018

U.S. and World News

  • Trade talks with China have stalled after the United States imposed $34 billion worth of tariffs on the country earlier this month. An additional $16 billion is being targeted after the initial $34 billion was met with reciprocity by China almost immediately. President Trump stated in an interview with CNBC this morning that he is ready to go to $500 billion worth of tariffs on Chinese goods if needed. Chinese stocks are down almost 30% since peaking in January amidst the ongoing trade tensions. The European Union is considering retaliatory tariffs on United States coal, pharmaceuticals, and chemical products if restrictions are imposed on European cars. President Trump stated this week that a trade deal with Mexico is currently being negotiated and that a separate one would be crafted with Canada following that.
  • gasoline-504794324The price of WTI Crude oil fell back below $70/barrel this week after Saudi Arabia has begun supplying at least two Asian countries with additional cargoes. Meanwhile, the Trump administration is attempting to lower gas prices before the November elections and is considering using its Strategic Petroleum Reserve. The state of Texas is on its way to becoming the world’s number 3 oil producer behind Russia and Saudi Arabia as the cost of drilling has declined dramatically. Approximately 5.6 million barrels per day is expected to be produced from the Permian Basin and Eagle Ford oilfields alone by 2019.


Markets

  • Stocks finished the week slightly higher. The S&P 500 increased by 0.40% and closed at 2,802. The Dow Jones rose 0.20% and closed at 25,058. Year to date, the S&P is up 5.87% and the Dow Jones is up 2.59%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.77% and 2.90%, respectively.
  • The spot price of WTI Crude Oil fell this week once again, losing 0.77% and closing at $70.46 per barrel. Year to date, Oil prices are up 17.22%.
  • The spot price of Gold decreased 1.07% this week, closing at $1,230.97 per ounce. Year to date, Gold prices are down 5.51%.


Economic Data

  • Initial jobless claims fell by 8,000 to 207,000 this week. The four-week moving average of claims moved down by 2,000 to 221,000. Jobless claims fell by 2,000 in Florida, New Jersey, Oregon, and Tennessee and fell by 4,000 in New York.
  • The Philadelphia Fed manufacturing index rose by 5.8 points in July to 25.7 exceeding consensus estimates of 21.5.
  • Housing starts fell by 12.3% in June to 1,173k versus expectations of a 2.2% decline. The June weakness was led by the mult-family category declining by 19.8% during the month.
  • Building permits fell by 2.2% to an annualized rate of 1,273k in June versus expectations of a 2.2% increase.
  • Industrial production rose by 0.6% in June versus consensus expectations of a 0.5 increase. The increase was led by motor vehicle output.
  • Retail Sales increased by 0.5% month-over-month in June meeting expectations. The increase was led by gas stations and auto dealerships.
    • Core Retail Sales ex-autos came in a 0.2% in June versus expectations of a 0.4% increase. Clothing and departing store figures came in lighter than expected.


Fact of the Week

  • On 7/01/18, the price of a barrel of oil was $74.15 while the average price of a gallon of gasoline was $2.85. On 7/01/17 (1 year ago), the price of a barrel of oil was $46.04 while the average price of a gallon of gasoline was $2.24 (source: NYMEX, AAA).

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.

Brexit, China tariffs: Wealth Economic Update July 13, 2018

U.S. and World News

  • brexit-583815736_370Brexit was at the center of attention this week as Secretary David Davis and junior Brexit ministers Steve Baker and Suella Braverman have stepped down. The resignations are a result of opposition to Theresa May’s new “soft Brexit” strategy and pose a threat to Theresa May’s ability to gain the backing of parliament as nine months remain before Britain leaves the European Union. The way in which Great Britain will separate from the European Union is to be agreed upon given two strong sided beliefs; one side believes in more freedom from the European Union while the other side wishes to remain closer to the European Union to minimize the risk of damage to the economy. Jeremy Hunt has been appointed as U.K. foreign secretary, a supporter of the “soft Brexit” strategy. President Trump expressed concern that Theresa May’s Brexit strategy may not lead to a free trade deal with the United States.
  • Earlier this week, the United States announced that it would put in place an additional 10% tariff on $200 billion of Chinese goods. China called the move “completely unacceptable” and plans to retaliate. Meanwhile, China’s monthly trade surplus with the United States rose to a record $28.97 billion, underlying the existing problems on trade with China.

Markets

  • Stocks continued their upward path this week. The S&P 500 increased by 1.55% and closed at 2,801. The Dow Jones rose 2.31% and closed at 25,019. Year to date, the S&P is up 5.82% and the Dow Jones is up 2.39%.
  • Yields were unchanged for the week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.72% and 2.82%, respectively.
  • The spot price of WTI Crude Oil fell this week, losing 4.21% and closing at $70.69 per barrel. Year to date, Oil prices are up 17.60%.
  • The spot price of Gold decreased 1.11% this week, closing at $1,241.50 per ounce. Year to date, Gold prices are down 4.71%.

Economic Data

  • Initial jobless claims fell by 18,000 to 214,000 this week. The four-week moving average of claims moved down by 2,000 to 223,000. Jobless claims fell by 4,000 in Kentucky and rose by 2,000 in Oregon.
  • The consumer price index (CPI) rose 0.13% month-over-month in June versus expectations of a 0.2% increase. The lower than expected figure reflects lower energy prices. The year-over-year rate of core inflation rose 0.1% to 2.3%.
  • Import prices fell 0.4% in June month-over-month missing expectations of a 0.1% increase. The decline reflected a drop in food and beverage prices.
  • The University of Michigan’s index of consumer sentiment fell by 1.1 points to 97.1 in the July preliminary report versus expectations of 98.0.
  • The producer price index rose 0.3% in May versus expectations of a 0.2% increase. The rise reflects higher energy prices and higher retailer margins.

Fact of the Week

  • The cost of renting a 26-foot moving truck for a 1-way trip from San Jose, CA to Las Vegas, NV is $1,990 for a July 2018 trip. The cost associated with a trip from Las Vegas to San Jose (the reverse trip) over the same time period is $174. The price disparity is due to a shortage of moving trucks in California caused by an exodus of California residents to other states. (Source: U-Haul)

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.

 

China tariffs, OPEC: Wealth Economic Update July 6, 2018

U.S. and World News

  • shipping-868192010_370Just after midnight Washington time, a 25% tariff on $34 billion of Chinese goods went into effect as scheduled. Also expected, China hit back with tariffs of the same scale on goods such as soybeans and automobiles. Neither side is showing signs of backing down as the Trump administration is already discussing $16 billion in additional tariffs on Chinese goods. During a rally in Montana on Thursday, President Trump threatened that tariffs on Chinese goods could reach $500 billion, which is almost equal to what the United States imports from China in total. Markets did not react to the tariffs taking affect as investors were aware of the event, however, risk arises from higher prices passed on to companies and consumers.
  • On Saturday, President Trump made an agreement with Saudi Arabia that gives the kingdom a 2 million barrel per day spare capacity output to use if and when necessary, to make up for the lost supply from Iran and Venezuela. OPEC members, particularly Iran, have responded negatively to President Trump’s tweets directed at OPEC. The United States is attempting to stop all allies from importing oil from Iran, while President Trump is directing tweets at OPEC to influence them to lower oil prices. Iranian Revolutionary Guards commander Ismail Kowsari said that Tehran will block oil shipments through the Strait of Hormuz in the Gulf if the U.S. bans Iranian oil sales.

Markets

  • Stocks rebounded this week. The S&P 500 increased by 1.56% and closed at 2,760. The Dow Jones rose 0.82% and closed at 24,456. Year to date, the S&P is up 4.23% and the Dow Jones is up 0.10%.
  • Stocks rebounded this week. The S&P 500 increased by 1.56% and closed at 2,760. The Dow Jones rose 0.82% and closed at 24,456. Year to date, the S&P is up 4.23% and the Dow Jones is up 0.10%.
  • Yields fell slightly this week and the yield curve continued to flatten. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.72% and 2.82%, respectively.
  • The spot price of WTI Crude Oil was relatively calmer, losing 0.39% this week and closing at $73.86 per barrel. Year to date, Oil prices are up 22.87%.
  • The spot price of Gold increased 0.20% this week, closing at $1,255.08 per ounce. Year to date, Gold prices are down 3.66%.

Economic Data

  • Initial jobless claims rose by 3,000 to 231,000 this week. The four-week moving average of claims moved up by 3,000 to 225,000. Jobless claims fell by 6,000 in California and rose by 2,000 in Ohio and Massachusetts.
  • Private payrolls increased by 177,000 in June versus expectations of a 190,000 increase. The gains were mostly balanced across sectors.
  • The ISM manufacturing index rose by 1.5 points to 60.2 in June against expectations of 58.5. The increase was led by supplier deliveries.
  • The ISM non-manufacturing index rose by 0.5 points to 59.1 against expectations of 58.3. The report was mostly mixed.
  • Nonfarm payrolls rose by 213,000 in June versus consensus expectations of 195,000, and previous months were revised up by a net 37,000. The positive payrolls figure was led by jobs in the manufacturing sector.
    • The unemployment rate came in at 4.0% versus expectations of 3.8%, this was led higher by a higher labor force participation rate.
    • Average hourly earnings rose by 0.2% in June and the year-over-year rate remained at 2.7%. The consensus estimate was for 0.3% in June.
  • The trade deficit declined to -$43.1 billion in May from -$46.1 billion in April. The decline in the trade balance came from non-petroleum categories.

Fact of the Week

  • The S&P 500 has closed at its calendar year high in the second half of the year (i.e., during the 6 months of July-December) 74% of the time since 1950. In 15 of the last 25 years, the index’s calendar year high has occurred during the month of December. The S&P 500 consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: 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
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.

 

Why Borrowing From Yourself Can Be a Smart Move

Terri Hanson, Vice President—Residential Lending  

With the recent appreciation in home values in our area, it’s likely your home equity has risen to a point where you’re living inside a literal nest egg. Accessing that equity to finance some of the other expenses in your life could be a smart financial move, given the current level of interest rates.

Be at Home With Your Loan: Borrowing Options

One option homeowners have for accessing the savings they’ve accumulated in their home is to refinance with a cash-out mortgage. This involves replacing your current mortgage with one that has a higher outstanding balance. It’s typically more beneficial when interest rates are below the rate of your existing mortgage.

When interest rates are rising, as they are expected to do, using a home equity loan is often more cost-effective than refinancing. Home equity loans are secured by residential real estate, which is typically your largest asset and tends to appreciate over time. So, they often have more attractive terms than unsecured personal loans or those secured by another asset, such as a car.

Home equity loans come in two “flavors”: fixed-rate home equity loans and home equity lines of credit (HELOCs). Here’s what you need to know about each type.

Fixed-rate home equity loans are like having second mortgages. When you borrow, you receive a lump sum and begin repaying the loan immediately, with fixed monthly payments of principal and interest. The loans have a set maturity and are closed after you repay them.

As mentioned above, when rates are rising, home equity loans are helpful in minimizing borrowing costs. For instance, customers who don’t qualify for the best terms at auto dealerships or who buy used cars on a person-to-person basis may find using a home equity loan to buy a car could lower their cost of borrowing.

HELOCs are also secured by your home equity, but they offer greater flexibility. This is why many homeowners prefer them to fixed-rate home equity loans. They work like credit cards in that you only receive a bill when you have an outstanding balance. You can also borrow, repay and borrow again. When you borrow against a HELOC, only the interest on your current balance is due each month for a number of years before principal payments are expected. This enables you to decide how much you want to repay on the principal amount and when to do it.

Prior to retiring, many older homeowners will open a HELOC so they have access to emergency funds for unexpected repairs and medical expenses. There are no restrictions for how the money may be used. However, the interest rate charged on outstanding balances will fluctuate. At Old Second, HELOCs adjust with the U.S. Prime Rate (plus a margin). As interest rates go up or down, so will the interest due each month.

Is It the Right Thing to Do?

Building home equity creates options as you move through your financial life. In addition to the wealth you have in individual savings and investment and retirement accounts, it makes sense to manage the money you accumulate in your home as well. Whether it helps you afford college expenses, pay for a wedding, prepare your current home for sale or is a source of funds for your new home’s down payment, borrowing against your home equity can be a smart financial move. However, before taking out any loan, make sure you know your options and the terms and costs associated with each one. You can check our current rates and incentives here.

The Next Move Is Yours

To access a collection of home equity calculators that will help you understand how borrowing against your home would affect your budget, click here or contact us about your home equity loan options at 630-466-4843 (thanson@oldsecond.com). We can’t wait to talk to you about what we can do for you today.

If you are ready to start an online application, click here.

 

 

 

 

 

 

 

 

Source: TransUnion HELOC Study