Tax Reform: Wealth Economic Update Nov. 17, 2017

U.S. and World News

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

Markets

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

 Economic Data

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

Fact of the Week

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

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

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

U.S. and World News

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

Markets

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

 Economic Data

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

Fact of the Week

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

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

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

U.S. and World News

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

Markets

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

 Economic Data

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

Fact of the Week

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

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Is a Home Equity Line of Credit Right for You?

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

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

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

How a HELOC Works

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

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

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

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

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

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

When to HELOC

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

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

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

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

Catalonia Independence, ECB: Wealth Economic Update Oct. 27, 2017

U.S. and World News

  • catalonia-659592784_360The Catalonia crisis intensified as the Catalan Parliament officially declared the region’s independence from Spain in a 70 to 10 vote on Friday, following weeks of demonstrations by its citizens. In response, Spanish Prime Minister Mariano Rajoy dismissed Catalonia’s president Carles Puigdemont and dissolved its Parliament hours after the independence vote. Rajoy called for new elections and fired the Catalan police chief as part of the series of measures aimed at seizing control of the revolting regime in Barcelona. Rajoy remarked, “In this moment, we need to be serene and careful, but we also need to have confidence that the state has the tools, backed by the law and reason, to peacefully and reasonably go back to legality and take away threats to democracy.”
  • The European Central Bank held a widely anticipated meeting this week. While there was no change in interest rates made, there was an announcement that the ECB’s bond buying program would be reduced by half to €30 billion per month starting in January. The ECB’s quantitative-easing program was also extended through September 2018 as anticipated. ECB President Mario Draghi emphasized the commitment to an “open-ended program” that will “not stop suddenly.”

Markets

  • Markets climbed higher this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs on Friday. The S&P rose 0.23% and closed at 2,581. The Dow Jones rose 0.45% for the week and closed at 23,434. Year to date, the S&P is up 17.16% and the Dow is up 20.87%.
  • Interest rates rose marginally this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.03% and 2.41%, respectively.
  • The spot price of WTI Crude Oil increased by 5.29% this week, closing at $54.16 per barrel. Year to date, Oil prices have risen 0.89%.
  • The spot price of Gold ended the week lower by 0.56%, closing at $1,273.35 per ounce. Year to date, Gold prices are up 10.97%.

 Economic Data

  • Initial jobless claims increased by 10,000 from last week, coming in at 233,000 after reaching its lowest level since 1973 last week. The four week moving average for claims fell to 240,000.
  • New home sales increased 18.9% in September to a seasonally adjusted annualized rate of 667,000 units which represents a new cycle high. A rebound in home sales in the hurricane-affected South region contributed over 75% of the overall increase.
  • Real GDP increased by 3.0% in the 3rd quarter, above consensus expectations of 2.6%. The year over year rate of Real GDP growth now stands at 2.3%, the highest since 2015. The Bureau of Economic Analysis noted that the hurricanes that occurred during the quarter disrupted production activity and consumer spending but was unable to estimate the impact on growth.

Fact of the Week

  • The United States has suffered 218 weather and climate disasters since 1980 in which the cost of damages exceeded an inflation-adjusted $1 billion, which is an average of 6 separate $1 billion+ disasters per year. (Source: National Centers for Environmental Information)

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.

 

Fed Chair Finalists, Catalonia: Wealth Economic Update Oct. 20, 2017

U.S. and World News

  • fed_chair-104257649As Fed Chair Janet Yellen’s term expiration date nears, the finalists for the next Fed Chair are beginning to narrow. The decision between finalists Janet Yellen, Jerome Powell, Kevin Warsh, Gary Cohn, and John Taylor is expected to be made by President Trump before November 3rd. On Thursday, President Trump met with the five candidates and Fed Governor Jerome Powell is leading the pack as he appears to favor no change from current Fed policy and is favored by Treasury Secretary Steven Mnuchin.
  • The crisis in Catalonia rose to higher levels today as the possibility of the government losing power over the region has become very real after the process to suspend government powers in the region has made further progress and Regional President Carles Puigdemont continues his push for independence. The Regional President is persistently asking to meet with Prime Minister Mariano Rajoy to begin discussing the future of Catalonia while the Prime Minister has vowed to force the region to obey the law.

Markets

  • Markets surged higher this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs once again during the week. The S&P rose 0.88% and closed at 2,575. The Dow Jones rose 2.04% for the week and closed at 23,329. Year to date, the S&P is up 16.75% and the Dow is up 20.10%.
  • Interest rates also dramatically increased this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.02% and 2.38%, respectively.
  • The spot price of WTI Crude Oil increased by 0.44% this week, closing at $51.96 per barrel. Year to date, Oil prices have fallen 3.28%.
  • The spot price of Gold ended the week lower by 1.75%, closing at $1,280.95 per ounce. Year to date, Gold prices are up 11.63%.

 Economic Data

  • Initial jobless claims decreased by 22,000 from last week, coming in at 222,000, reaching its lowest level since 1973 and no state’s claims increased by more than 1,000. The decline in claims in hurricane affected states attributed to the overall decline in the month. The four week moving average for claims fell to 248,000.
  • Housing starts fell by 4.7% in September to 1,127k while August’s numbers were revised up. The decline affected both single-family and multi-family homes and the month’s weakness is likely to be explained by the hurricanes in the South region.
  • Existing home sales increased by 0.7% in September to a seasonally adjusted rate of 5.39 million units versus consensus expectations of a -0.9% decline. Declines in the South region were more than offset by other regions in the country.

Fact of the Week

  • The New York stock market crash of 1987 happened 30 years ago this week, on October 19, the Dow Jones Industrial Average (DJIA of the Dow) plunged by a then-record 508 points-a 22% decline in the index.
    • Currently, a 500-point down day would only amount to a 2.2% drop in the Dow Jones Industrial Average. It has happened 17 times since 1987.
    • Today, it is not uncommon for 1-1.5 billion shares to be traded on a given day.
    • On October 19, 1987, Apple was only 6% of the size of IBM, then the largest company in the nation. Presently, Apple Inc.’s market capitalization is 6X (or 600%) that of IBM’s.

(Source: Oppenheimer)

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.

 

Interest Rates, Catalonia, Hurricanes: Wealth Economic Update Oct. 13, 2017

U.S. and World News

  • Minutes from the September Federal Reserve meeting were released this week and included comments about the near-term effects from Hurricanes Harvey, Irma and Maria but generally expressed unchanged views on underlying growth and inflation conditions. Many participants thought that another rate increase this year was likely warranted “if the medium term outlook remained broadly unchanged,” and consensus views continue to call for three rate hikes in 2018. The Fed will meet twice more in 2017, in November and in December, and the market is currently pricing in a 73% probability of a rate hike in December.
  • Catalonia-579153418_360The Catalonia saga continued on this week, though tensions have somewhat eased. Catalan President Carles Puigdemont, declared independence for the region but then halted the separation process to instead propose talks with the Spanish government. With the act, Puigdemont and his team remain in danger of being arrested for sedition, and Spanish President Mariano Rajoy had previously rejected any talks until secession plans were abandoned. Spanish and other European markets experienced a relief rally as a result of Catalonia choosing the more diplomatic option.

Markets

  • Markets grinded higher with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.17% and closed at 2,553. The Dow Jones rose 0.43% for the week and closed at 22,872. Year to date, the S&P is up 15.86% and the Dow is up 17.92%.
  • Interest rates pulled back this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.90% and 2.27%, respectively.
  • The spot price of WTI Crude Oil increased by 4.20% this week, closing at $51.36 per barrel. Year to date, Oil prices have fallen 4.26%.
  • The spot price of Gold ended the week higher by 2.09%, closing at $1,303.41 per ounce. Year to date, Gold prices are up 13.59%.

 Economic Data

  • Initial jobless claims decreased by 15,000 from last week, coming in at 245,000, only modestly above its pre-hurricane level. Jobless claims continued to normalize in the hurricane-affected states. The four week moving average for claims fell to 258,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.5% in September, slightly missing expectations of 0.6%. Headline CPI was boosted by a 6.1% increase in energy prices during the month. Over the last 12 months, the CPI is up 2.2%.
    • Core CPI (excludes food and energy prices) increased 0.1% in the month, missing forecasts of 0.2%. Over the last year, core inflation has risen 1.7%.
  • Retail sales rose 1.6% for September, just below the forecast of 1.7%. After seeing weakness in August due to the hurricanes, September’s sales bounced back with auto sales rising 3.6% and gas station sales rising 5.6%.

Fact of the Week

  • It was 10 years ago this week (10/9/07) that the S&P 500 peaked at a then all-time high of 1,565. The very next day, the index began a substantial 17 month slide that dragged the S&P down 57%, its worst bear market loss in the last 80 years. With the S&P closing at 2,553 on Friday, even if an investor had bought the 2007 market top on 10/9/07, they would have still experienced a 7.3% annualized total return (includes dividends) over the last 10 years. (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
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.

 

Vegas shooting, Catalonia, Hurricane Maria: Wealth Economic Update Oct. 6, 2017

U.S. and World News

  • mandalay_bay_360During a country music concert in Las Vegas, Stephen Paddock perpetrated the deadliest mass shooting in U.S. history from his hotel suite at the Mandalay Bay hotel, killing 58 people and wounding more than 500 more. Paddock had a large cache of rifles, thousands of rounds of ammunition and two ‘bump-stocks’ that convert semi-automatic firearms into fully automatics. Police are still seeking clues to explain Paddock’s motives and legislators are reviewing current gun laws and how he was able to assemble such a deadly arsenal. Gun stocks rallied following the massacre on reports of people stocking up on firearms ahead of potential legislation.
  • Catalonia is once again pushing for its independence from Spain as more than 90% of Catalan voters favored breaking off in a referendum deemed by Spanish officials as illegal. Catalan leader Carles Puigdemont is calling for international mediation for the dispute with Madrid, stating its referendum was valid and must be implemented. Puigdemont is also calling for a removal of Spanish security forces that have been clashing with citizens for weeks and has said that the Catalonia region will declare independence within a “matter of days.”
  • According to the island’s treasury secretary, Puerto Rico will need “tens of billions” of dollars in aid from the U.S. as it struggles to bounce back from the devastation of Hurricane Maria. President Trump visited the island this week to assess the recovery efforts. While Trump said early in the visit, “I hate to tell you, Puerto Rico, but you threw our budget a little out of whack,” he also implied that there would be an easing of Puerto Rico’s massive debt load stating, “They owe a lot of money to your friends on Wall Street and we’re going to have to wipe that out. You’re going to say goodbye to that.”

Markets

  • Markets rallied this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 1.25% and closed at 2,549. The Dow Jones rose 1.70% for the week and closed at 22,774. Year to date, the S&P is up 15.67% and the Dow is up 17.42%.
  • Interest rates continued to push higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.97% and 2.37%, respectively.
  • The spot price of WTI Crude Oil decreased by 4.68% this week, closing at $49.25 per barrel. Year to date, Oil prices have fallen 8.32%.
  • The spot price of Gold ended the week lower by 0.24%, closing at $1,276.68 per ounce. Year to date, Gold prices are up 11.26%.

 Economic Data

  • Initial jobless claims decreased by 12,000 from last week, coming in at 260,000. Jobless claims pulled back in hurricane-affected states. The four week moving average for claims fell to 268,000.
  • The September employment report showed a loss of 33,000 jobs during the month, widely missing expectations of an 80,000 payroll increase. The miss appears to be completely related to distortions caused by the multiple hurricanes that hit the country during the month. The prior two months figures were revised down a combined 38,000, bringing the three month average of job gains down to 91,000.
    • The headline unemployment rate fell to 4.2%, beating expectations of 4.4%. It doesn’t appear as though the hurricanes had an effect on the unemployment rate and the labor force participation rate increased from 62.9% to 63.1%.
    • Average hourly earnings rose by 0.5% in September, better than forecasts of 0.3%. Over the last 12 months, average wages have increased 2.9%.

Fact of the Week

  • Harvard University’s $37.1 billion endowment fund, which is the largest university endowment fund in the world, gained just 8.1% in the 12 months ending on June 30th. This compares to a 17.9% return for the S&P 500 over the same time period; a performance that the CEO of Harvard’s management company called “disappointing”. (Source: Harvard Management Company)

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.

 

North Korea, Hurricane Maria, Tax Plan: Wealth Economic Update Sept. 29, 2017

U.S. and World News

  • jets-525969835_360China has requested that President Trump and Kim Jong Un end the ongoing war of words after the foreign minister of North Korea referred to Trump’s latest warning of “they won’t be around much longer!” as a declaration of war. North Korea has responded by threatening to shoot down any American warplanes beyond North Korean airspace while Washington stated that North Korea’s interpretation of Trump’s words was “absurd”. China, North Korea’s most important ally, has ordered all North Korean companies operating in China to shut down by January 1st, as part of recently passed sanctions by the United Nations.
  • Hurricane Maria is estimated to have caused $85 billion in insured losses after it made landfall in Puerto Rico last weekend. Most of the island was destroyed, and bondholders are attempting to put together a $1 billion restructuring deal consisting of private money to aid the struggling U.S. territory. The price of Puerto Rican debt has fallen to record lows as a result of the devastation.
  • President Trump has unveiled his tax reform plan which aims at lowering corporate and personal tax rates. The plan includes a proposal that allows a one-off low tax rate for corporations repatriating profits from overseas. The tax plan is also said to make the tax code simpler and create millions of new jobs for Americans.

Markets

  • Markets rallied this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.72% and closed at 2,519. The Dow Jones rose 0.25% for the week and closed at 22,405. Year to date, the S&P is up 14.10% and the Dow is up 15.30%.
  • Interest rates extended their rally this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.93% and 2.34%, respectively.
  • The spot price of WTI Crude Oil increased by 1.82% this week, closing at $51.58 per barrel. Year to date, Oil prices have fallen 3.98%.
  • The spot price of Gold ended the week lower by 1.33%, closing at $1,280.01 per ounce. Year to date, Gold prices are up 11.55%.

 Economic Data

  • Initial jobless claims increased by 12,000 from last week, coming in at 272,000. The increase was attributed to the southeast region as a result of Hurricane Irma. The four week moving average for claims rose to 278,000.
  • Real GDP growth for Q2 was revised up to 3.1% from 3%. The revision was attributed to a faster pace of inventory accumulation.
  • Sales of new single-family homes fell by 3.4% in August to a seasonally-adjusted annualized rate of 571k units, below expectations. The south region in areas affected by the hurricane contributed to 75% of the decline.
  • The core PCE price index (excluding food and energy) increased 0.1% last month, below expectations of a 0.2% increase.

Fact of the Week

  • After adjusting numerical data from the past for the impact of inflation, the median household income in 2016 ($59,039) is the highest ever recorded in the United States, surpassing the previous median income record high ($58,665) set in 1999 (source: Federal Reserve Bank of St. Lous).

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.

 

Interest Rates, Puerto Rico, North Korea: Wealth Economic Update Sept. 22, 2017

U.S. and World News

  • puerto-468910550_360The Federal Reserve left interest rates unchanged during their September meeting this week. They did however announce that they will begin to let their over $4 trillion balance sheet run off starting in October. The pace of the runoff will begin slowly and progressively pick up in size until the Fed’s balance sheet has become normalized, unwinding its massive and unprecedented Quantitative Easing program. The Committee’s projections continued to show that a third rate hike of 2017 is probable in December but that only two rate hikes were anticipated in 2018. In Fed Chair Janet Yellen’s post-meeting press conference she noted that while there may be a short-term growth impact from the recent hurricanes, she does not expect them to “materially alter the course’ of medium term growth. The market is currently pricing in a 63% chance of a rate hike in December.
  • Puerto Rico was rocked by a hurricane for the second time this month as Hurricane Maria slammed into the island this week. Still picking up the pieces from Hurricane Irma, Maria knocked out power to the entire island that has a population of over 3 million people. It’s estimated that the damage will likely cause $30 billion in damage for the island that had recently sought bankruptcy protection.
  • The North Korean saga continued this week with President Trump and Kim Jong-Un trading barbs and threats through various means. Speaking at the UN, Trump threatened to “totally destroy ‘Rocket Man’s regime”. Additionally, Trump issued an executive order that would penalize any company or person doing business with North Korea by either cutting off their access to the U.S. financial system or freezing their assets, a move seen as aimed at Chinese financial institutions which have long been tied to North Korea. In response, Un released a statement that said that Trump was ‘mentally deranged’ and that North Korea could test a hydrogen bomb over the Pacific Ocean in response to the threats.

Markets

  • Markets edged higher with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.21% and closed at 2,502. The Dow Jones rose 0.90% for the week and closed at 22,350. Year to date, the S&P is up 13.43% and the Dow is up 15.17%.
  • Interest rates continued to rise from their recent lows. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.86% and 2.25%, respectively.
  • The spot price of WTI Crude Oil increased by 1.52% this week, closing at $50.65 per barrel. Year to date, Oil prices have fallen 5.45%.
  • The spot price of Gold ended the week lower by 1.77%, closing at $1,296.81 per ounce. Year to date, Gold prices are up 13.01%.

 Economic Data

  • Initial jobless claims declined by 23,000 from last week, coming in at 259,000. The drop reflected a rebound from the effects of Hurricane Harvey, and a smaller than expected the impact from Hurricane Irma. The four week moving average for claims rose to 269,000.
  • Housing starts fell by -0.8% in August, worse than the forecasted 1.7% increase. The more volatile multi-family category (-6.5%) dragged the total down while single family starts showed a 1.6% increase.
  • Existing home sales fell -1.7% in August, lower than an expected 0.2% increase in existing homes. Data was mixed regionally as existing home sales in the South (-5.7%) and West (-4.8%) fell while they rose in the Midwest (+2.4%) and Northeast (+10.8%).

Fact of the Week

  • Prior to the first round of Quantitative Easing (QE) beginning on November 26, 2008, the Fed’s balance sheet stood at $480 billion and only held Treasury bills, notes and bonds, but not any mortgage-backed securities. As of September 6, 2017 Fed’s balance sheet stood at an enormous $4.2 trillion and included $2.4 trillion of Treasury bonds and $1.8 trillion of mortgage-backed securities. (Source: Federal Reserve)

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.