Hurricane Irma, North Korea: Wealth Economic Update Sept. 18, 2017

U.S. and World News

  • florida-532409298_360Hurricane Irma tore through Florida and the southeast last weekend, knocking out power to nearly 8 million homes and causing an estimated $25 billion in damage. In combination with Hurricane Harvey, which is expected to be one of the costliest disasters in U.S. history, the storms are likely drag 3rd quarter GDP by at least 1%.
  • The North Korea saga continued this week. First the United Nations voted unanimously for fresh sanctions against North Korea which will cap oil imports and impose an embargo on the country’s textile trade. Then, for the second time in less than a month, North Korea fired a ballistic missile that flew over Japan. This prompted an emergency meeting of the UN Security Council. Also in response, Secretary of State Rex Tillerson continued to urge China to use its leverage as North Korea’s principal supplier of oil to dissuade them from further pursuing its development of nuclear weapons.

Markets

  • Markets rallied this week with both the S&P 500 and Dow Jones Industrial Average closing at new All-Time Highs. The S&P rose 1.63% and closed at 2,500. The Dow Jones spiked 2.19% for the week and closed at 22,268. Year to date, the S&P is up 13.25% and the Dow is up 12.20%.
  • Interest rates rebounded from last week’s declines. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.80% and 2.20%, respectively.
  • The spot price of WTI Crude Oil increased by 5.06% this week, closing at $49.88 per barrel. Year to date, Oil prices have fallen 7.15%.
  • The spot price of Gold ended the week lower by 1.87%, closing at $1,321.38 per ounce. Year to date, Gold prices are up 15.15%.

 Economic Data

  • Initial jobless claims declined by 14,000 from last week, coming in at 284,000. The drop reflected a rebound from the effects of Hurricane Harvey, however, the effects of Hurricane Irma have not yet been included. The four week moving average for claims rose to 263,000.
  • Headline CPI (measure of inflation) rose by 0.4% in August, more than expectations of 0.3%. This was largely due to a 2.8% increase in energy prices related to Hurricane Harvey. Over the last 12 months, headline CPI has risen 1.9%.
    • Core CPI (excludes food and energy prices) rose 0.2% in August, in line with expectations. Over the last 12 months Core CPI has risen 1.7%.

Fact of the Week

  • Only 40% of American households reporting between $100,000-$199,999 of income have investments in the stock market. The percentage of stock ownership drops to 20% of American households for those reporting between $50,000-$74,999 of income. (Source: Federal Reserve Bank of St. Louis)

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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Hurricane Irma, Debt Ceiling, DACA: Wealth Economic Update Sept. 8, 2017

U.S. and World News

  • hurricane-499087970_360As Texas gets the cleanup and reconstruction process underway following Hurricane Harvey, Florida is bracing for Hurricane Irma which is expected to hit the U.S. mainland on Sunday. Irma, which has developed into one of the most powerful storms ever recorded in the Atlantic Ocean, has already decimated many islands in the Caribbean, including Puerto Rico, on its way to East Coast.
  • A short term deal regarding the debt ceiling is close to completion, pushing the deadline back 3 months to March 2018. The temporary fix will be coupled with more than $15 billion in aid funding for Hurricanes Harvey and Irma. Some economists see this as a potential negative for tax reform prospects as the debt ceiling will now be breached sometime in the 1st quarter of 2018, right when it’s expected that tax legislation would be unveiled which may complicate matters further.
  • President Trump has decided to revoke the DACA program that shields young unauthorized immigrants from deportation. Trump announced that no action will be taken on those in the ‘Dreamers’ program for six months, giving Congress time to craft a solution. Absent action from Congress in that time frame, Trump said that he will “revisit the issue” when that deadline hits. Presumably, if a resolution isn’t found, over 800,000 young adults brought into the country illegally would become eligible for deportation.

Markets

  • Markets dipped this week. The S&P 500 fell 0.58% and closed at 2,461. The Dow Jones dropped 0.82% for the week and closed at 21,798. Year to date, the S&P is up 11.45% and the Dow is up 12.20%.
  • Interest rates fell quite substantially this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.64% and 2.05%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.57% this week, closing at $47.56 per barrel. Year to date, Oil prices have fallen 12.52%.
  • The spot price of Gold ended the week higher by 1.63%, closing at $1,346.78 per ounce. Year to date, Gold prices are up 17.37%.

 Economic Data

  • Initial jobless claims rose by 62,000 from last week, coming in at 298,000. This is the highest level of claims in more than two years; however, this mostly reflects a large jump (52,000) of jobless claims in Texas associated with Hurricane Harvey. The four week moving average for claims rose to 250,000.

Fact of the Week

  • According to the Census Bureau, 53% of the owner-occupied homes in the U.S. are owned by people who are age 55 or older. Ten years prior, the proportion of age 55+ homeowners was just 43%.

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

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Harvey, North Korea: Wealth Economic Update Sept. 1, 2017

U.S. and World News

  • flood-184878691_360Almost a quarter of the country’s oil refining capacity is offline this week and 10% of those refineries currently offline may remain unavailable for several months after Hurricane Harvey wreaked havoc in southern Texas last weekend. As a result, gasoline prices in the U.S. have reached $2 per gallon, the highest since 2015. Hurricane Harvey is expected to be the most expensive natural disaster in American history at an estimated $190 billion after the storm left the most rainfall ever measured in the U.S according to AccuWeather.
  • Kim Jong-un has warned that his regime will be testing more ballistic missiles and that the missile launch over Japan was a “meaningful prelude to containing” the island of Guam. The UN has responded by calling for the implementation of harsh sanctions that have recently been developed and agreed on. Defense Secretary James Mattis and Secretary of State Rex Tillerson expressed their hopes of having some dialogue with North Korea and solving the issue in Southeast Asia diplomatically while President Trump tweeted on Wednesday that “Talking is not the answer!”

Markets

  • Markets rose higher this week. The S&P 500 gained 1.40% and closed at 2,477. The Dow Jones rose 0.92% for the week and closed at 21,988. Year to date, the S&P is up 12.10% and the Dow is up 13.11%.
  • Interest rates had a volatile week but ended relatively unchanged. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.74% and 2.16%, respectively.
  • The spot price of WTI Crude Oil decreased by 1.15% this week, closing at $47.32 per barrel. Year to date, Oil prices have fallen 11.91%.
  • The spot price of Gold ended the week higher by 2.62%, closing at $1,325.19 per ounce. Year to date, Gold prices are up 15.48%.

 Economic Data

  • Initial jobless claims rose by 1,000 from last week, coming in at 236,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims moved down to 237,000.
  • The core PCE price index (excluding food and energy) increased 0.09% last month as expected and the year-over-year figure dropped 0.1% to 1.41%.
  • Pending home sales declined by 0.8% in July which was below expectations of a 0.4% gain.
  • Quarter 2 Real GDP was revised up 0.4% to 3.0%; the best figure in two years, after a larger-than-expected revision to personal consumption and business fixed investment.
  • Nonfarm payroll growth came in at 156,000 in August which was lower than expectations of 160,000 and the previous two months were revised down. The unemployment rate ticked up to 4.4% while the participation rate remained at 62.9%. Average hourly earnings increased by 0.1% in August and the year-over-year rate remained stable at 2.5% missing consensus expectations of 2.6%. Average weekly hours declined 0.1% to 34.4.

Fact of the Week

  • More than 114,000 Social Security recipients have their benefits garnished to pay student loan debt, debt that in many cases was taken out on behalf of a child, grandchild or other relative’s education rather than their own. The report, by the GAO, said that is an increase of 540 percent over the last 10 years and that in some cases the beneficiaries fall below the poverty line as a result.

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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Fed summit: Wealth Economic Update Aug 25, 2017

U.S. and World News

  • Monetary policymakers from around the world have gathered in Jacksonjackson-hole-507309204_360 Hole, Wyoming for the Federal Reserve’s annual summit on economic policy. Janet Yellen, possibly on her last trip to Jackson Hole as Fed Chair, delivered a speech on past and prospective reforms to the financial system but did not offer any additional details regarding the future path of Fed rate hikes or balance sheet reduction. Also in focus will be European Central Bank Chair Mario Draghi who may offer clues as to when the ECB will begin to taper their Quantitative Easing program.

Markets

  • Markets bounced back this week following consecutive weeks of declines. The S&P 500 gained 0.75% and closed at 2,443. The Dow Jones rose 0.71% for the week and closed at 21,814. Year to date, the S&P is up 10.54% and the Dow is up 12.14%.
  • Interest rates ended the week relatively unchanged. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.76% and 2.17%, respectively.
  • The spot price of WTI Crude Oil decreased by 1.46% this week, closing at $47.80 per barrel. Year to date, Oil prices have fallen 11.02%.
  • The spot price of Gold ended the week higher by 0.55%, closing at $1,291.13 per ounce. Year to date, Gold prices are up 12.52%.

 Economic Data

  • Initial jobless claims rose by 2,000 from last week, coming in at 234,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims moved down to 238,000.
  • New home sales declined by 9.4% in July, disappointing compared to consensus estimates. The July weakness was fairly broad-based with only the Midwest (+4k) seeing an increase versus declines in the Northwest (-10k), South (-14k) and the West (-39k).
  • Existing home sales declined -1.3% in July, lower than expectations of a 0.5% increase. The regional data were mixed with increases in the West (+5.0%) and South (+2.2%) and decreases in the Midwest (-5.3%) and Northeast (-14.5%).

Fact of the Week

  • The average interest rate paid by the U.S. government on its interest bearing debt was 2.28% as of 7/31. The average interest rate that the government was paying on its debt 10 years ago was 5.04%, or more than double what it is now. Every 1% increase in the cost of debt on our country’s $14.4 trillion of debt is equal to $144 billion of additional annual interest expense. (Source: Treasury Department)

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

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Charlottesville, Bannon, Fed: Wealth Economic Update Aug 18, 2017

U.S. and World News

  • iStock-137169606_360In the wake of President Trump’s response to the violent and deadly acts at a white nationalist rally in Charlottesville, Virginia last weekend, many high profile CEOs began resigning from Trump’s Manufacturing Council. President Trump originally responded to the first resignations by tweeting, “For every CEO that drops out, I have many to take their place.” However, as the resignations began to mount, the Manufacturing Council as well as the Strategic and Policy Forum were disbanded as more and more CEOs refused to be associated with this administration. In addition to the CEOs that have abandoned ship, famed investor Carl Icahn stepped down as a special advisor to the President late Friday afternoon.
  • Chief White House Strategist Steve Bannon has left his duties at the White House, though the nature of his departure remains unclear. A person close to Bannon said that the strategist had submitted his resignation on August 7, but the announcement was delayed after the violence that occurred at a white nationalist rally in Charlottesville, Virginia on August 12. Traders on the floor of the New York Stock Exchange audibly cheered when the news broke, reflecting the views on many on Wall Street. Stock markets initially rose on the news before fading late in the day as traders may think that with Bannon’s ouster and Chief Economic Advisor Gary Cohn remaining on the staff, the prospects of passing a budget and getting tax reform improve.
  • Minutes from the Federal Reserve’s July meeting were released this week and showed that policymakers are divided over the timeline for future rate hikes. While some members appeared wary about the recent weak inflation figures, others were more eager to have an additional rate increase sometime in 2017. The minutes also seemed to indicate that an announcement regarding the reduction of the Fed’s balance sheet could occur at the September meeting. The market is currently pricing in a 35% probability of an additional rate hike this year.

Markets

  • Markets fell this again this week following a rally on Monday. The S&P 500 dropped 0.58% and closed at 2,426. The Dow Jones fell 0.77% for the week and closed at 21,675. Year to date, the S&P is up 9.73% and the Dow is up 11.36%.
  • Interest rates ended the week relatively unchanged. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.76% and 2.20%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.28% this week, closing at $48.68 per barrel. Year to date, Oil prices have fallen 9.45%.
  • The spot price of Gold ended the week lower by 0.32%, closing at $1,289.30 per ounce. Year to date, Gold prices are up 12.00%.

 Economic Data

  • Initial jobless claims fell by 12,000 from last week, coming in at 232,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims remained at 241,000.
  • Housing starts declined -4.8% in July, lower than the median forecast of a 0.4% increase. The volatile multi-family category led the decline (-15.3%), while the more stable single family starts figure dropped -0.5%. Starts declined in the Northeast (-15.7%), Midwest (-15.2%) and West (-1.6%) but edged up in the South (+0.6%).
  • The University of Michigan consumer sentiment index rose 4.2 points to 97.6 in the preliminary August report, rebounding from declines in June and July. Although the survey’s current conditions index dipped, the expectations for the future component had the largest jump in four years.

Fact of the Week

  • Of the 8.56 million new households formed in the last 10 years, 95% of them (8.13 million) were comprised of families that are renting. (Source: Census Bureau)

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: Wealth Economic Update Aug 11, 2017

U.S. and World News

  • north_korea-157533672_360Tensions between the United States and North Korea continue to escalate as intelligence reports suggest that North Korea has successfully developed a “miniaturized nuclear weapon” that can be launched by missile. President Trump stated early in the week, “North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen.” North Korea responded by threatening to hit the U.S. territory of Guam with missiles.  Trump has continued to stand by his ‘fire and fury’ statement, even reiterating them and warning that if Kim Jong-un’s regime does anything to the U.S. or an ally, “things will happen to them like they never thought possible.”

Markets

  • Markets fell this week amid geopolitical tensions. The S&P 500 dropped 1.36% and closed at 2,441. The Dow Jones fell 0.91% for the week and closed at 21,858. Year to date, the S&P is up 10.36% and the Dow is up 12.21%.
  • Markets fell this week amid geopolitical tensions. The S&P 500 dropped 1.36% and closed at 2,441. The Dow Jones fell 0.91% for the week and closed at 21,858. Year to date, the S&P is up 10.36% and the Dow is up 12.21%.
  • Interest rates ended the week a lower. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.74% and 2.19%, respectively.
  • The spot price of WTI Crude Oil decreased by 1.59% this week, closing at $48.79 per barrel. Year to date, Oil prices have fallen 9.18%.
  • The spot price of Gold ended the week higher by 2.42%, closing at $1,289.30 per ounce. Year to date, Gold prices are up 12.36%.

 Economic Data

  • Initial jobless claims rose by 3,000 from last week, coming in at 244,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims edged down to 241,000.
  • The Consumer Price Index (inflation) rose 0.1% in July, lower than expectations of 0.2%. Food prices gained 0.2% in the month but energy prices edged down -0.1%. Over the last 12 months, headline CPI has increased 1.7%.
    • Core CPI (excludes food and energy) also rose 0.1%, again missing expectations of 0.2%. Over the last 12 months, Core CPI has increased 1.7%.

Fact of the Week

  • The Dow Jones Industrial Average (DJIA) just finished a 10 day winning streak this week, which is historically a good sign for bull markets. However, despite the 2.8% gain over the 10-day period, the S&P 500 returned a more modest 0.4%, and the Dow’s gain marked the lowest return during a 10-day winning streak.

    The DJIA is a price weighted index that aims to represent the broad market using only 30 stocks. These 30 stocks are decided upon by editors of the Wall Street Journal, and are exclusively blue chip names. Unlike its peers such as the S&P 500, the DJIA is price-weighted, meaning that the impact a stock within the DJIA has on the index as a whole is dependent solely on the price of the stock. For example, Boeing (BA) is currently the largest weighted holding in the Dow at 7.3% with a price of $234.88/share. At the bottom is General Electric (GE) at only 0.79% of the index with a price of $25.20/share. Boeing has a market capitalization of $140 billion while General Electric has a market capitalization of $223 billion. (Sources: LPL Research, InvestorPlace, IndexArb)

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.

Russia sanctions, China trade: Wealth Economic Update Aug 4, 2017

U.S. and World News

  • moscow-155388930_360President Trump has signed a bill that imposes sanctions on Russia after Moscow ordered the U.S. to cut hundreds of diplomatic staff and said it would seize two U.S. diplomatic properties. The new sanctions are the equivalent of a “full-scale trade war” according to Russian Prime Minister Dimitry Medvedev. The sanctions mark some of the strongest action Congress has taken against Russia since the Cold War. Meanwhile, the investigation into Russian interference in the U.S. election is taking a step forward as special counsel Robert Mueller has reportedly convened a grand jury. The move would give him the power to compel witness testimony and obtain evidence. Links between the Trump campaign and Russia are subject to the investigation, although President Trump has deemed the probe a “witch hunt”.
  • A planned announcement by President Trump outlining a significant trade action against China has been postponed. It was expected that President Trump would direct U.S. Trade Representative Robert Lighthizer to open an investigation into Chinese violations of U.S. intellectual property rights and forced technology transfer. The move would bypass the World Trade Organization and is getting some rare bipartisan support; with Senate Democratic leader Chuck Schumer saying that the U.S. should skip any investigation and take immediate action against China. It is now unknown when or if this trade action will be announced.

Markets

  • Markets were generally higher this week. The S&P 500 rose 0.23% and closed at 2,477. The Dow Jones rose 1.22% for the week and closed at a new All-Time High of 22,093. Year to date, the S&P is up 11.87% and the Dow is up 13.23%.
  • Interest rates ended the week a bit lower. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.82% and 2.26%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.38% this week, closing at $49.52 per barrel. Year to date, Oil prices have fallen 7.85%.
  • The spot price of Gold ended the week lower by 0.81%, closing at $1,259.31 per ounce. Year to date, Gold prices are up 9.74%.

 Economic Data

  • Initial jobless claims fell by 5,000 from last week, coming in at 240,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims held steady at 242,000.
  • The July jobs reports came in better than expected with 209,000 jobs added, beating estimates of 180,000. The prior two months’ figures were revised upwards by 2,000, bringing the three month average for job gains to 194,000.
    • The headline unemployment rate edged down to 4.3%, in line with forecasts. The labor force participation rate ticked up 0.1% to 62.9%, making the reduction in the unemployment rate stronger.
    • Average hourly earnings increased by 0.3% in the month, meeting expectations. Over the last year, wages have grown 2.5%.
  • Headline PCE inflation was flat in the month of June, in line with consensus expectations. Over the last 12 months, headline PCE inflation has increased 1.4%.
    • Core PCE inflation (excludes food and energy, Fed’s preferred inflation measure) rose by 0.1% in June, also in line with expectations. Over the last 12 months, Core PCE inflation has increased 1.5%.

Fact of the Week

  • Since 1962, Congress has increased the nation’s debt ceiling 79 times. This amounts to once every 8 months over the last 55 years. This year, Congress must vote by mid-October to raise America’s debt ceiling or risk defaulting on its debt. (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.

Fed Rate, Healthcare: Wealth Economic Update July 31, 2017

U.S. and World News

  • traffic_360The Federal Reserve left interest rates unchanged at their policy meeting this week as was expected. The post-meeting statement noted that the Committee expects to begin reducing the size of its balance sheet “relatively soon” as opposed to “this year” as had been in the June statement. This implies that there will be some sort of an announcement regarding letting maturing bonds run-off the balance sheet at the Fed’s September meeting. The market is currently pricing in a 40% chance there is another rate hike before the end of the year.
  • Following failed Senate votes to repeal and replace Obamacare, Republican senators shifted their focus to a “skinny” healthcare repeal that introduces smaller changes to the Affordable Care Act. The changes included eliminating individual and employer insurance mandates and removing the medical device tax. Despite the more limited scope of the “skinny repeal”, the bill was still struck down by a vote of 51-49 as three GOP senators voted against it. In a floor speech following the defeat, Senate Majority Leader Mitch McConnell said, “it is time to move on.”

Markets

  • Markets were mixed this week. The S&P 500 was flat and closed at 2,472. The Dow Jones rose 1.17% for the week and closed at a new All-Time High of 21,830. Year to date, the S&P is up 11.67% and the Dow is up 11.88%.
  • Markets were mixed this week. The S&P 500 was flat and closed at 2,472. The Dow Jones rose 1.17% for the week and closed at a new All-Time High of 21,830. Year to date, the S&P is up 11.67% and the Dow is up 11.88%.
  • Interest rates ended the week a bit higher. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.83% and 2.29%, respectively.
  • The spot price of WTI Crude Oil increased by 8.63% this week, closing at $49.72 per barrel. Year to date, Oil prices have fallen 7.45%.
  • The spot price of Gold ended the week higher by 1.14%, closing at $1,269.34 per ounce. Year to date, Gold prices are up 10.62%.

 Economic Data

  • Initial jobless claims rose by 10,000 from last week, coming in at 244,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims held steady at 244,000.
  • Initial jobless claims rose by 10,000 from last week, coming in at 244,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims held steady at 244,000.
  • The Case-Shiller home price index rose by 0.1% in May, lower than expectations of a 0.3% increase. Prices rose in 14 of the 20 cities surveyed with Seattle (+0.9%), Las Vegas (+0.6%) and Portland (+0.5%) showing the largest monthly increases and New York City (-0.6%), Chicago (-0.4%) and Boston (-0.4%) seeing the largest decreases. Over the last 12 months, home prices as measured by the index have risen 5.7%.
  • The first estimate of 2nd quarter Real GDP showed 2.6% quarter over quarter growth, slightly below expectations of 2.7%. This first print represents an acceleration of growth over the 1st quarter’s figure of 1.4%.

Fact of the Week

  • Over the last 5 years ending June 30th, the S&P 500 has had an annualized total return of 14.6% per year. If an investor were to have missed out on the 5 best performance days in that span, the average annual return was cut by 3% to 11.6% per year. (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.

Healthcare, McCain: Wealth Economic Update July 21, 2017

U.S. and World News

  • stethoscope-519691768_360The U.S. Senate has further delayed a vote regarding repealing and replacing Obamacare and may scrap the plan altogether. This was the result of two more GOP senators stating they would not vote for the proposal, leaving Republicans short of the votes they would need to pass the American Health Care Act. Adding to the uncertainty, Senator John McCain has been diagnosed with a brain tumor and the timing of his return is very much unknown.

Markets

  • Markets were mixed this week. The S&P 500 rose 0.55% and closed at 2,472. The Dow Jones dipped 0.23% for the week and closed at 21,579. Year to date, the S&P is up 11.61% and the Dow is up 10.59%.
  • Markets were mixed this week. The S&P 500 rose 0.55% and closed at 2,472. The Dow Jones dipped 0.23% for the week and closed at 21,579. Year to date, the S&P is up 11.61% and the Dow is up 10.59%.
  • Interest rates ended the week lower. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.80% and 2.23%, respectively.
  • The spot price of WTI Crude Oil fell by 1.83% this week, closing at $45.69 per barrel. Year to date, Oil prices have fallen 14.95%.
  • The spot price of Gold ended the week higher by 2.14%, closing at $1,254.97 per ounce. Year to date, Gold prices are up 9.37%.

 Economic Data

  • Initial jobless claims fell by 15,000 from last week, coming in at 233,000. The Labor Department noted that the decrease may have been a result of summer auto plant shutdowns during the July 4th holiday. The four week moving average for claims moved down to 244,000.
  • Housing starts rose by 8.3% in June, beating expectations of a 6.2% increase. The increase was led by the volatile multifamily category (+13.3%) but single-family starts also increased (+6.3%) follow three months of declines.

Fact of the Week

  • On October 3, 1995, all activity in the United States halted in anticipation of the verdict of the “Trial of the Century”; the murder trial of Hall of Fame NFL Player and Actor O.J. Simpson. After 16 months of obsessive media coverage, the nation dropped everything they were doing to watch the verdict live. Among other phenomena such as water usage plummeting (not wanting to miss the verdict while in the bathroom) and electricity consumption surging (TV sets being turned on), trading volumes on the New York Stock Exchange fell by 41% as traders were glued to their TV screens. In all, it is believed that the verdict cost the U.S. economy $480 million in productivity that day. (Source: Alan Dershowitz’s “America on Trial)

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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Understanding the Benefits of a Special Needs Trust

Michele Morgan, Vice President/Trust OfficerMorganM_BUS003xqc

When you or a family member has a disability, protecting financial assets becomes a priority, especially when qualification for Medicaid and Supplemental Security Income (SSI) is involved. Fortunately, two types of special needs trusts (SNT) can help accomplish this.

Both trusts offer significant financial protection and can be used to pay for quality-of-life expenses, like wages for personal attendants and travel costs as well as for home furnishings, cars and even the therapeutic treatments not covered by Medicaid. The trusts differ in the degree to which these supplemental expenses are covered. This makes it essential to choose the right one for the job.

  • First-Party-Funded SNTs are funded using the disabled person’s own financial assets.
  • Third-Party-Funded SNTs are created using someone else’s money, not the disabled person’s assets.

While both types of trusts are exempt for Medicaid-qualification purposes, different rules apply to the way distributions can be made. This means the situations for their best use also differ.

First-Party-Funded SNT Rules

This type of trust is used when the disabled person’s own assets are sufficient to pay for the expenses Medicaid doesn’t cover. The disabled person, or someone acting on their behalf, creates the trust. That person is a parent, grandparent, legal guardian or the court. Funds typically come from a personal injury settlement, or inheritance that did not take a disability into account.

These trusts are irrevocable—once established, no changes are permitted. They must also include language that declares Medicaid has a lien on the trust’s assets. Any balances due to Medicaid for services received during the disabled person’s lifetime will need to be repaid to Medicaid before any other distributions may be made per the wishes of the disabled person’s estate.

Because Medicaid has this claim against the trust, all distributions during the trust owner’s lifetime are subject to review by Medicaid. The rules regarding those distributions are restrictive. For instance, a disabled person who wants to give a birthday gift to a sibling is prevented from doing so under this type of trust. The penalty for an errant disbursement can be severe. The disabled person is disqualified from Medicaid, becomes a private payer and needs to spend down the trust. Once that person’s assets reach $2,000 they may reapply for Medicaid.

Third-Party-Funded SNT Rules

This SNT is also exempt for Medicaid purposes because the money is not the disabled person’s and there is not a Medicaid lien. However, with no payback provision, the allowed distributions are less restrictive and determined by the grantor of the trust. Third-party trusts are typically funded with inheritances and bequests from family members who planned ahead and created the trust.

However, there are still rules. Chief among these is that the disabled person may not have any control whatsoever over the funds.

Hiring a Professional

Because the administration and investment of these trusts requires deep knowledge of the disbursement rules, typically either a corporate trustee or a combination of both a family member and a corporate trustee is chosen to oversee them. While naming only a family member is also possible, it puts undue pressure on that person. One false disbursement could strip a loved one of Medicaid coverage.

When hiring a corporate trustee, it’s important to find one who is willing to spend the time needed to understand and accommodate not just the rules but the needs and preferences of the disabled person.

If you, a friend or a family member might benefit from establishing an SNT—or from having a corporate trustee assume more responsibility for administering an existing SNT—we would be happy to talk to you about the options.

Call me at 630-844-3222. I am happy to help in any way I can.