China, Korea, Tariffs: Wealth Economic Update Apr. 2, 2018

U.S. and World News

  • semiconductor-179653150_360The Trump administration sent a letter with specific requests to help reduce China’s trade surplus with the U.S. to Chinese economic overseer Liu He. These requests include a tariff cut on U.S. automobiles, more Chinese purchases of U.S. semiconductors and greater access to China’s financial sector by American companies. A list of retaliatory tariffs on a large number of major imports to China are to be announced soon.
  • After revising its six-year-old bilateral trade deal with the U.S., South Korea is next to escape President Trump’s metal tariffs.  Seoul will double its import quota for American-made cars and decrease the amount of steel sent to the United States. South Korea will also allow the United States to keep the 25% tariffs on pickup trucks in place for 20 more years.
  • In more than a decade North and South Korea will hold their first Summit on April 27th, after Kim Jong-un pledged his commitment to denuclearization.  The summit will be on the southern side of the Demilitarized Zone.
  • During a  meeting with President Xi in Beijing, Kim Jung-un agreed to denuclearize the Korean peninsula.  Since he assumed power in 2011, this is Kim’s first known trip abroad.  It is believed by analysts as preparation for upcoming summits with South Korea and the U.S.  Kim is scheduled to meet President Trump sometime in May.

Markets

  • The markets rebounded this week. The S&P 500 gained 05% and closed at 2,640.87. The Dow Jones followed suit by also gaining 2.42% and closed at 24,103.11. Year to date, the S&P is down 0.75% and the Dow Jones is down 1.95%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 56% and 2.74%, respectively.
  • The spot price of WTI Crude Oil decreased by 43% this week, closing at $64.94 per barrel. Year to date, Oil prices are up 8.04%.
  • The spot price of Gold fell this week by 62%, closing at $1,325.48 per ounce. Year to date, Gold prices are up 1.74%.

Economic Data

  • Initial jobless claims dropped to a new 49-year low of 215,000, a decrease of 12,000. The largest decreases were in California, New York, New Jersey, and Virginia. The four-week moving average remained stable at 225,000.
  • GDP grew to 2.9% reflecting a moderately faster pace of consumption growth.
  • Merchant Wholesale inventories rose 1.1% in February.
  • Pending home sales are up 3.1% in February which is slightly more than expected.  Sales were led by the Northeast and the South regions.  Pending home sales are still 4.1% lower than a year ago.

Fact of the Week

  • American oil producers have pumped at least 10 million barrels a day of crude oil for the last 7 weeks, hitting 10.407 million barrels per day or the week ending Friday 3/16/18.  The last time US oil producers hit 10 million barrels a day of crude oil was in 1970. (source: Energy Information Administration).

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.

A Wealth of Experience

Jacqueline A. Runnberg, CFP®, First Vice President/Wealth Advisor 

When it takes a lifetime to build a legacy, it’s only natural to want it to last for generations, along with the advisor you entrust with it. What many people don’t realize about Old Second Bank is that we are that advisor. Not only are we the largest provider of personal fiduciary, investment management, wealth management, and trust and custody services in the western suburbs, we were also the first. We are literally second to none, having been in the trust business since 1919. In fact, we currently have $1.16 billion in assets under management for our clients (as of 12/31/2017).

Expertise You Can Trust Close to Home

For nearly a century, Old Second has consistently delivered wealth management solutions to the families that formed the communities we all now call home. While we’ve consistently provided a full range of highly personalized solutions, many of our competitors in this area have exited the business over the decades. Many others consolidated into larger banks and, in the process, shifted their services to central locations outside our area. Meanwhile, at Old Second we have continued to pursue our strategy of providing personalized, well-informed and comprehensive wealth management services close to home.

Our wealth managers and investment professionals average more than 20 years of trust and investment experience. We have the depth and breadth of knowledge to provide all the wealth management solutions and services you need while maintaining the balance of personalized services you expect from a bank in your community.

A Common Sense Approach

When it comes to wealth management, it’s a matter of trust, and you can trust us to take a common sense approach that rests on a comprehensive process for delivering services. These services include:

  • Using a financial planning-based approach, we Identify your specific life goals and financial objectives and assessing your current circumstances.
  • Communicating with you every step of the way and listening to what you have to say rather than talking at you.
  • Involving you, your family members, your beneficiaries and your other financial professionals when appropriate and according to your wishes.
  • Investing the time to build a lasting relationship with you and each generation of your family.

Sound Advice

With a seasoned staff of professional wealth managers, we provide advice regardless of where you are in your financial life—from young families just starting to build wealth to those who are planning for their wealth’s transition. Our distinct and comprehensive approach brings a team of credentialed specialists together to provide advanced financial planning, investment and money management, tax planning, estate planning and administration, charitable giving and wealth transfer. Over the decades, individuals and families like yours have placed their trust in our consistently sound advice as they’ve built and shaped their legacies.

Whether you’re in the early stages of building wealth or looking to preserve the wealth you have, visit us here  or, better yet, give us a call at 630-966-2462 so we can start proving to you that we truly are second to none.

China, Budget: Wealth Economic Update Mar. 23, 2018

U.S. and World News

  • The trade negotiations heated up this week as the newly imposed steel and aluminum tariffs come closer to taking effect. China continues to be the main target after an investigation into their practices revealed evidence of unfair terms on U.S. companies and foreign ownership restrictions. The United States filed a complaint at the World Trade Organization (WTO) over allegations that China is breaking WTO rules by denying basic patent rights that would stop Chinese entities from eventually using the technology of foreign patent holders. China responded on Thursday evening by revealing a specific list of 128 U.S goods that they plan to tariff in two steps. The plan includes a 15% tariff on 120 goods totaling $1 billion and a 25% tariff on eight goods totaling $2 billion.
  • self-driving-829192480_360Early this morning, the Senate passed a $1.3 trillion spending bill that would fund the government until September 30th, putting an end to the fuss about a potential government shutdown. The bill includes an increase in defense spending of $80 billion, domestic spending of $63 billion, $1.6 billion to fund a border wall with Mexico, and $100 million for research and testing of autonomous cars. Before President Trump signed the bill, he threatened to veto it citing lack of funding for the border wall with Mexico and no consideration for undocumented immigrants.

Markets

  • The markets experienced another selloff this week. The S&P 500 plummeted 93% and closed at 2,588.26. The Dow Jones also experienced a sharp decline this week losing 5.67% and closed at 23,533.20. Year to date, the S&P is down 2.74% and the Dow Jones is down 4.25%.
  • Yields moved lower this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 60% and 2.81%, respectively.
  • The spot price of WTI Crude Oil rose 70% this week, closing at $65.97 per barrel. Year to date, Oil prices are up 9.75%.
  • The spot price of Gold moved higher this week gaining 55%, closing at $1,347.80 per ounce. Year to date, Gold prices are up 3.45%.

Economic Data

  • Initial jobless claims rose by 3,000 from last week, coming in at 229,000. The four-week moving average moved slightly higher to 224,000. Layoffs remain at a very low pace and continue to fall further.
  • Existing home sales increased by 3.0% in February to a seasonally adjusted rate of 5.54 million units, beating expectations of a 0.4% increase. Sales in the West largely contributed to the increase.
  • Sales of new single-family homes fell 0.6% in February to a seasonally adjusted rate of 618,000 units slightly missing expectations of a 620,000 increase.
  • The Federal Open Market Committee (FOMC) raised the Fed Funds rate by 0.25% to a range of 1.50-1.75% in a widely expected move on Wednesday. The meeting had a more hawkish tone than expected, signaling 8 cumulative hikes in 2018-2020 when 6.75 were previously expected. The Fed now expects inflation to rebound in “the coming months” as opposed to “this year”.
  • Durable goods orders rose 3.1% in the month of February, beating expectations of a 1.6% increase. Durable goods orders continue to trend higher and a 25.5% increase in aircraft orders contributed to much of the increase.

Fact of the Week

  • As of last Friday (3/16/18), no US bank had failed YTD and required a financial bailout from the FDIC. This is the latest in any calendar year with no bank failures YTD since 2006, the last year in which no bank failures occurred during the entire year. Over the last 5 calendar years (2013-17), 63 banks failed in the United States, an average of 13 per year (source: Federal Deposit Insurance Corporation).

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.

Kudlow, Japan/EU: Wealth Economic Update Mar. 19, 2018

U.S. and World News

  • economics_telescope-687981332_360CNBC Commentator Larry Kudlow has accepted the role of Chief Economic Advisor to President Trump after the departure of Gary Cohn amidst conflicting opinions on steel and aluminum tariffs. Larry Kudlow will first be tasked with negotiating the issue on tariffs while being particularly tough on China and he stated on Wednesday, “China can expect the U.S. to take a tough stance when it comes to international trade.” Larry Kudlow has been known to dislike tariffs and disagree with the President on this issue, however, after learning of the Canada and Mexico exemptions he has softened his view stating “I must say as somebody who doesn’t like tariffs, I think that China has earned a tough response not only from the United States.”
  • Japan and the European Union have pressured the United States to exempt them from the new steel and aluminum tariffs during a meeting in Brussels on Saturday. This was expected to come up as the United States has left further exemptions up for discussion after signing into law the new tariffs last week. The three countries agreed to take joint steps to combat steel overcapacity and attempt to regulate market prices with stronger subsidy rules.

Markets

  • Markets ended the week lower. The S&P 500 lost 20% and closed at 2,752.01. The Dow Jones also fell by 1.51% and closed at 24,946.51. Year to date, the S&P is up 3.37% and the Dow Jones is up 1.46%.
  • Yields were once again relatively unchanged this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 64% and 2.84%, respectively.
  • The spot price of WTI Crude Oil rose 24% this week, closing at $62.19 per barrel. Year to date, Oil prices are up 3.48%.
  • The spot price of Gold was down for the week losing 77%, closing at $1,313.70 per ounce. Year to date, Gold prices are up 0.84%.

Economic Data

  • Initial jobless claims fell by 4,000 from last week, coming in at 226,000. The four-week moving average was unchanged at 222,000. Layoffs remain at a very low pace and continue to fall further.
  • The Consumer Price Index rose by 0.15% in February, slightly below expectations of 0.2%. The rise in February was mostly influenced by rising energy prices and the year-over-year rate remained at 1.8%.
  • The Producer Price Index rose by 0.2% in the month of February driven by core producer price inflation. This was higher than expectations of a 0.1% increase and the year-over-year rate stands at 2.9%.
  • Retail Sales declined by 0.1% in February coming in short of expectations of a 0.3% increase and the previous two months were revised down slightly.
  • Housing starts declined by -7% in February to 1,236, below consensus expectations of a -2.7% decrease. The decline of housing starts in the west largely contributed to the February figure.

 

Fact of the Week

  • Just 2.2% of the banks and savings institutions in the United States hold 83% of the deposits maintained in FDIC-insured institutions nationwide as of 12/31/17. There are a total of 5,670 banks and savings institutions holdings $17.4 trillion of deposits as of the end of last year (Source: FDIC).

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.

Diversity and Inclusion Comes From Within

Damaris Abella, Vice President—Support Centers 

The sense of belonging is one of the perks of coming to work at Old Second Bank each day. It’s like being part of a family, a very large family. Like most families, ours spans generations—from our call center representatives with decades of banking experience to our newly hired tellers.

The feeling also extends beyond the people who work here. Many of our customers are members of families who have banked with us through several generations. Then, there are customers we just know so well; they seem like family.

What is particularly gratifying, especially for me, is that our Old Second family is as culturally diverse as the communities and businesses we serve. It’s a reflection of the people we see, where we go and how we live our daily lives.

At Our Core

What I believe helps us achieve and sustain this highly inclusive and personal environment, for both our customers and ourselves, is that our staff members have gone “all in,” so to speak, in adopting the core values at the heart of Old Second. Normally, core values are an inward facing thing. However, they’re reflected in the encounters we have with our customers.

We Are Here to Serve

As a member of Old Second’s Diversity and Inclusion Committee and a longtime member of the Diversity, Equity and Inclusion Committee for Oswego School District 308, I thrive on being responsible to and for people. As the head of Old Second’s call center, I have a unique view of how well we as a banking family reflect our values and how our customers react and benefit from them.

From working with staff members across the management structure and different divisions of Old Second, I’ve noticed a common driver: Each of us wants to make a difference, for you, for the bank and for our families.

Making that difference takes teamwork. Like a family, we need to be there for one another. That means when a customer raises a concern, we work together as quickly and efficiently as possible to address the issue to everyone’s satisfaction.

Empowered Ownership

When you work in a call center, the reality is that your job is to get every caller a quick resolution. Whether it is an issue with an ATM, a lost wallet, or opening a new account, we are in a position that empowers us to take ownership of finding the quickest way to a resolution. Regardless of where an issue originates—with us, with you, with some source beyond our respective control—you can trust us to do what needs to be done to get things right—and also to be professional about it. Then, we look for ways the next caller’s experience can be improved. We do this for a living, after all, and we want to be the best we can be at it.

Customized to You

When you treat everyone the way you would like to be treated, it creates a pleasant environment. It also becomes quite personal. Maintaining this level of personalization cuts to the core of what Old Second is all about. For instance, in the call center, it’s the reason we keep our upfront phone menu to a few clicks. We want to get you to a person as quickly as possible. While we support self-service, we’re all about customization and personal attention. We want you to receive the advice and products that are right for you and your particular situation.

Whether you are looking for a more meaningful banking experience or a career opportunity where your work will have meaning—or you just want to talk to a banker who will take the time to listen—give us a call at 1-877-866-0202. We can’t wait to talk to you!

To learn more about our efforts regarding diversity and inclusion, visit us here.

Steel, North Korea: Wealth Economic Update Mar. 9, 2018

U.S. and World News

  • After more than 100 House Republicans had signed a letter to President Trump objecting the proposed steel and aluminum tariffs, the President signed an order imposing a 25% tariff on steel and a 10% tariff on aluminum excluding Canada and Mexico. Canada, the United States biggest source of aluminum and steel, threatened to reciprocate the trade tariffs if they were included. The order was much less aggressive than originally intended after some drama in the White House which included Chief Economic Advisor Gary Cohn resigning over a dispute with President Trump over the planned tariffs. The order also includes the potential for other nations to be reduced to a lower rate down the road.
  • north_korea-672521128_360North Korean leader Kim Jong-un has invited President Trump to meet and discuss denuclearization on the heels of some of the toughest sanctions placed on North Korea by the United States. Kim Jong-un stated that North Korea would suspend missile tests while talks are ongoing. President Trump responded by saying he would meet by May and the time and place of the meeting is to be determined.

Markets

  • Markets surged higher this week. The S&P 500 soared 59% and closed at 2,786.57. The Dow Jones also rose higher by 3.01% and closing at 25,335.74. Year to date, the S&P is up 4.62% and the Dow Jones is up 3.01%.
  • Yields held relatively steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 65% and 2.90%, respectively.
  • The spot price of WTI Crude Oil rose 39% this week, closing at $62.10 per barrel. Year to date, Oil prices are up 2.81%.
  • The spot price of Gold was unchanged for the week increasing by just 06% this week, closing at $1,323.58 per ounce. Year to date, Gold prices are up 1.60%.

Economic Data

  • Initial jobless claims increased 21,000 from last week, coming in at 231,000. The four-week moving average moved up to 223,000. Layoffs remain at a very low pace and continue to fall further.
  • Nonfarm payrolls rose 313,000 in the month of February, soaring past consensus expectations of 108,000.
  • Average hourly earnings rose 0.1% which was lower than the consensus estimates of 0.2%. Previous months were revised lower, bringing the year-over-year rate down to 2.6% from 2.9%.
  • The unemployment rate remained at 4.1%.

Fact of the Week

  • There are currently 1,510 cryptocurrencies in the world with a market capitalization of 392 billion. About 1,000 users control 40% of the cryptocurrency. (Source: Strategas)

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.

Steel, Powell: Wealth Economic Update Mar. 5, 2018

U.S. and World News

  • steel-656657304_370President Trump stated on Thursday that the U.S. will impose tariffs of 25 percent on imported steel and 10 percent on aluminum or a “long period of time.” Stock and bond yields plummeted on the news as fear of a larger trade war could hinder the economy.
  • New Chairman Jerome Powell delivered his second round of semi-annual testimony to Congress on Tuesday and Thursday. Powell told lawmakers on Tuesday the next two years for the economy will be “good” ones. If he is right, it will be the longest expansion in record.

Markets

  • Markets fell this week. The S&P 500 dropped 1.98% and closed at 2,691.25. The Dow Jones followed suit and decreased by -2.96% and closing at 24,538.06. Year to date, the S&P is up 1.01% and the Dow Jones down -0.30%.
  • Yields held relatively steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.63% and 2.87%, respectively.
  • The spot price of WTI Crude Oil fell 3.62% this week, closing at $61.25 per barrel. Year to date, Oil prices are up 1.90%.
  • The spot price of Gold decreased by 0.45% this week, closing at $1,322.75 per ounce. Year to date, Gold prices are up 1.53%.

Economic Data

  • Initial jobless claims decreased 12,000 from last week, coming in at 210,000, lower than consensus estimates – lowest since 1969.
  • January durable goods fell more than expected posting a -3.7% loss compared to a -2.0% loss surveyed by economists.

Fact of the Week

  • Aggregate household debt in the USA reached $13.15 trillion as of 12/31/17, the highest level ever recorded.  Household debt has now increased for 14 consecutive quarters. (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.

The Generation Gap in Wealth

Rich Gartelmann, CFP®, Senior Vice President and Head of Wealth Management Rich Gartlemann Bio Picture

Money may be ageless, but how it’s viewed, invested and spent can depend on when we were born. Attitudes toward money develop early and are influenced by our parents. They can also be shaped by the social and political events that affect “our” generation as we enter adulthood.

This combination can also affect how we plan our financial futures, the amount of risk we are willing to take and, ultimately, the types of investments that enable us to sleep well at night. If left unchallenged, some of these tendencies may also keep us from realizing our financial goals.

Looking Through Different Lenses

At a very high level, it helps to consider how financial experiences may have varied across the last several generations—generations to which many of our family members belong.

The Silent Generation

For many in this age group, their earliest memories involved economic hardship due to the Great Depression, followed by rationing during World War II. Their early adulthoods then coincided with more “war” years— Korean and Vietnam. It’s little wonder that these experiences seemed to find expression in a tendency to be conservative and save both cash and provisions for the next threat. Many ended up being able to retire early, supported by company pensions, Social Security benefits and interest on their savings, though perhaps they didn’t take the risks or have as many experiences as they would have liked.

Baby Boomers

Baby Boomers grew up under very different circumstances. Their childhoods coincided with a post-war boom, while their adulthood coincided with a time of high inflation. It conditioned many to buy what they wanted “now” since they might not be able to afford it later, which may have led to the material-driven lifestyle choices associated with this generation. As they head into their retirement years, some Baby Boomers may still focus more on enjoying what they have while they can. As a group, they tend to tolerate more risk and be more trusting of the stock market and of things working out. For many, retirement can be more about what they will do next than actually a time for slowing down.

Gen X

As teens and young adults, Gen Xers witnessed—and many have been victims of—multiple manias and crashes at key times in their financial lives. These include the 1987 market crash and subsequent recession as well as the bull market of the 1990s, followed by the dotcom debacle, not to mention the many Wall Street scandals. Then, they experienced the 2008 recession and housing crisis! Because of the timing, many in this generation have had a harder time accumulating wealth than those in the Baby Boomer and Silent generations. Overall, Gen Xers are often characterized as distrustful when it comes to wealth and investing. Some may even need to be convinced the future is something you really can successfully plan for.

Millennials

Millennials were children or just entering adulthood at the time of the September 11 attacks. They may have seen their parents and their friends’ parents struggle with unemployment and housing issues during the recession and housing crisis of the late-2000s. As young adults, many continue to deal with student loans. In general, they have been slower to reach traditional milestones—from marriage and starting families to buying a home. However, they are moving forward and seem focused on planning ahead and perhaps having a side gig, just in case.

Gen Z

Gen Z, today’s children and emerging adults, has never known an app-less life. Even more than Millennials, they trust technology and “off-the-grid” solutions, including cryptocurrencies, virtual payments and crowdsourced funding. They are also said to be savers and leery of debt, determined not to repeat the “mistakes” of generations before them.

Customized to You

When you look across generations from this very high level, what becomes clear is that aspirations, needs, comfort levels and attitudes toward risk can vary widely. While intentions may be good and accepted actions logical in the context of the times, each group can benefit from taking a broader perspective when planning ahead. Creating that broader perspective is what advisors do especially where multigenerational family wealth is involved.

While members of each generation may seek different things from their money, we know they all want the same thing from their advisors—sound advice customized to their unique circumstances, attitudes, aspirations and needs. That advice often needs adjusting for personal preferences and to create a shared appreciation of how different members’ perspectives factor into a family’s plan for the future.

For more information on our approach to delivering goal-driven wealth management services across all generations, visit us here or call 630-906-2000.

Fed meeting: Wealth Economic Update Feb. 26, 2018

U.S. and World News

  • Minutes from the January Federal Reserve meeting were released this week and indicated further improvement in the growth outlook and slightly more hawkish views on inflation. The Committee described growth as ‘above trend’ and cited the recent tax legislation, the global economic outlook, and easier financial conditions as being supportive of growth in the near term. Regarding inflation, the Committee did not change their outlook but did appear more confident that core inflation would return to their 2% target over the medium term. The market is currently pricing in a near 100% probability that the Fed hikes rates at their upcoming March meeting, the first under new Fed Chair Jerome Powell.

Markets

  • In continued intraday volatile trading, markets crept higher this week. The S&P 500 gained 0.58% and closed at 2,747. The Dow Jones followed suit by gaining 0.36% and closing at 25,310. Year to date, the S&P is up 3.04% and the Dow Jones has gained 2.74%.
  • Yields held relatively steady this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.62% and 2.87%, respectively.
  • The spot price of WTI Crude Oil rose 3.02% this week, closing at $63.54 per barrel. Year to date, Oil prices are up 6.18%.
  • The spot price of Gold decreased by 1.33% this week, closing at $1,329.08 per ounce. Year to date, Gold prices are up 2.02%.

Economic Data

  • Initial jobless claims decreased 7,000 from last week, coming in at 222,000, lower than consensus estimates. By state, the largest declines were in Michigan (-6k) and Illinois (-2k). The four week moving average for claims moved down to 226,000.
  • Existing home sales fell -3.2% in January, lower than expectations for a 0.5% increase. Sales declined in single-family homes by -3.8% but rose for condos/co-ops which increased 1.6%. Existing home sales decline in all four regions: Midwest (-6.0%), West (-5.0%), Northeast (-1.4%) and South (-1.3%).

Fact of the Week

  • The New York Stock Exchange, which was originally founded in 1792, has transformed greatly in recent history:
    • In 1980, there were 5,500 men and women who worked on the floor the NYSE. Only 205 people remain today.
    • Average daily volume on the NYSE peaked at 1.6 billion shares in 2006 and is down to 910 million today.
    • At its peak, the NYSE handled nearly 80% of the trading in its listed securities, today its market share is only 25%.

(Source: Strategas Research Partners)
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.

Budget, Infrastructure: Wealth Economic Update Feb. 19, 2018

U.S. and World News

  • traffic-637694576_400President Trump released a detailed outline of his long-awaited infrastructure proposal. The major aspects of the proposal are similar to the framework that had been leaked a few weeks ago. The overall amount of federal funding for the proposal would be $200 billion and this would be combined with private funding for a total package of $1.5 trillion spread over several years. There are four broad segments addressed in the proposal: Infrastructure Incentives Program (transportation, water/sewer), Rural Infrastructure Program (broadband, electrical power), Transformative Projects Program (commercially viable projects with high risk/reward), and Infrastructure Financing Programs (additional funding and broader eligibility). In addition, President Trump is calling for a $0.25/gallon hike to the federal gas tax in order to fund the federal portion that will upgrade roads, bridges and public works. The proposal faces strong challenges before it can be enacted due to the 60 votes needed to pass it in the Senate and a current lack of bipartisan consensus about the appropriate structure for federal infrastructure funds.

Markets

  • Markets rebounded from last week’s plunge, although trading was still relatively volatile. The S&P 500 gained 4.37% and closed at 2,732. The Dow Jones followed suit by also gaining 4.36% and closing at 25,219. Year to date, the S&P is up 2.45% and the Dow Jones has gained 2.37%.
  • Yields continued their upward trend this week, the 5 year and 10 year U.S. Treasury Notes are now yielding 2.64% and 2.88%, respectively.
  • The spot price of WTI Crude Oil rose 4.04% this week, closing at $61.61 per barrel. Year to date, Oil prices are up 3.11%.
  • The spot price of Gold increased by 2.30% this week, closing at $1,346.96 per ounce. Year to date, Gold prices are up 3.39%.

Economic Data

  • Initial jobless claims increase 7,000 from last week, coming in at 230,000, a bit above consensus estimates of a slight increase. The four week moving average for claims now stands at 229,000.
  • The headline Consumer Price Index (inflation) reading for January increased 0.5%, over expectations of 0.3%. This reflected a 3.0% rise in energy prices. Over the last 12 months, headline prices have risen 2.1%.
    • Core CPI (excludes food and energy) came in at 0.35%, also higher than expectations of 0.2%. Over the last 12 months, Core inflation has been 1.85%.
  • Retail sales declined -0.3% in January, a disappointing figure compared to +0.2% expectations. Excluding autos, retail sales were flat, also below expectations. The largest declines in January were in health and personal care (-1.2%), sporting goods, hobby, book and music (-0.8%), and furniture (-0.4%) retailers.

Fact of the Week

  • The National Retail Federation estimates that more than 55% of the U.S. population celebrated Valentine’s Day this week, and will have spent $19.6 billion on gifts for the holiday.

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

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