quarterly newsletter —fall 2015 matters of trust€¦ · time. they get to know their clients and...

1901 Butterfield Road, Suite 1000 • Downers Grove, IL 60515 • 630-545-2200 • trustwealthadvisors.com

MATTERS OF TRUST

China’s recent stock market plummet has cast a shadow over the global economy. In the shadow is the nervous U.S. investor, who is asking two interrelated questions: What is the impact on the U.S. economy and what are the implications for the U.S. stock market (and, consequently, my investments)?

CHINA’S BOOM ECONOMY

Up to 2014, China’s economy grew (ostensibly) at an astounding rate of 10% annually. The data are elusive, since China’s central government does not adhere to the same rigorous reporting standards as the developed world. But it has been one of the broadest and most rapid economic ascents in history, raising Chinese living standards and propelling global growth and trade to new heights.

China’s growth rate is not surprising considering how much smaller its economy was prior to the recent period of super-heated growth.

China was able to sustain this economic boom simply because it had enormous capacity for growth over the past two decades, which has now made China the second largest economy in the world. But that growth is now tapering off, forcing China to make adjustments to its economic formula. In addition, China’s economy has been propped up by a highly controlling central government, and dominated by state-owned enterprises. The recent financial jolt has revealed China’s economic reality. There are cracks in its foundation.

Quarterly newsletter —Fall 2015

THE BOTTOM LINE

China’s 10% growth rate was sustained because of an enormous capacity for growth.

America’s per capita GDP is almost eight times higher than China’s. For China a 4% rate is almost like a recession; China needs to sustain a high rate of growth over a long period of time to lift the country out of poverty.

The U.S. economy continues to grow at a pace of 2.5%, and corporations are currently growing at a rate of 7%.

Short term: U.S. stock market may be more volatile. Long term: U.S. stock market is still a good haven for your money.

Chinese troubles have contributed to a rout in commodity prices, which presents opportunities to alert investors.

CHINA IN CONTEXTWhy it pays to be an optimist in a down economy.

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TRUST TALKS

“When it comes to their financial well- being, our clients want and deserve advisors with integrity, experience and a sensitivity to life’s uncertainties,” says Trust Company CEO Bill Giffin.

The firm recently hired two team members to develop new markets and add to its wealth management team. Thomas Egan was appointed to the position of Portfolio Manager and Mark Monaco was appointed to the position of Market Development Officer.

“Hiring these two successful profes-sionals shows our commitment to our investment resources,” says Giffin,

“and the growth of this organization.”

With an extensive background in portfolio management, Egan will serve as a resource for the Trust Company’s wealth advisors, providing ideas and perspectives informed by his research into companies in which clients are invested.

For example, if a client has a position in Netflix, and the stock drops sig-nificantly, Egan will develop a strat-egy for what to do next. “I combine my research with my analysis and provide our wealth advisors with a one-page summary about what to do with Netflix.”

“I thrive on combining the analytical challenge of constructing a portfolio,” says Egan, “with the interpersonal skills to communicate recommen-dations and see them work for our clients and their families. My goal is to bring ideas that can help improve a portfolio’s performance.” He also plans on broadening the firm’s in-vestment offerings.

“Hiring Monaco and Egan, two successful professionals, shows our commitment to our investment resources.”

Egan has over 25 years of financial anal-ysis and portfolio management experi-ence. He began his financial career as an analyst and then progressed to pro-viding business valuation services on a wide variety of industries. Egan joins the Trust Company from U.S. Trust, where he held market investment director and senior portfolio manager positions.

Monaco, who most recently served as Vice President of Wealth Management with First American Trust, comes to the Trust Company with passion and drive. He feels particularly passionate about sharing the story of the Trust Company.

“There is a high degree of integrity with this firm,” says Monaco. “The people

here have worked at the firm for a long time. They get to know their clients and treat them like family.”

Monaco’s primary responsibility will be to develop new markets in all areas of the Trust Company’s business offerings, along with helping clients in every aspect of their financial lives, in-cluding wealth management, trust and estate services, retirement planning, and elder care.

Monaco has 20 years of experience in wealth management for high net worth clients, starting his career at Merrill Lynch and Morgan Stanley. He previously served as head of institu-tional sales, director of marketing, and vice president of sales and marketing for three companies that were subse-quently acquired by Fortune 500 com-panies Charles Schwab, Nasdaq OMX and Archer Daniels Midland.

Egan’s and Monaco’s contributions to the Trust Company will combine with the contributions of our diverse and committed staff to accelerate the growth and client services of the company.

NEW TALENT FOR PORTFOLIO ANALYSIS AND BUSINESS DEVELOPMENT The firm hires two executives to help with its growth strategy.


EVENTS AND SPONSORSHIPS

ESOP SEMINAR--FOR BUSINESS OWNERS Sponsored by the Trust CompanyTrust Company Office, Downers Grove, ILOctober 1

OUTREACH COMMUNITIES MINISTRY WOMEN’S LUNCH Abbington Banquets, Glen Ellyn, IL October 15

ZONTA/MUTUAL GROUND FUNDRAISER WALKFabyan Parkway, Forest Preserve in Geneva, ILOctober 17

CASA OF DUPAGE COUNTY GALAHotel Arista, Naperville, ILNovember 13

MARIANJOY HOSPITAL LEGACY BALLSheraton Lisle Hotel, Lisle, IL November 14

OF SIGNIFICANCE

The worst piece of financial advice a widow can receive is to immediately start making important decisions.

When Margaret’s husband passed away, she experienced multiple emotions of grief: devastation, heartbreak, numbness, and even anger. Her grieving process, however, was complicated by the myriad financial decisions she felt pressured to make in the days immediately following his death. Having abdicated financial leadership to her husband, she felt lost as she decided whether she had enough to sustain her current lifestyle. Her financial worry worsened when her son, John, pressured her for a financial gift. While she felt a strong emotional desire to help her son, she didn’t know if she could afford to give gifts.

Margaret is just one of 12 million American women who are widows. Statistically, women outlive men by 15 years; widows have many years after their husband’s death to be responsible for financial decisions.

Unfortunately, 50% of widowed respondents said that becoming a widow created a financial crisis for them. More than 84% also noted the loss of a spouse made them realize how financial awareness is important.

As Wealth Management Services Director at the Trust Company of Illinois, I find it especially rewarding to help widows find financial stability and independence. My first advice to them is this: allow yourself time. In the year following a spouse’s death, it’s important to take time to process and grieve before you make any weighty financial decisions.

NOTEWORTHY

MARK D. MONACOBusiness Development OfficerAugust 2015

TAMI BOWMAN, CPC, QPARetirement Plan Services Compliance ManagerOctober 2015

THOMAS B. EGAN, CIMA ®Portfolio ManagerJuly 2015

NEW HIRES

FINANCIAL DECISIONS IN THE WAKE OF WIDOWHOODWhy it’s important to slow down, seek counsel, and develop a plan.

By Brandy L. Harrington, CFP®, Wealth Management Services Director

READ FULL ARTICLE ONLINE: www.trustwealthadvisors.com/OfSignificance


DECELERATION

For the U.S. a growth rate of 4% might prompt the Fed to raise interest rates to prevent rampant inflation. But for China a 4% rate is almost like a recession, with recent projections for continued growth between 4% – 6%. While China’s economy has grown to become the second largest in the world, it is still a poor country, with most of its wealth concentrated on the coasts and in large cities. America’s per capita GDP is almost eight times higher than China’s.

China needs to sustain a high rate of growth over a long period of time to lift the country out of poverty. For this to happen, wealthier Chinese need to keep spending. However, a perceived weak economy causes consumers to tighten their budgets and shy away from taking out loans for larger purchases, like cars and homes. Collectively, consumer retraction functions as a self-fulfilling prophecy, adversely affecting the entire economy.

SYSTEMIC ECONOMIC PROBLEMS

This points to another challenge. China’s economy is driven by exports, relying on them to create jobs and wealth. By contrast, the U.S. economy is consumer driven, with the primary market for its products from the U.S. The Chinese economy continues to be vulnerable because it is overly dependent on the global economy and needs to continue to keep its production costs down to export at a price that is attractive to the world market.

U.S. ECONOMIC IMMUNITY

The panic in China is carrying over to other smaller economies that have become dependent on China’s rapid growth. But the U.S. economy is on the other side of that equation. The U.S. imports a tremendous amount of goods from China and exports very little. Trade with China represents less than 1% of our economic activity. While sectors of our economy are affected by anemic Chinese demand, our economy is simply too big and diversified, with its core strength coming from a strong consumer base, to be hurt by China’s troubles. The U.S. economy continues to grow at a pace of 2.5%, and corporations are currently growing at a rate of 7%. The Chinese slowdown is not significant enough to pull down the U.S. economy.

MAKE THE MOST OF THE OPPORTUNITY

The stock market is “touchy,” highly responsive to such things as the

perceptions of risk, concern about rising interest rates, and declining corporate profits. Chinese economic troubles accentuate these fears, and can have a bigger influence on the stock market than it would have on the economy as a whole. This means in the short term a jittery U.S. stock market may be more volatile. But in the long term, the stock market is still a good haven for your money.

History has taught us that there is always some economic catastrophe looming on the horizon: the credit crisis in 08, the “tech wreck” in 2000, and runaway inflation in the late 1970s. Weathering these economic crises is still a reminder that we can weather the China crisis, too.

And there is an upside to this volatility. Chinese troubles have contributed to a rout in commodity prices, which presents opportunities to alert investors. We advise opting for Master Limited Partnerships – investment vehicles that own pipelines that move natural gas and oil. MLPs have been adversely affected by the steep drop in the price of oil, but their continuing cash flows warrant higher prices for these investments, thereby offering patient investors higher than normal expected returns. Also, a falling U.S. stock market has provided some selective bargains, such as dividend paying stocks offering an attractive yield at a reasonable price.

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quarterly newsletter —fall 2015 matters of trust€¦ · time. they get to know their clients and...

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