Korea, Iran: Wealth Economic Update May 21, 2018

U.S. and World News

  • radiation-856884068_380After witnessing ongoing joint military drills between South Korea and the United States, North Korea has cancelled planned discussions with South Korea and threatened to cancel the scheduled meeting with the United States on June 12th. Kim Jong-un expressed displeasure with having to unilaterally abandon its nuclear program. Vice Foreign Minister Kim Kye-gwan stated “If the U.S. is trying to drive us into a corner to force our unilateral nuclear abandonment, we will no longer be interested in such dialogue and cannot but reconsider our proceeding to the North Korea-U.S. summit”. The United States has stated that it continues to plan for the scheduled meeting on June 12th.
  • UAE Energy Minister Suhail bin Mohammed al-Mazroui stated that OPEC has the ability to produce enough oil to cushion oil prices if the United States re-imposes sanctions on Iran. The Energy Minister told reporters that OPEC is familiar with situations like these and there is no reason to worry about supply. The IEA cut its global demand growth for oil to 1.4 million barrels per day in 2018, lower than a previous estimate of 1.5 million barrels per day.

Markets

  • The markets ended the week slightly lower. The S&P 500 fell 47% this week and closed at 2,712.97. The Dow Jones lost 0.36% and closed at 24,715.09. Year to date, the S&P is up 2.24% and the Dow Jones is up 0.89%.
  • Yields moved higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 89% and 3.06%, respectively.
  • The spot price of WTI Crude Oil rose 89% this week and closed at $71.33 per barrel. Year to date, Oil prices are up 18.66%.
  • The spot price of Gold decreased by 05%, closing at $1,292.29 per ounce. Year to date, Gold prices are down -0.81%.

Economic Data

  • Initial jobless claims rose 11,000 to 222,000 for the week. The largest increases were in Missouri, Kentucky, and California. The four-week moving average moved lower 3,000 to 213,000. The pace of layoffs still remains very low.
  • The Philadelphia Fed manufacturing index rose by 11.2 points in May to 34.4 versus expectations of 21.0.
    • The  new orders component rose 22.2 points to 40.6 to the highest level since 1973.
  • Housing starts fell by 3.7% in April to a seasonally adjusted rate of 1,287k which was below expectations of a -0.7% decline. The decline was led by the multi-family category while single family homes moved higher by 0.1%.
    • The largest  declines were in the Northeast and Midwest , reflecting unseasonable weather.
  • Building permits fell 1.8% in April to an annualized rate of 1,352k in April compared to expectations of a 2.1% decline.
  • Industrial production rose 0.7% in April versus expectations of a 0.6% increase. Industrial production was led by utilities and mining output in April.
  • Retail sales rose by 0.3% in April, matching expectations. The figure was led higher by an increase at gas stations.
    • Retail sales ex-autos rose 0.3% in April versus expectations of a 0.5% increase.

Fact of the Week

  • The royal wedding between Prince Harry and Meghan Markle is estimated to cost around $45.8 million. This is well over 1000 times the cost of the average marriage in the US and UK at $34,000. Almost all of the $45.8 million budget is for security, which is estimated to cost $43 million. (Source: Business Insider)

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.

Iran, CA Solar Homes, Korean Hostages: Wealth Economic Update May 11, 2018

U.S. and World News

  • The United States has withdrawn from the nuclear deal with Iran, sending the price of crude oil up over 3% to $71 a barrel. President Trump announced that he will impose the “highest level” of sanctions on Iran starting August 6th which would include restrictions on exports of airplanes and parts, dollar transactions, trade in gold and other metals, sovereign debt and the auto industry. On November 4th, additional sanctions will include a ban on oil purchases and transactions with the central bank. The withdrawal from the deal has been condemned by European countries, particularly France whose Foreign Minister said European companies should not have to pay for the US decision. Iran is now calling on Airbus, a plane manufacturer based in Europe, to continue to sell it planes.
  • solar-687096836_370California has voted unanimously to require that nearly all new homes and residential buildings smaller than four stories built after January 1st 2020 have solar panels. This is estimated to add between $8,000 and $12,000 to building a home. The CEC also estimated that mortgages will increase on average by $40 per month and savings on utility bills will be $80 per month.
  • Three Americans that were held as prisoners in North Korea for months were returned to the United States this week with Secretary of State Mike Pompeo. The meeting between President Trump and Kim Jong Un will take place on June 12th in Singapore. The location of Singapore symbolizes the desire to no longer utilize South Korea as an intermediary between the United States and North Korea, and also is a big step for Kim Jong Un to gain credibility as a leader.

Markets

  • AThe markets surged higher this week. The S&P 500, rose 2.49% this week and closed at 2,727.72. The Dow Jones rose 2.51% and closed at 24,831.17. Year to date, the S&P is up 2.71% and the Dow Jones is up 1.26%.
  • Yields rose higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.84% and 2.97%, respectively.
  • The spot price of WTI Crude Oil rose this week by 1.23% and closed at $70.58 per barrel. Year to date, Oil prices are up 17.42%.
  • The spot price of Gold rose this week by 0.35%, closing at $1,319.04 per ounce. Year to date, Gold prices are up 1.25%.

Economic Data

  • Initial jobless claims were flat at 211,000 for the week. The largest increase was in Ohio and the largest decline was in Wisconsin. The four-week moving average moved down 5,000 to 216,000, a 49 year low. The pace of layoffs still remains very low.
  • The consumer price index (CPI) rose 0.22% in April versus expectations of a 0.3% increase and the year-over-year rate remains unchanged at 2.1%. The increase was led by a rise in energy prices.
    • Core CPI (ex-food and energy) rose 0.1% in April versus expectations of a 0.2% increase.
  • The producer price index (PPI) rose 0.1% in April, below expectations of a 0.2% rise. The figure was held lower due to a 1.1% decline in food prices.
    • PPI ex-food and energy rose 0.2% in April, in line with expectations.
  • In the University of Michigan’s index of consumer sentiment May preliminary report, the index was unchanged at 98.8 versus expectations of a modest decline.

Fact of the Week

  • The individual stock that was the top performing stock within the S&P 500 YTD through 4/30/18 with a gain of +62.8% was also ranked as the #1 stock within the index for all of calendar year 2013 and again in calendar year 2015. But the stock was also ranked #430 in 2014 and #278 in 2016 (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, 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.

The Game-Changing Benefits of Predictable Cash Flow

David Mottet , First Vice President—Commercial Lending 

To understand the dynamics of small business management, you need to look beyond your revenues and focus on how quickly cash flows through your organization. Because, if your company comes up with insufficient cash to operate at the end of the month, it really won’t matter that your business’ earnings hit a new high the month before. That’s why you need to keep your eye on your operating cash cycle to get a better gauge on the health of your cash flow.

The Lifeblood of Your Organization

The operating cash cycle represents the length of time your cash is tied up in working capital, including the inventory cycle and the accounts receivable cycle. For most businesses, it takes somewhere between 40 and 60 cents in working capital investment to generate one dollar in new revenue. This is the basic premise behind achieving sustainable growth.

Your growth capacity is determined by your working capital surplus. But the “timing of cashis also a factor. Operating cash cycles are the circulatory system of your business. If cash is not flowing smoothly through the system, the patient weakens. If cash flow stops all together, the patient’s viability is at risk.

Assessing Predictability

To gauge the strength of your current operating cash cycle, ask yourself the following questions:

  • How would your day-to-day operations be impacted if your clients made their payments within 24 hours of receiving your invoice?
  • How would truly predictable cash flow affect the ability of your company to add staff or other resources?
  • How would paying all accounts within five business days impact your ability to negotiate better prices and discounts with your vendors?

If you are like most managers, answering these questions led you to a better place than you are right now. Once you know when you will receive payment, you no longer need to juggle payables and other business obligations. You begin to control your cash flow rather than being controlled by it. That’s where the value of having a predictable cash flow leads.

The Benefits of a Predictable Cash Flow

Business owners typically realize five major benefits from achieving a predictable operating cash cycle.

  1. Reduce managerial stress. Just as with personal finances, a lack of money can lead to stress in a business. You start to worry about your employees just as you would your family.
  2. Build stronger business relationships. Once you take control of your operational cash cycle, you can begin to nurture valuable relationships with both vendors and clients. This can often lead to earning better pricing through prompt payment.
  3. Experience debt reduction. Predictable cash cycles in a business enable you to pay down term debt more quickly, as well as other short-term obligations. In time, your business can become totally debt free, and, as an owner, you become an investment and cash management client rather than strictly a borrower.
  4. Improve staffing flexibility. During times of uncertainty, the last thing a business owner wants to do is commit to paying annual salaries for new employees. Predictable operational cash flow enables you to hire with confidence as growth opportunities arise.
  5. Realize growth in sales. Businesses must have working capital to support expansion. By making operational cash cycles more predictable, one key barrier to growth is removed. Consistent cash cycles provide you with the opportunity to expand your sales more easily, given market demand.

To gain firm control of your operational cash flow and the resulting benefits of predictable payments, Old Second offers business clients access to the BusinessManager® program. This online program allows you to get cash for your accounts receivable deposited directly into your bank account by selling them to the bank at a discount. Essentially, it allows you to quickly turn your invoices into cash, makes your cash flow more predictable and enables you to negotiate better terms from your suppliers. The result is a much stronger operating cash cycle and healthier finances.

To learn more about this game-changing program and the other cash management strategies available at Old Second Bank, contact your lender to set up an appointment. We can’t wait to show you the difference it can make.

China, Hawaii Volcano: Wealth Economic Update May 4, 2018

U.S. and World News

  • A United States delegation traveled to China this week to negotiate on trade. Ahead of the meeting, Chinese Foreign Ministry spokeswomen Hua Chunying stated that it is not realistic to expect to have all the issues resolved in one meeting. It has been rumored that the United States requested China to reduce its trade surplus by at least $200 billion by 2021, cease government support for advanced technologies, cut tariffs on American products, and to agree not to retaliate. The United States has not made an official statement on the results of the meeting yet, however, China’s official news agency announced that the two countries agreed in some areas and would set up a “working mechanism” to keep trade negotiations going.
  • Kilauea-157649787_370Earlier in the week, a series of earthquakes on Hawaii’s Big Island sparked the eruption of the Kilauea volcano on Thursday evening. Nearly 1,500 people were forced to evacuate the area and lava is flowing through the streets of the Leilani Estates subdivision while residents are being sheltered at two community centers. On a Honolulu television station, a resident stated that “It sounded like if you were to put a bunch of rocks into a dryer and turn it on as high as you could.” The fire department has detected sulfar dioxide gas in the evacuation are at extreme levels. Kilauea is 212 miles southeast of Honolulu and is considered the most active volcano in Hawaii.

Markets

  • After The markets ended the week slightly lower. The S&P 500, lost 0.21% this week and closed at 2,663.42. The Dow Jones fell 0.19% and closed at 24,262.51. Year to date, the S&P is up 0.24% and the Dow Jones is down 1.20%.
  • Yields also moved lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.79% and 2.95%, respectively.
  • The spot price of WTI Crude Oil rose this week by 2.50% and closed at $69.80 per barrel. Year to date, Oil prices are up 16.12%.
  • The spot price of Gold fell this week by 0.67%, closing at $1,315.11 per ounce. Year to date, Gold prices are up 0.95%.

Economic Data

  • Initial jobless claims rose 2,000 to 211,000 for the week. The largest increases were in New York and California. The four-week moving average moved down 7,000 to 222,000. The pace of layoffs still remains very low.
  • The trade deficit fell $8.8 billion to $49.0 billion in March led by the decline of goods and services imports and real imports of nonpetroleum goods.
  • Nonfarm payrolls growth came in at 164,000 for the month of April, below expectations of a 193,000 increase. Growth in prior months was revised up by a netted 30,000. Unseasonable weather in the Midwest was partly to blame for the weaker than expected number.
    • Average hourly earnings rose by 0.15%, missing expectations of a 0.20% increase and the year-over-year rate remained stable at 2.6%.
    • The unemployment rate fell to 3.9% in April versus expectations of 4.0%.
  • Private payrolls increase by 204,000 versus expectations of a 198,000 increase.
  • The ISM non-manufacturing index fell by 2 points to 56.8, missing expectations of 58. The decline was led by the business activity index and the employment index.
  • Factory orders rose by 1.6% in March, exceeding expectations of a 1.4% increase.
  • The core PCE price index excluding food and energy increased 0.15% in March and the year-over-year rate increased to 1.88%. Expectations were for a 0.20% increase.
    • Personal income rose 0.3% in March versus expectations of a 0.4% increase.
    • Personal spending rose 0.4% in March, in line with expectations.

Fact of the Week

  • The total return for the S&P 500 over the last 10 years (2008-2017) was a gain of 8.5% per year (total return). If you avoided the 10 worst percentage days over the 10 years (10 trading days in total, not 10 days per year), the +8.5% annual gain rises to an annual gain of 16.8% (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, 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.

Korea, Macron: Wealth Economic Update Apr. 27, 2018

U.S. and World News

  • korea_handshake-824604454_360The leaders of North and South Korea announced this morning that they would end the war that has lasted nearly 70 years and that they would begin pursuing “complete denuclearization” of the peninsula after holding a historic summit at the border. This marked the first time that a North Korean leader set foot in South Korea since 1953. The two leaders also agreed on potentially having high-level talks and negotiations with the United States and China.
  • President Trump met with French President Emanuel Macron earlier this week to discuss foreign policy issues. Following the meeting, Emanuel Macron stated that he believes that President Trump will scrap the Iran nuclear deal before the May 12th deadline, citing the president’s strong negative feelings about the deal. The Iran deal consists of billions of dollars in sanctions imposed on Iran being removed in exchange for an agreement to cease its nuclear program.

Markets

  • After another volatile week in the markets, the indices are almost unchanged from last week. The S&P 500, in a very rare occurrence, returned 0.00% this week and closed at 2,669.91. The Dow Jones fell 0.62% and closed at 24,311.19. Year to date, the S&P is up 0.45% and the Dow Jones is down 1.01%.
  • Yields were also unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.80% and 2.96%, respectively, the same exact level as last Friday’s close.
  • The spot price of WTI Crude Oil moved lower this week by 0.53% and closed at $68.04 per barrel. Year to date, Oil prices are up 13.19%.
  • The spot price of Gold fell this week by 0.98%, closing at $1,323.33 per ounce. Year to date, Gold prices are up 1.58%.

Economic Data

  • Initial jobless claims declined 24,000 to 209,000 for the week. The largest declines were in New Jersey, Pennsylvania, and Ohio. The four-week moving average moved down 2,000 to 229,000. The pace of layoffs still remains very low.
  • New durable goods orders increased by 2.6% in March exceeding expectations of a 1.6% increase. The increase was largely influenced by the 44.5% increase in non-defense aircraft orders. N
    • New durable goods order ex-transportations was flat for the month of March compared to expectations of a 0.5% increase.
  • Wholesale inventories rose by 0.5% in March missing expectations of a 0.7% increase. The figure was held lower by a decline in retail inventories of -0.4%.
    Real GDP rose by 2.3% in the first quarter of 2018 versus expectations of a 2.0% increase.

    • Consumption growth slowed to 1.1% versus 4.0% in quarter four.
    • Housing investment came in at -3.5% versus expectations of a 0.1% increase.
    • Government spending came in at -1.4% versus expectations of a 2.5% increase.
    • Nonresidential structures rose 12.3% versus expectations of a 7.0% increase.
  • The University of Michigan’s index of consumer sentiment rose 1.0 point to 98.8 in April versus expectations of 98.0.
  • Existing home sales rose 1.1% in March to a seasonally adjusted rate of 5.60 million units exceeding expectations of a 0.2% increase.
  • Consumer confidence rose to 128.7 in April exceeding expectations of 126.0.

Fact of the Week

  • Amazon closed today at $1572.96, after reaching an all-time high during trading at $1633.26. Amazon’s first close in 1997 was $1.96, on a split-adjusted basis. If you have invested $10,000 at the first closing price, your investment would be worth $8,023,507.24 as of close today. (Source: Money.net)

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, 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.

4 Things You Need to Know About Cryptocurrencies and Block Chain

Brad Johnson, CFA, CFP®, Vice President/Senior Investment Officer

Thanks to the surge in the stock prices of cryptocurrencies like Bitcoin—and the technology companies that allow for its use—conversations around this topic often get emotional. Some are gripped by the fear of missing out on an opportunity to “get in on the ground floor,” while others quickly dismiss the volatile stock prices as evidence of a growing bubble, much like the dotcom era of the early 2000s.

The reality, however, can be found somewhere in between, and the conversation is far from over. To help inform the discussion, here’s what you need to know about cryptocurrencies and the technology—block chain—that makes them possible.

#1: The Technology Is Legit.

Block chain, is both legitimate and of real significance. It has the potential to change how business is transacted and information exchanged, resulting in an instantaneous and verified transfer.

It also creates a decentralized payment system that cuts out the middleman, the Federal Reserve system, in particular. This is the inverse of the current financial system in which the central bank makes decisions regarding monetary policy. This efficiency will have many applications, including reducing opportunities for fraud and lowering cash management costs. However, the technology and its use are years away from being able to support widespread adoption of block chain transmissions. That said, it’s well worth keeping an eye on the companies that are at the forefront of making block chain an eventual reality in day-to-day payment systems.

#2: Bitcoin Is Not the Only Cryptocurrency in Town.

There are thousands of cryptocurrencies, but Bitcoin is the most well known in its rapidly expanding universe. Cryptocurrencies are not on equal footing with currencies like the dollar, however. They are issued in fixed amounts—like trading cards. Their value rises and falls with demand for their limited supply. That undermines their use as a store of value. Currently, there are no regulatory bodies in charge of cryptocurrencies and no exchanges on which they trade. This creates a “wild west” of sorts—similar to the U.S. banking system prior to the 1900s, when individual banks, as well as the U.S. Treasury, issued currency. It will be a while before standards are in place enabling cryptocurrencies to function on equal footing with country currencies and “winners” emerge among the thousands of options.

Also important to note is that because of the outsized attention that speculation in the coins has caused, the public has a misperception about the influence this payment option has on the economy and world markets as a whole. It is still in its infancy and much too small to move global markets at this point.

#3: Cryptocurrencies and Block Chain Are Not Able to Replace the Current Financial System.

While the technology is exciting and has a role to play in the future, we think it’s more likely that cryptocurrencies and block chain will be a payment tool that resides within the current monetary system. Consider that because the coins are finite, the payment and its receipt are immediate—and it occurs on a one-to-one basis—there is no opportunity for lending.

The current global financial system operates with an infinite amount of currency. Central banks, like the U.S. Federal Reserve, have mechanisms for expanding and contracting the money supply to support the economy through borrowing and lending activities. Loans—whether between banks, countries, or banks and their individual and corporate borrowers—are a key part of the system. Without lending, there are no mortgages or car loans—credit that creates the liquidity necessary to increasing economic wealth. That, in turn, would not be good for economic growth.

#4: Participation in Cryptocurrencies Is Limited.

Regulated wealth management firms like ours are prohibited from acquiring and holding cryptocurrency positions for clients. There just is no mechanism for us to do to so as a fiduciary. Also, the cryptocurrency world is currently plagued by fraud and confusion since anyone can issue coins. Pyramid schemes have also been increasing. What we can do for our clients is monitor and suggest investment—where prudent—in the companies involved in developing block chain technology and the applications that will eventually emerge.

It’s Too Soon

There is little doubt that, at some future point, cryptocurrencies and block chain will become part of the mainstream financial world. However, adoption of block chain and cryptocurrencies is not imminent. The technology and its use are years away from being able to support widespread use. How the system will work, who will use it, which currency or currencies will be adopted, and the opportunities they will give rise to, however, are something we continue to monitor closely.

To stay current on the latest developments impacting the investment world, consider subscribing to our weekly newsletter. Our Wealth Management representatives are also eager to answer your questions about opportunities to grow your invested assets. To reach us, call 630-906-2000 or visit us online.

North Korea, Japan, Cuba: Wealth Economic Update Apr. 20, 2018

U.S. and World News

  • KOREA-652900206_360Japan’s Shinzo Abe traveled to Mar-a-Lago to meet with President Trump on Tuesday to discuss trade and a planned summit with North Korean leader Kim Jong-un. Japan wanted to discuss the United States renewed interest in re-entering the Trans-Pacific Partnership (TPP) and the possibility of Japan’s inclusion in the exemption of steel and aluminum tariffs with other United States allies. Japan was also concerned that they may have been excluded from nuclear negotiations with North Korea after President Trump made a decision to meet with Kim Jong-un without first conferring with Shinzo Abe. The two-day summit concluded with no deal being reached on the TPP, no exemption for Japan on the steel and aluminum tariffs, and a stronger agreement between the two leaders on North Korea.
  • After more than 60 years of Castro leadership in Cuba, Miguel Diaz-Canel was elected the next president of Cuba, a widely expected result. On Thursday, Raul Castro announced that he is stepping down and Diaz-Canel was elected after 603 out of the 604-member National Assembly had approved of him. Raul Castro will remain head of the country’s Communist Party until the next scheduled party congress in 2021. Miguel Diaz-Canel stated that he will reform the economy to improve the communication between the government and the people while preserving Cuba’s communist system.

Markets

  • The markets finished higher this week. The S&P 500 rose 0.54% and closed at 2,670.14. The Dow Jones rose 0.46% and closed at 24,462.94. Year to date, the S&P is up 0.45% and the Dow Jones is down 0.40%.
  • Yields moved much higher for yet another week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.80% and 2.96%, respectively. The 10-year Treasury yield hit its highest level since 2014.
  • The spot price of WTI Crude Oil rose again this week by 1.15% and closed at $68.10 per barrel. Year to date, Oil prices are up 13.29%.
  • The spot price of Gold fell this week by 0.76%, closing at $1,335.96 per ounce. Year to date, Gold prices are up 2.55%.

Economic Data

  • Initial jobless claims declined 1,000 to 232,000 for the week. The largest declines were in New Jersey, Pennsylvania, and Ohio. The four-week moving average moved up 1,000 to 231,000. The pace of layoffs still remains very low.
  • The Philadelphia Fed manufacturing index moved higher by 0.9 points to 23.2 vs consensus expectations of 21.0. The increase was led by the employment component and the average workweek component.
  • Retail sales increased by 0.6% in March versus expectations of a 0.4% increase. The increase was led by auto sales and slightly held back by falling gasoline prices.
    • Retail sales ex-autos increased 0.2% versus a median forecast of 0.2%
    • Retail sales ex-autos, gasoline, and building materials increased 0.4% versus a median forecast of 0.4%
  • Housing starts rose 1.9% in March to 1,319k, short of expectations of a 2.5% increase. The rise was driven by multi-family starts.
    • Building permits rose by 2.5% month-over-month in March to an annualized rate of 1,354k compared to a median forecast of an unchanged month-over-month figure.

Fact of the Week

  • Marijuana sales in Colorado generated $506 million in tax revenue for the state, through June 2017. In 2014, the first year it was legalized, the state generated $76 million in tax revenue from marijuana, nearly double the $42 million that was generated from alcohol sales in the state. The deficit in Illinois is $148 billion as of 4/20/18. (CNN Money, US Debt Clock).

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, 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.

Syria, China, Oil: Wealth Economic Update Apr. 13, 2018

U.S. and World News

  • On Sunday, President Bashar Assad of Syria allegedly launched another chemical attack on his people, killing 49 people, including women and children. President Trump stated in a tweet that “President Putin, Russia and Iran are responsible for backing Animal Assad. Big price to pay”. The United States has warned Russia that all options are on the table for a military response in Syria, a move that the United States’ allies fully support. British submarines were ordered to move within striking distance of Syria as the possibility of military response to Syria is imminent. After Russia warned against the plan of the United States and their allies launching a military strike in Syria, this morning, Russia’s foreign minister claimed that the alleged chemical attack was staged by an unknown foreign intelligence agency.
  • President Xi Jinping of China revealed at the Boao Forum for Asia on Monday night that he plans to further open up the China economy, significantly lower import tariffs, and improve the investment environment for foreign companies. This morning, China reported its first trade deficit in over a year amid trade tensions between China and the United States. The falling exports are estimated to be a result of seasonal factors such as the China New Year holiday.
  • The price of Crude oil has risen dramatically as a result of increased tension in the middle east and is having an effect on gasoline prices. The U.S. Energy Information Administration revealed that the average regular retail gas prices reached $2.70/gallon last week; this is the highest level of gasoline prices in three years.

Markets

  • The markets rallied this week as volatility continues. The S&P 500 rose 2.04% and closed at 2,656.30. The Dow Jones rose 1.80% and closed at 24,360.14. Year to date, the S&P is down 0.09% and the Dow Jones is down 0.86%.
  • Yields moved higher again this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.67% and 2.82%, respectively.
  • The spot price of WTI Crude Oil had a big week rising 8.51% and closing at $61.92 per barrel for the week as tensions in the middle east ratchet higher. Year to date, Oil prices are up 12.05%.
  • The spot price of Gold rose slightly higher this week by 0.92%, closing at $1,345.28 per ounce. Year to date, Gold prices are up 3.26%.

Economic Data

  • Initial jobless claims fell 9,000 to 233,000 for the week. The largest declines were in Pennsylvania and New Jersey. The four-week moving average moved up 2,000 to 230,000. The pace of layoffs still remains very low.
  • Import prices were unchanged in March versus expectations of a 0.1% increase. The flat reading in March is a result of a 1.6% drop in fuel prices and a 0.2% increase in import prices ex fuels.
  • The producer price index (PPI) rose 0.3% in March exceeding expectations of a 0.1% gain as the drop in fuel prices was largely offset by an increase in core producer price inflation, food, and trade services.
    • PPI ex-food and energy rose 0.3% in March versus expectations of a 0.2% increase.
    • PPI ex-food and energy and trade services rose 0.4% versus expectations of a 0.2% increase.

     

  • The Consumer Price Index (CPI) fell 0.06% in March exceeding expectations of a drop of 0.09% reflecting a fall in gasoline prices slightly offset by an increase in food prices.
    • Core CPI (ex- food and energy) rose 0.18% in March meeting expectations of a 0.2% increase.
    • The year-over-year Core CPI rate also came in at 2.12% meeting expectations of 2.1%.
  • The University of Michigan’s index of consumer sentiment fell 3.6 points to 97.8 points in the April preliminary report. The drop is related to concerns over the potential impact of proposed trade policies.

Fact of the Week

  • 94.5% of home mortgages (by number, not by dollar) are “current and performing” as of 12/31/2017. Just 2.4% of home mortgages were “seriously delinquent” (defined as 60 days or more past due) as of 12/31/2017 (source: Office of the Comptroller of the Currency).

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, 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.

Attracting and Retaining Skilled Employees

Sean O’Connor, First Vice President/Retirement Benefits 

With the current robust economy comes a tight job market. While that may be great for revenues, it also brings the added pressure of attracting and retaining skilled staff members. Whether you are trying to entice good workers to leave the jobs they have to join your firm or want current employees to stay, it takes a more than salary and a pleasant workplace. Having a good employee benefit plan helps make your case.

The Thing About Millennials

Millennials, the generation that is currently flooding workplaces as the pace of Baby Boomer retirements starts to percolate, may have a reputation for being swayed by the promise of an office foosball table and Taco Tuesdays, but that is not all they want. A key characteristic for this demographic is that they are savers, and many have already begun saving for retirement. As self-guided learners, they are already looking for more sophisticated strategies and advice on retiring. They want to be prepared to “win” retirement—and a potentially early retirement at that.

As an employer, this makes your plan, and its attractiveness in meeting your staff members’ long-term goals, even more critical to your company’s continued growth and expansion.

Closing the Gaps

As a wealth management firm, we have been creating and administering employee retirement plans for decades. That includes establishing, monitoring and administering defined contribution plans, or 401ks and 403Bs, for our business and municipal clients.

With a highly “seasoned” staff—some of us started our careers with larger global consulting firms and research groups—we have an unexpectedly deep bench when it comes to our in-house capability for structuring customized new employer plans for clients. We can also provide consultative services that lead to recommendations for strengthening the retirement plan you already have in place to make it more appealing to participants of all ages.

Easy Access to Answers

Recently, we’ve been making the biggest difference for our plan sponsor clients by bringing their plans up to the technological standards workers expect, especially those that are younger and tech savvy. Millennials, in particular, are information miners. They expect to find the answers they need to questions as they occur to them, online and through a mobile device. Then, they want to be able to contact a person for a one-on-one conversation. We accommodate that.

Through a variety of vendor relationships, we strive to create a seamless and intuitive experience for your plan participants. This enables them to trade online and access research on their own. It also provides the tools and apps that help them focus on achieving their financial wellness goals. Given our own community banking heritage, we are also available to take calls and meet on-site to address their questions and provide the educational assistance that enables participants to get the most out of their employer plan.

Investment Guidance

As a division within a commercial bank’s trust department, we also offer two more advantages. Fiduciary duty is part of our DNA. We are required by law to operate with fiduciary responsibility at every level of our business. This isn’t something new for us; it has always been part of our service.

Secondly, being a wealth management provider, we are also able to leverage the market research and investment knowledge of in-house experts to the advantage of your plan. That expertise can help in structuring the plan and choosing the most cost-effective investment options for you to offer. Beyond fund selection, the fact that we monitor markets and investments daily can lead to a quicker reaction to shifts in market and economic fundamentals. Many of our plan sponsor clients find that added responsiveness and proactive involvement relieves them of the extra responsibility and pressure to conduct their own monitoring and investment reviews.

We Simplify Plan Sponsors’ Lives

We also help keep compliance testing in line with ERISA compliance and monitor costs related to the investments and to the plan’s operation. After all, controlling costs creates more of a growth opportunity for participants. Although, we also recognize it isn’t always about the price. It’s about being able to deliver participants to their goals and providing plan sponsors with the services and support they need—from access to the best investment platforms to on-site education and consultations.

Whether you want to ensure your current plan remains competitive in today’s battle for workers or you think it’s time to add a plan, visit us here or, better yet, give us a call at 630-844-8655. We can help you stay competitive and keep your employees on track to achieve the retirement goals.

China, Tariffs: Wealth Economic Update Apr. 6, 2018

U.S. and World News

  • The trade negotiation between the United States and China has gained popularity in the news this week as new tariffs are announced by either side seemingly every day. Both sides appear to be playing a game of chicken as it relates to trade; on Monday, China implemented tariffs of 25% on 128 U.S products totaling $3 billion in response to the United States recently imposed steel and aluminum tariffs. The United States quickly retaliated on Wednesday with an additional $50 billion worth of 25% tariffs on 1,300 Chinese products to which China responded with tariffs on 106 more U.S products totaling $50 billion on products such as cars, whiskey, and soybeans. Thursday evening President Trump announced that he had told the U.S trade representative to look into whether $100 billion in additional tariffs would be appropriate. China ambassador Cui Tiankai discussed the United States levying further tariffs on Chinese products in an interview Monday stating “If they do, we will certainly take countermeasures of the same proportion, and the same scale, same intensity”.

Markets

  • The markets sold off this week, prolonging the ongoing correction. The S&P 500 lost 1.35% and closed at 2,604.47. The Dow Jones fared slightly better losing 0.67% and closed at 23,932.76. Year to date, the S&P is down 2.08% and the Dow Jones is down 2.60%.
  • Yields moved higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 59% and 2.77%, respectively.
  • The spot price of WTI Crude Oil decreased by 65% this week, closing at $61.92 per barrel. Year to date, Oil prices are up 3.01%.
  • The spot price of Gold rose slightly higher this week by 57%, closing at $1,333.03 per ounce. Year to date, Gold prices are up 2.32%.

Economic Data

  • Initial jobless claims rose 24,000 to 242,000 for the week which was larger-than-expected. The largest increases were in California, New York, and Pennsylvania. The four-week moving average moved up 3,000 to 228,000. The pace of layoffs still remains very low.
  • The ISM manufacturing index fell 1.5 points to 59.3 in March versus expectations of 59.7. The decline in employment and new orders led the decline for the month, however the pace of manufacturing growth remains very strong
  • Construction spending rose 0.1% in February versus expectations of a 0.4% increase and the decline was led by public construction spending as opposed to private construction spending.
  • Private Sector ADP employment rose 241,000 in March exceeding expectations of a 210,000 gain. The gain in private sector employment was led by professional and business services and trade, transportation, and utilities.
  • Nonfarm payrolls came in at 103,000 for the month of March below consensus expectations of 185,000. The weakness in job growth for the month of March is believed to be the result of severe winter weather.
    • Average hourly earnings rose by 0.30% in March and the year-over-year rate rose 0.1% to 2.7%.
    • The unemployment rate remained at 4.1% versus expectations of a decline to 4.0%.

 

Fact of the Week

  • The US bond market (including treasury, municipal, corporate, mortgage and asset-backed debt) was worth $40.8 trillion as of 12/31/17. The US bond market was worth $4.1 trillion as of 12/31/85 (Source: Securities Industry and Financial Markets Association).

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, 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.