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SUMMER 2015 WEALTH MATTERS. NEWS, COMMENTARY AND UPDATES FROM THE EXPERTS AT CHEMICAL BANK WEALTH MANAGEMENT. FROM THE SENIOR TRUST OFFICER Fall is quickly approaching! We hope all of you had the chance to enjoy the pleasant weather and recreation that our great state has to offer. This summer we are pleased to announce that our Traverse City Wealth Management office has relocated from Garfield Street to downtown Traverse City. For those of you in the Northern Michigan region, you may now visit our exceptional team of Wealth Management professionals at 109 East Front Street. We look forward to providing you with the same, unparalleled service from our new office and hope that you will enjoy visiting us at our new downtown location. Thank you for being a client of Chemical Bank Wealth Management. We appreciate the opportunity to share our news, employee achievements and financial expertise with you. If you have any feedback or comments you’d like to share with us, I welcome you to contact us at [email protected]. John E. Kessler Executive Vice President Senior Trust Officer GUARDIANSHIPS & CONSERVATORSHIPS A Guardian is appointed by a probate court to be responsible for, and make decisions about, the daily care of a legally incapacitated person (LIP). An LIP is an adult who the Court deems impaired by reason of mental illness, mental deficiency, physical illness or disability, chronic use of drugs, chronic intoxication, or other cause, which impairment causes the person to lack sufficient understanding or capacity to make or communicate informed decisions. The legal Guardian stands in the shoes of the LIP to make daily care decisions that the LIP is unable to make and is issued “Letters of Guardianship” as evidence of his/her legal authority. The Guardianship may be a Full Guardianship, meaning the LIP is totally without the capacity to care for him/herself or it may be a Limited Guardianship, meaning the LIP lacks the capacity to do some, but not all, of the tasks necessary to care for him/herself. Unless limited by the court order, a Guardian has the responsibility to: • • • • Make provision for the LIP’s care and comfort, including food, clothing and shelter Take care of the LIP’s vehicles and personal belongings Return the LIP to selfmanagement, if and when possible Obtain professional services the LIP might need such as: - Health and dental care - Personal care, including feeding, bathing, dressing - Nutrition, including home delivered meals and food stamps - Day care -Transportation While a Guardian makes decisions concerning an LIP’s physical care, a Conservator is a bank trust department or an individual appointed by the court to handle an LIP’s property and financial affairs. Once appointed, a Conservator receives “Letters of Conservatorship” and takes title to and manages the LIP’s assets. Similar to a Trustee, Guardians and Conservators are fiduciaries that owe a duty of loyalty to an LIP. Guardians and Conservators are supervised by the Probate Court through the filing of annual reports/ accountings, which detail their efforts and financial transactions on behalf of the LIP. If you or one of your loved ones is in need of more information concerning Guardians and Conservators, one of our knowledgable Trust Officers are available to help. INVESTMENT COMMENTARY THE ECONOMY Real gross domestic product (GDP) increased at an annual rate of 2.3% in the 2nd quarter of 2015 based on the preliminary estimate. In the 1st quarter, real GDP increased only 0.6% as bad weather and a stronger dollar impacted growth. Real personal consumption expenditures, which represent roughly 70% of GDP, increased 2.9% in the 2nd quarter compared to an increase of only 1.8% in the previous quarter. The Federal Reserve is projecting roughly a 2% growth rate for 2015 and a projected growth range of 2.3% to 3.0% for 2016. Much of the recent economic data has been solid or better than expected. The widely-watched jobs report, a lagging indicator, in July showed that non-farm payrolls increased by 215,000. The average monthly gain over the past year has been a very healthy 246,000. The unemployment rate was unchanged at 5.3%. Average hourly earnings over the past year have risen by 2.1%, slightly higher than the core rate of inflation. The latest report from the U.S. Bureau of Labor Statistics showed that the number of job openings was little changed at 5.4 million on the last business day of May, the highest level since the series began in December 2000. The number was only 4.6 million last May. Job openings increased over the past year for many industries with the largest increases occurring in professional and business services, and in health care. This is a very good sign and should bode well for the still 8.3 million unemployed people. Index of Leading Indicators (LEI), an index made up of 10 economic components, whose changes tend to precede changes in the overall economy, continues to point to further U.S. expansion. Lastly, consumer confidence, which had improved in June, declined in July. While it is still slightly higher than it was at the end of 2007, it is well below the peaks seen just prior to the last three recessions. THE MARKETS Interest rates across the yield curve increased from the end of the 1st quarter, but by 7/31/15, were close to where they stood on 12/31/14. The 10-year treasury yielded 2.18% at the end of July. The 2-year treasury yielded 0.67%, surprisingly only 2 basis points from its 0.69% yield on 12/31/14. The 2-year treasury is closely watched because it is most sensitive to Fed policy. With rates virtually unchanged in 2015, bond performance was only slightly positive year-to-date through 7/31/15. The Barclays U.S. Intermediate Govt/ Corp Bond Index returned +1.2% and the Barclays Aggregate Bond Index returned +0.6%. The Fed will most likely end its zero interestrate policy this year and increase the federal funds rate by 0.25%, possibly as early as September. They have stated that the first rate hike remains data dependent. This will be the first rate hike in more than nine years. The tightening process will most likely be very gradual and orderly. The Fed could wait until 2016 before its first rate hike given recent turmoil in Greece, China, and Puerto Rico. However, since next year is an election year, they may prefer to get Building permits, a leading indicator, far started sooner instead. exceeded expectations in June, reaching The domestic stock market YTD through an annual rate of 1.34 million, the highest 7/31/15 provided positive returns. Both level since July 2007, and 30% higher large-cap stocks and small-cap stocks than just one year ago. The Composite performed in line with one another. CONTINUED ON NEXT PAGE. EMPLOYEE SPOTLIGHT HAPPY ANNIVERSARY! 35 YEARS! KIRK FISHER, CFA Vice President & Trust Investment Officer 25 YEARS! PATTIE KEITH Administrative Assistant 15 YEARS! SUSAN SHELDON SVP & Director of Sales and Service 10 YEARS! CAROL JACKSON Administrative Assistant 5 YEARS! LESLIE TOLAND Investment Executive SHARON SLEEPER Administrative assistant WELCOME! JOSH BEITEL Financial Advisor MIKE LANGENBERG Associate Investment Executive CONGRATULATIONS! CYNTHIA WOLF Retiring: Administrative Assistant ROGER NORKOLI, CFA Retired: Vice President & Trust Investment Officer HERBERT HARDY Retired: Vice President & Employee Benefits Officer KIMBERLY MELROSE New Position: Administrative Assistant KEVIN SCORSONE Promoted: 1st Vice President & Director of Private Banking INVESTMENT COMMENTARY CONTINUED The S&P 500 Index returned +3.4%, while the Russell 2000 Index returned +3.5%. Developed international stocks outperformed domestic stocks by a fairly large margin. The MSCI EAFE Index, our bogey for international stocks, returned +8.1%. Emerging markets were the exception. The MSCI Emerging Markets Index declined 4.0% YTD through 7/31/15. Best performing S&P sectors YTD through 7/31/15: Healthcare (+12.6%) and Consumer Discretionary (+12.0). Worst performing S&P sectors YTD through 7/31/15: Energy (-12.0%) and Utilities (-5.3%). Many are concerned that the stock market will struggle in the face of rising interest rates. Historically, however, the stock market generally trends higher during the earlier stages of tighter monetary policy. While stock valuations are above historical averages, earnings are expected to continue growing in 2015, albeit at a very low pace; inflation is low and the level of interest rates is still very low justifying a higher valuation for the market. Lastly, keep in mind that the S&P 500 Index has not seen a 10% correction since October 2011. So, increased volatility in the market should not be a surprise. WHY EVERYONE NEEDS A PLAN Have you heard the saying, “If you don’t know where you’re going, how do you expect to get there?” It is a simple but true statement when it comes to financial planning. Few American households have a comprehensive plan in place that will map out their long term financial goals. In some instances, clients do have enough funds to retire when the time comes. Having a financial plan in place will help get individuals closer to that dream. A financial plan is the formal process of charting a road map of financial goals while taking into consideration an individual’s assets and liabilities. There are many benefits of making a financial plan: 1 FUTURE GOALS By estimating your retirement income and expenses, you can begin to determine the amount you need to save to meet your retirement goals. 2 TIMING By planning, you can gain a better handle on the time needed to get to your goal. The sooner they start putting away, the less money they need to put away to get to that goal. Time is money as they say, and the compounding effect is powerful. 3 ASSURANCE A good financial plan will provide you and your trusted advisors a clear and complete picture of your financial condition and future strategy. 4 5 FINANCIAL CONTROL Your family is better protected against a possible financial crisis and assumes more control by implementing a solid plan. REDUCING TAXES By allocating income and assets more effectively with the help of a financial plan, individuals have the potential to reduce taxes and develop a tax-deferred strategy. 6 INVESTING IN A PROFITABLE PORTFOLIO A financial plan makes it simpler for individuals to increase their cash flow and make good investment decisions. They can make better decisions when allocating their financial assets. In summary, a financial plan can give you a clear picture of your current financial situation, a strategy of where you are going, and give you a peace of mind about your financial future. If you’re interested in learning more about financial planning and retirement, visit your local branch or call us at 800.808.5404. 715 East Main Street | PO Box 2049 Midland, MI | 48641-2049 800.808.5404 ChemicalBankMI.com/WM INSIDE Investment Commentary: - The Economy - The Markets Why Everyone Needs a Plan 5 Ways Life Insurance Can Benefit You This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material. 5 WAYS LIFE INSURANCE CAN BENEFIT YOU When you list the financial assets on your balance sheet, you might think immediately of your house, vehicles, retirement funds or financial investments. Another essential element in your financial plan, your life insurance, offers benefits that other assets don’t. Beyond the familiar death benefit, permanent life insurance has several valuable advantages that can both expand and protect your financial security. Here are some of the additional opportunities life insurance can offer: 1 LIQUIDITY Once it accumulates, your life insurance cash value is accessible through policy loan or withdrawal for family and business opportunities, education funding, retirement income, emergencies, or to pay policy premiums. 2 PROTECTION Life insurance can offer a financial fall-back when needed and offset the impact of estate taxes upon your death. The death benefit also can provide surviving family members with funds they need to live comfortably and achieve their goals. 3 FLEXIBILITY WITH LESS RESTRICTION You can access your accumulated cash value without restrictions that exist on other assets. For example, there are no penalties or required minimum distributions, unlike other tax-favored investments such as IRAs and 401k plans. 4 value LONG-TERM FINANCIAL SECURITY FOR YOU AND YOUR FAMILY Once you have built cash over decades, you have multiple options for accessing those funds. You can cash in the policy, convert it to an annuity for guaranteed lifetime income, keep a portion of the death benefit and access some of the cash value, or continue the policy to protect your family and leave a legacy. 5 GUARANTEED INSURABILITY As long as premiums are paid, permanent life insurance provides coverage throughout your life, even if health or personal situations change. And buying a policy at a young age locks in insurability. With so many unique benefits, permanent life insurance can be a strong addition to your balance sheet and the foundation for your financial security.