5 Myths That Keep Millennials From Becoming Homeowners

Frederick Nosal — First Vice President, Residential Lending

Though most Millennials are already well down the path of “adulting,” with careers, car and student loan repayments, and even starting to save for retirement, many haven’t taken a critical next step in their financial lives: homeownership.

Behind this hesitation are a handful of persistent myths.

Myth# 1: Renting saves me money.

Rent is an expense you pay to live in someone else’s real estate investment. If you were spending that same amount on a mortgage payment, you would actually be investing in an asset you own. It would be yours to sell and borrow against. It could even appreciate over time, which would help you build long-term wealth. Here’s a calculator that can help you put this in dollars—potentially your own.

Myth#2: I don’t make enough to buy a home.

You may not be able to buy your dream home right away, but the odds are good you can find one you’d be comfortable owning and can already afford. After all, you won’t be paying for your home all at once. While you can try different scenarios online to see what’s affordable, we recommend first-timers talk to an Old Second Mortgage banker. Not all mortgages are alike. Some lenders, like Old Second, participate in a variety of programs for first-time buyers that make affordability easier. 

Myth# 3: I still have student loans, so I can’t get a mortgage.

While your student loan balance may seem high, just focusing on how much you owe can be misleading. The amount you are required to pay back each month is what influences your mortgage approval. Also, federal student loan programs offer numerous options to ensure your payments are affordable, even with a car loan and mortgage payment. Many borrowers are able to make adjustments that allow them to comfortably repay their debt and make a housing move.

Myth# 4: It’ll be years before I can afford a down payment.

While experienced homebuyers typically make a larger down payment, first-time mortgage programs can require far less. Some are available with as little as a $1,000 investment. Depending on where you live, you may be able to access grants that cover a portion or all your down payment. This is where working with an Old Second Mortgage banker comes in handy. We can help you access the right programs for your situation. 

Myth# 5: Owning a home is a big responsibility.

While having a big property can mean a lot of yardwork and maintenance, you have options that reduce the “sweat equity” associated with homeownership. From new construction to high-rise condos or townhomes with shared maintenance costs, you can own without giving up your weekends to home maintenance chores.

Myth #6: Getting a mortgage is complicated.

You don’t have to do this alone. Talk to us. We listen and are always ready to answer questions. The only dumb question is the one you don’t ask, so ask us anything. We’ll help you understand what’s affordable, calculate how much different types of properties will cost and prequalify you so it’s easier to work with a real estate agent.

We’re here—online, by phone and in person. As your community bank, we aren’t going anywhere. So, ready when you are. After all, you may not do this every day, but we do.

Shopping Safer and Smarter

At this time of the year it’s not a matter of if you will be doing some holiday shopping, but how to do it in a safe way.  Fortunately, there are a variety of tools and services available to you that can help you shop safer and smarter… not just during the holiday season, but throughout the year.
To learn more, view our latest infographic below.

An Interview with Director Patti Temple Rocks

by Robert DiCosola

Introduction

Patti Temple Rocks has been a Director of Old Second Bancorp since 2015. She is a member of the Board’s Compensation Committee and IT Steering Commit- tee. She has had a distinguished career in the Advertising, Marketing and Communications space, and has held various leadership positions for some industry-leading corporations.

Her most recent role was Managing Director/Client Innovation Officer for Golin, a global communications agency. Previous career highlights include Vice President of Public Affairs, Brand and Reputation for The Dow Chemical Company, and Chief Reputation Officer for Leo Burnett Worldwide. Currently, Patti is Founder and Head of Temple Rocks Consulting, where she is utilizing her marketing and communications experience and expertise for clients looking for growth, both for their business and of their people.

“Patti, with your many years of experience in advertising, marketing and communications, talk to us about how that experience has translated into helpful perspectives and insights as a director for a financial institution.”

PTR: “My background is certainly different than some of the other directors, many of whom are from the financial services industry. My approach at first was to listen closely to the issues and challenges facing the Bank at the Board level, and then make contributions within my areas of expertise. I think that (Board members from) different industries are very relevant to the overall decision

making because of the different perspectives they bring. For example, I noticed that the consumer challenges facing the banking industry are similar to those facing other industries—how to market their products and services to the Millennial demographic and to Gen Z–the next generation after Millennials–and how predictive analytics can play a role in that decision-making process.”

“When you were initially approached as a possible candidate for Old Second’s Board of Directors, what were some of your thoughts out of the gate? What ultimately led you to accept the directorship?”

PTR: “I was intrigued, to say the least, as one of my long-term personal goals has been to serve on a publicly traded board of directors. I did have some concern about my lack of direct experience in financial services but I also knew that in today’s complex environment, boards are expected to ask questions and challenge the status quo to some extent, and not simply be a rubber stamp. I could tell from my conversations with the Bank’s management and other directors that there were highly capable people guiding the Bank with deep financial experience. I felt confident that I could add something differ- ent and hopefully complementary to what they already had. With that perspective, I was honored to say yes to the OSBC opportunity.”

“What would you say are three of the most critical competencies, characteristics or credentials of an effective Board member?”

PTR: “Curiosity is one of the most important…As Board members, we need to have the capacity to ask thought-provoking and challenging questions. (For example): ‘If we didn’t do that, what might happen?’

“Another important characteristic is empa- thy. As directors, we can add value by considering the perspective of customers and employees. At the end of the day, an unengaged employee base will almost always result in disappointed customers. If we can assist Bank management with insights regarding the overall customer experience, that’s a value-add.”

“The last one would be preparation. It’s never a good idea to attend a board or committee meeting blind, without advance preparation. When I first started with the Bank’s Board, there were a zillion acronyms I had to familiarize myself with, such as the OCC and OREO loans and many others that were simply not a part of my normal vocabulary. I couldn’t pretend that I knew what these were…I needed clarification so that I could be conversant and relevant to the discussion. I am very grateful that my fellow directors were very patient with me as I asked questions!”

“Diversity and Inclusion is an important reality for successful companies these days, including here at Old Second. Can you give us some examples of how D/I played an important role in a company’s success?”

PTR: “Without question, Diversity is essential to a company’s success, but not in a numbers-oriented, quota-based way. And there is no Inclusion without Diversity, and vice versa. In an effort to become more diverse, companies need to be careful to not make inappropriate hires that ultimately become bad hires—and often at no fault of the person hired. A diverse hire who is not on-boarded with care is never going to feel included in the organization. Companies need to take even greater care to make sure they have an inclusive environment to welcome the diverse hires into.

“I also believe very strongly in a broad view of Diversity. It is not simply skin color, gender or sexual preference. The best practice today is a workplace that not only looks different from the outside but is also one that values a variety of experiences and perspectives. For me, personally, I believe it is much more important to value my career experiences and insights as a working mom and a 50+ professional than simply the fact that I’m a female. One example that comes to mind is from the auto industry in the 1980’s…- Ford engineers developed ‘pregnancy bellies’ and asked their design engineers to wear them to understand how to design cars for families—including families with pregnant women. While their intentions were good and they got a lot of good PR for the effort, why not just hire some competent women engineers instead of outfitting the men?

“A workforce segment that seems to be getting overlooked these days, and a particular passion of mine, is the older worker. I’m writing a book that addresses this issue: #I’m Not- Done: It’s Time to Talk about Ageism in the Workplace. We must work to remove the stereotype that some workers lose value and relevance after a certain age.”

“What positive signs do you see going forward for the banking industry? What about challenges?”

PTR: “With the greatly improving economy, the future is looking much brighter for financial institutions. The days of banks being constantly slammed and criticized appear to be over, and trust has been established again. That’s the good news, but one of the challenges I see is providing relevant banking experiences to the generations coming up. Traditional brick-and-mortar banks simply are not an important part of their lives…Everything they do banking-wise is mobile, digital. This is very different from previous generations who still prefer one-on-one, in- person transactions. This will require entirely different approaches to what we offer and how we do it to ensure that the services the Bank provide are valued by all these age groups.”

“What makes Old Second Bank’s Mission meaningful to you?”

PTR: I would describe Old Second’s Mission in one word: authentic. You can determine a lot about a company’s culture if you would just ‘turn off the volume and watch the movie.’ I guess another way of saying that is pay attention to what I do, not just what I say. From my experience, if you did that here at the Bank, you will see an organization that truly cares about its employees, that I’m a female. One example that comes to mind is from the auto industry in the 1980’s…- Ford engineers developed ‘pregnancy bellies’ and asked their design engineers to wear them to understand how to design cars for families—including families with pregnant women. While their intentions were good and they got a lot of good PR for the effort, why not just hire some competent women engineers instead of outfitting the men?

“A workforce segment that seems to be getting overlooked these days, and a particular passion while at the same time being a growth and performance-based culture. Mission statements can’t be just flowery words on a piece of paper. There also needs to be accountability at every level of the organization.”

“Patti maintains a website (pattitemplerocks.com) which includes a number of thought-provoking blogs on a variety of topics. One that caught my eye particularly was ‘Don’t Let the Crush of Work Crush You.’ Would you elaborate on what prompted you to write that blog, and give us an executive summary on what you mean by “Don’t Let the Crush of Work Crush You.”

PTR: “In most businesses the goal is to enhance profitability and to make your numbers. This is especially apparent in the 4th quarter of the year, when the push is on to deliver and capture revenue for year-end, and clients have cash that they need to spend or lose it as the fiscal year comes to close. This makes for a particularly crazy end to the year in the agency business. I’ve walked the halls (at previous employers) and have seen the stress and exhaustion on the faces of employees who don’t have much more to give. I’ve found that in these stressful moments it’s so important to not lose the human factor. Continue to maintain empathy for those around you. When we get super busy, it’s easy to lose sight of simple, every-day courtesies—like being kind to one another and treating each other with respect.

“It’s also important to not get caught up in the stress of the moment and try to maintain a close link to what’s truly important to you. We can and should turn our focus to our customers and colleagues, but at the same time we need to take care of ourselves. I’ve also found that maintain- ing a sense of humor is essential! Being able to laugh is a gift not just to ourselves, but to others. And I believe that makes our work better.”

China, Brazil election: Wealth Economic Update Nov. 3, 2018

U.S. and World News

  • China made progress this week towards making its financial markets more investor friendly. The China Securities Regulatory Commission said that it will begin increasing liquidity, reduce unnecessary interference in trading, and increase fairness in the markets for investors. President Trump ramped up trade threats if negotiations with Chinese President Xi fail, stating that the U.S. is planning tariffs on the remaining $257 billion in Chinese goods. Reports surfaced early this morning that President Trump had asked U.S. officials to draft a trade agreement with China, however, a few members of the administration later said that an agreement is not imminent.
  • brazil-676361592_370In a controversial victory, right winged presidential candidate Jair Bolsonaro won Brazil’s presidential election with 55% of the vote. The Brazilian Real gained 9.7% against the U.S. Dollar and the Bovespa stock index rose 13.5% in the last 30 days as the market predicted a Bolsonaro victory leading up to the election. Brazil has gone through years of corruption scandals, brutal elections and protests, the impeachment of a president, and negative economic growth. Bolsonaro campaigned on restoring discipline and law-and-order, putting an end to the corruption.


Markets

  • Stocks rebounded from correction levels this week as volatility remains elevated. The S&P 500 rose 2.45% and closed at 2,723. The Dow Jones gained 2.36% and closed at 25,271. Year to date, the S&P is up 3.47% and the Dow Jones is up 4.03%.
  • Yields also rebounded dramatically from their lows last week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.04% and 3.22%, respectively.
  • The spot price of WTI Crude Oil continued its slide this week, losing a whopping 6.92% and closing at $62.91 per barrel. Year to date, Oil prices are up 4.66%.
  • The spot price of Gold ended the week almost unchanged from last week, losing 0.05% and closing at $1,232.94 per ounce. Year to date, Gold prices are down 5.36%.

Economic Data

  • Initial jobless claims fell by 2,000 to 214,000 this week. The four-week moving average of claims increased by 2,000 to 214,000. Claims fell by 3,000 in California and by 2,000 in Georgia. Jobless claims still remain high in hurricane affected states.
  • The core PCE index (excluding food and energy) rose by 0.15% month-over-month in September and the year-over-year figure came in at 1.97%, in line with expectations.
  • Personal income rose by 0.2% month-over-month in September versus expectations for a 0.4% increase.
  • Personal spending rose by 0.4% month-over-month in September, in-line with expectations.
  • The Conference Board index of consumer conference rose to 137.9 versus expectations for a reading of 135.9. This is the highest level since 2000.
    Private sector employment rose 227,000 in October versus expectations for a 187,000 increase.
  • Factory orders increased by 0.7% month-over-month in September versus expectations for a 0.5% increase.
  • Nonfarm payrolls rose by 250,000 in October month-over-month versus expectations of a 200,000 increase.
    • The unemployment rate remained unchanged at 3.7%, in-line with expectations.
    • Average hourly earnings rose by 0.2% month-over-month in October and the year-over-year figure rose by 0.3% to 3.1%, a new cycle-high.
    • The trade deficit rose by $700 million to $54 billion in September, versus expectations for a $300 million increase.

Fact of the Week

  • The last time Amazon saw a 20% drawdown in stock price was in February of 2016, when its market cap was $227 Billion. In the period from September 4th to October 30th, Amazon fell nearly 25% and lost $249 Billion in market cap.

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
Mike Cava – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Saudis, Turkey, Khashoggi: Wealth Economic Update Oct. 26, 2018

U.S. and World News

  • iStock-927165528Saudi Arabia’s handling of the death of Jamal Khashoggi, a journalist working for the Washington Post, is under sharp criticism as the story continues to change nearly every day. The latest announcement from Saudi prosecutors was yesterday, when they stated that the killing was in fact premeditated. This morning, President Erdogan of Turkey stated that “Turkey has other information and evidence about the killing by Saudi officials after Khashoggi entered the consulate on October 2nd, and it will eventually reveal that information”. Whether the crown prince of Saudi Arabia knew of the murder and the location of the body are the two mysteries that remain. The incident has put a strain on a long standing strong relationship with the United States and Saudi Arabia.


Markets

  • Stocks plummeted this week as volatility picked up further. The S&P 500 lost 3.93% and closed at 2,659. The Dow Jones fell by 2.97% and closed at 24,688. Year to date, the S&P is up 1.03% and the Dow Jones is up 1.67%.
  • Yields also fell sharply this week as investors piled into bonds this week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.91% and 3.08%, respectively.
  • The spot price of WTI Crude Oil was down for yet another week, losing 2.32% and closing at $67.67 per barrel. Year to date, Oil prices are up 12.58%.
  • The spot price of Gold rose 0.61% this week, and closed at $1,233.95 per ounce. Year to date, Gold prices are down 5.28%.

Economic Data

  • Initial jobless claims rose by 5,000 to 215,000 this week. The four-week moving average of claims remained unchanged at 212,000. Claims rose by 4,000 in Florida and by 3,000 in Georgia as a result of Hurricane Michael.
  • Durable goods orders rose by 0.8% in September versus expectations of a -1.5% decrease. This was led by defense aircraft.
    • Durable goods orders ex-transports rose by 0.1% in September versus expectations of a 0.4% increase.
  • Core capital goods orders fell by 0.1% in September versus expectations for a 0.5% increase.
  • New home sales fell 5.5% in September to a seasonally-adjusted rate of 553,000 units versus expectations for 625,000 units. Sales fell the most in the Northeast region (-40.6%).
  • Pending home sales rose by 0.5% in September versus expectations for no change. Pending home sales rose the most in the West region (+4.5%).
  • Real GDP rose by 3.5% in the third quarter, beating expectations of a 3.3% increase.
    • Personal consumption rose by 4.0% versus expectations of 3.3%, the fastest pace since the fourth quarter of 2014.
    • The Core PCE Price index rose by 1.6% in the third quarter versus expectations for a 1.8% increase.
  • The University of Michigan’s index of consumer sentiment fell by 0.4 points to 98.6 in October versus expectations for a reading of 99.0.

Fact of the Week

  • The largest one day decline in the S&P 500 happened on “Black Monday” (10/19/87), when the index dropped 20.5%, equal to 58 points. A 20.5% drop today would be equal to 545 points. The largest one day drop so far this year was 113 points. (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
Mike Cava – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Interest rates, Midterms, NAFTA, Saudis: Wealth Management Special Update Oct. 26, 2018

Following a largely positive 3rd quarter during which the S&P 500 set a new all-time high, markets have moved sharply lower to begin the month of October. Gains in both the S&P and Dow have been wiped out, while the Nasdaq is clinging to a ~2% gain. The recent weakness has been heaviest in those Nasdaq/Growth stocks which have been leadership for the last few years. While there is no clear cause of the near 10% correction in stocks, there are a number of factors that may be contributing:

  • Recent communication from the Federal Reserve indicates a commitment to further rate hikes which the markets have perceived as too aggressive. To borrow from our research partner Strategas, “The level of interest rates that the economy can take is higher that the interest rate financial markets are comfortable with.” So despite an otherwise strong economy which justifies further rate increases, the markets have responded poorly to the perceived path of hikes. With the recent market downturn, implied odds of a December rate hike have fallen from over 80% to 69%, though the Fed seems intent on one more hike in 2018.
  • ballot-884243522_370October tends to be a weak time seasonally for equity markets, in particular during midterm election years. Markets don’t like uncertainty, so a midterm election that has the potential to swing the balance of power in Congress could be a source of heightened volatility. While there may be some specific industries or sectors that win or lose based on the outcomes, historically the broad market indices rally into year-end following the midterms once the results are clear.
  • Trade continues to be an issue. The USMCA agreement (updated NAFTA), which has been agreed to in principle by the U.S., Mexico and Canada, won’t be voted on until 2019 when the new Congress comes in, raising fears that its passage may be impeded if the Democrats are to take control. The tariff war with China continues on and little to no progress towards a resolution has been made.
  • The situation with Saudi Arabia has intensified and fears of isolation of that country and its potential effect on oil prices is a cause for concern.

Despite these concerns, the underlying fundamental data of the economy remains strong. Growth (GDP), employment and earnings figures continue to be solid and valuations are reasonable. With interest rates rising and the real rate of interest now positive (rates exceed inflation) for the first time since the financial crisis, companies are no long enjoying a near zero cost of capital. This results in more rationed allocations of capital and greater volatility as there is less margin for error for companies from more expensive capital and cash as an asset class is more viable. Increased volatility and lower correlations between assets is likely here to stay throughout the remainder of this cycle and benefits the active management approach.

 

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
Mike Cava – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Brexit, Saudi relations: Wealth Economic Update Oct. 19, 2018

U.S. and World News

  • Brexit negotiations have been a story of two steps forward, one step back and the discussion over the Irish border situation has been a roadblock for reaching a deal. Businesses, consumers, and investors have become increasingly concerned that more delays will only result in unresolved differences. European Union Chief Negotiator Michel Barnier stated that “A Brexit deal with the U.K. is 90% done” while debates continue over the Irish border and Theresa May attempts to create yet another delay and extend the post-Brexit transition period until 2021.
  • saudi-629324102_370Tensions rose rapidly this week between the United States and Saudi Arabia amidst the unexplained sudden disappearance of an American journalist. Secretary of State Mike Pompeo traveled to Saudi Arabia to meet with King Salman bin Abdulaziz earlier this week to discuss the issue, at which time the King denied allegations that Saudi Arabia orchestrated the disappearance of the American journalist. Reports surfaced during the week stating that Khashoggi was killed as a result of an interrogation that went wrong. President Trump stated that he wants to get to the bottom of what actually happened and if Saudi Arabia is found responsible, that the American response would be “very severe”. Saudi Arabia has shared interests with the United States that include containing Iran and sharing defense contracts.


Markets

  • Stocks were relatively unchanged from last week after another very volatile week. The S&P 500 rose 0.05% and closed at 2,768. The Dow Jones rose by 0.45% and closed at 25,444. Year to date, the S&P is up 5.10% and the Dow Jones is up 4.73%.
  • Yields climbed higher this week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.05% and 3.19%, respectively.
  • The spot price of WTI Crude Oil continued its slide this week, losing 2.89% and closing at $69.28 per barrel. Year to date, Oil prices are up 15.26%.
  • The spot price of Gold rose 0.08% this week, and closed at $1,226.75 per ounce. Year to date, Gold prices are down 5.84%.

Economic Data

  • Initial jobless claims fell by 5,000 to 210,000 this week. The four-week moving average of claims increased by 2,000 to 212,000. Claims fell by 4,000 in North Carolina, and by 8,000 in Kentucky.
  • The Philadelphia Fed manufacturing index fell by 0.7 points to 22.2 for October versus expectations for a reading of 20.0.
  • Retail sales rose 0.1% month-over-month in September versus expectations for a 0.6% increase. The weaker than expected figure reflects lower sales at gas stations.
    • Retail sales core/control (ex-autos, gasoline, and building materials) increased 0.5% month-over-month in September versus expectations for a 0.4% increase.
  • Job openings increased to 7,136k in August versus expectations for 6,900k.

Fact of the Week

  • In 2008, Japan’s economy was larger that China’s economy ($4.9 trillion vs $4.5 trillion). China’s $12 trillion economy is now more than double that of Japan, who’s economy is $5 trillion. (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
Mike Cava – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Brexit, Hurricane Michael: Wealth Economic Update Oct. 12, 2018

U.S. and World News

  • Former British Prime Minister Tony Blair stated that there is a 50-50 chance of reaching another Brexit referendum as it is doubtful that Theresa May will secure a majority vote for a divorce deal with only six months until the deadline. Many issues remain unresolved before the deadline, including trade issues, security issues, regulatory uncertainty, and whether there will be a border separating Ireland. Japanese Prime Minister Shinzo Abe stated that Britain will be welcome to join the Trans-Pacific Partnership after it leaves the European Union, allowing it to retain its “global strength”.
  • hurricane-1035765586_370Rescuers have begun searching for survivors after Hurricane Michael flattened towns along the coast of the Florida panhandle. The hurricane made landfall early afternoon on Wednesday in Mexico Beach, Florida as a strong Category 4 storm with sustained winds of 155 miles per hour and knocked out power in about 1.5 million homes and businesses in the Southeast region. The storm is responsible for 12 deaths across Florida, Georgia, North Carolina, and Virginia and that number is expected to rise according to FEMA Administrator Brock Long. Offshore oil rigs in the Gulf were evacuated as the hurricane approached Florida, cutting oil production by over 40% and natural gas output by 33%.


Markets

  • Stocks plunged this week following last week’s declines. The S&P 500 fell 4.06% and closed at 2,767. The Dow Jones declined by 4.17% and closed at 25,340. Year to date, the S&P is up 5.06% and the Dow Jones is up 4.27%.
  • Yields pulled back this week after rising rapidly last week. The 5 year and 10 year U.S. Treasury Notes are yielding 3.02% and 3.17%, respectively.
  • The spot price of WTI Crude Oil also fell dramatically, losing 3.81% this week to close at $71.51 per barrel. Year to date, Oil prices are up 18.97%.
  • The spot price of Gold rose 1.20% this week, and closed at $1,218.04 per ounce. Year to date, Gold prices are down 6.51%.

Economic Data

  • Initial jobless claims increased by 7,000 to 214,000 this week. The four-week moving average of claims increased by 3,000 to 210,000. Claims rose by 7,000 in Kentucky, and by 4,000 in North Carolina.
  • The consumer price index (CPI) rose by 0.06% in September versus expectations for a 0.2% increase. The weaker figure was driven by lower energy prices. The year-over-year rate came in at 2.27% versus 2.4% expected.
    • Core CPI rose by 0.12% in September versus expectations of a 0.2% increase. The year-over-year rate in Core CPI remains at 2.2%.
  • The producer price index (PPI) increased by 0.2% in September, in-line with expectations.
    • PPI ex-food and energy rose by 0.2% in September, in-line with expectations.
  • Import prices rose by 0.5% in September month-over-month versus expectations for a 0.2% increase. The higher than expected reading was led by the foods, feeds, and beverages category.
  • The University of Michigan’s index of consumer sentiment declined 1.1 points to 99.0 in the October preliminary reading against expectations for a reading of 100.5.

Fact of the Week

  • A greater percentage of Millennials have all of their pre-tax retirement money invested in cash and bonds (20%) than those that have all of their pre-tax retirement money invested in stocks (19%). 2,593 Millennials (ages 20-36 in 2017) were surveyed in the 4th quarter 2017 (source: Transamerica Retirement Survey).

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

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NAFTA, Italy, EU: Wealth Economic Update Oct. 5, 2018

U.S. and World News

  • cow-184614299_370On Sunday night, the United States and Canada reached an agreement for the revised North American Free Trade Agreement just before the deadline of October 1st. The new agreement that includes Mexico will be called the U.S.-Mexico-Canada Agreement or USMCA. Canada agreed to open its dairy market to the United States while the United States agreed to keep the dispute-resolution process in the deal which would provide Canada protection from potential tariffs imposed by the United States. President Trump calls the deal the “most important deal we’ve ever made by far” and stated that he is skeptical of congress passing the deal as a result of political motives.
  • Italy has given into pressure put on by the European Central Bank and reduced its growth forecasts. The Euro fell dramatically and the Italian 10-year yield hit a four-year high as the second largest debt laden European country was closely reaching an October 15th deadline for submitting its final budget deal. The new growth forecast for this year was cut to 1.2% from a previous estimate of 1.5% and the budget deficit target was assumed at 2.4% of GDP for 2019, 2.1% for 2020, and 1.8% for 2021. Italy’s stock market declined this morning as a result of the lower growth forecasts.


Markets

  • Stocks continued their slide this week. The S&P 500 fell 0.95% and closed at 2,886. The Dow Jones declined by 0.36% and closed at 26,447. Year to date, the S&P is up 9.44% and the Dow Jones is up 8.73%.
  • Yields rallied dramatically this week, spooking the domestic stock market. The 5 year and 10 year U.S. Treasury Notes are yielding 3.07% and 3.23%, respectively.
  • The spot price of WTI Crude Oil finished the week higher again, gaining another 1.49% this week to close at $74.34 per barrel. Year to date, Oil prices are up 23.67%.
  • The spot price of Gold rose 1.08% this week, and closed at $1,203.77 per ounce. Year to date, Gold prices are down 7.60%.

Economic Data

  • Initial jobless claims fell by 7,000 to 207,000 this week. The four-week moving average of claims remained unchanged at 207,000. Claims fell by 6,000 in North Carolina, rebounding this week after Hurricane Florence.
  • The ISM manufacturing index fell 1.5 points to 59.8 in September versus expectations for a reading of 60.0.
  • The ISM non-manufacturing index rose by 3.1 points to 61.6 in September versus expectations for a reading of 58.0.
  • Construction spending rose by 0.1% month-over-month in August versus expectations for a 0.4% increase. Private residential construction was weaker in August.
  • Private sector employment rose by 230,000 in September month-over-month versus expectations for a 184,000 gain. This was led by professional and business services.
  • Nonfarm payrolls rose by 134,000 in September month-over-month versus expectations of an increase of 185,000.
    • The Bureau of Labor Statistics noted that Hurricane Florence had an estimated impact of around 50,000-60,000 jobs. The figure was also affected by the number of employees not at work due to weather.
    • These estimates would result in an actual figure of about 190,000
    • The unemployment rate declined to 3.7% versus 3.8% expected
    • Average hourly earnings rose 0.3% month-over-month, in-line with expectations.

Fact of the Week

  • The Small Business Optimism Index reached its all-time high in August, surpassing the mark set in July 1983. The index measures small business owners expectations for hiring, business growth, and profitability. (Source: National Federation of Independent Businesses)

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 nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.

Mexico/Canada trade, Oil prices: Wealth Economic Update Sept. 28, 2018

U.S. and World News

  • The Trump administration is willing to move forward on a trade agreement with Mexico, excluding Canada, if Canada does not agree to grant the United States access to its dairy market. This has been a very important point for the United States throughout the negotiation process. President Trump also threatened to impose a 25% tariff on cars imported from Canada, as the administration continues to further pressure Canada. So far, Canada is not calling the bluff, and U.S. Trade Representative Robert Lighthizer expressed a negative view on current negotiations with Canada. Congress members stated that there would be very little support for a deal that excluded Canada.
  • oil-859021152_370Oil prices skyrocketed as United States sanctions on Iran are set to begin on November 4th and OPEC has agreed to keep oil production at its current levels rather than pump more. The United States promised that the oil market would be sufficiently supplied in time for the sanctions to begin. OPEC’s decision against increasing supply could force the United States to release oil from the Strategic Petroleum Reserve to keep oil prices under control.


Markets

  • Stocks pulled back this week while the S&P 500 finished its strongest quarter since December of 2013. The S&P 500 fell 0.51% and closed at 2,914. The Dow Jones lost 1.07% and closed at 26,458. Year to date, the S&P is up 10.47% and the Dow Jones is up 8.73%.
  • Yields finished the week almost unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 2.95% and 3.06%, respectively.
  • The spot price of WTI Crude Oil continued its surge higher another 3.90% this week to close at $73.54 per barrel. Year to date, Oil prices are up 22.34%.
  • The spot price of Gold fell 0.71% this week, and closed at $1,191.53 per ounce. Year to date, Gold prices are down 8.54%.

Economic Data

  • Initial jobless claims rose by 12,000 to 214,000 this week. The four-week moving average of claims remained unchanged at 206,000. Claims rose by 10,000 in North Carolina, 7,000 in Kentucky, and 3,000 in South Carolina and California.
  • Durable goods orders rose by 4.5% in August, exceeding expectations of a 2% increase. This increase reflected a 13% increase in transportation equipment.
    • Durable goods orders ex-transportation rose by 0.1% versus expectations of 0.4%.
  • The Conference Board index of consumer confidence rose to 138.4 in September versus expectations of a 132.1 reading. This is the highest level since 2000.
  • Sales of new single-family homes rose by 3.5% in August to a seasonally-adjusted annualized rate of 629,000 versus expectations of 630,000. The prior three months were revised down by a net 40,000. The largest increase was in the Northeast region.
  • The core PCE price index ex-food and energy rose by 0.4% month-over-month in August versus expectations of 0.1%.
    • Personal income rose by 0.3% in August versus expectations of 0.4%
    • Personal spending rose by 0.3% in August, in line with expectations
  • The University of Michigan’s index of consumer sentiment fell to 100.1 in the August final reading versus expectations of a 100.6 reading.
  • The Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to 2-2.25% at the September meeting. Jerome Powell indicated that the FOMC would continue with gradual rate hikes and did not refer to the current monetary policy as “accommodative”, which is what it was previously referred too.


Fact of the Week

  • Of 2,000 American’s surveyed, 48% thought that the market was flat over the last 10 years, while 18% thought the market was down the last 10 years. As of last Friday, September 21st, the S&P 500 had returned 163.42% on a total return basis , or 10.16% annualized. (Source: Betterment, Bloomberg)

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 nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.