Blog   Tagged ‘private wealth’

July Outlook by the Numbers

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Do you have questions on the housing market, labor market and interest rates? Check out UMB Investment Management team’s July 2017 Outlook by the Numbers for a quick snapshot on these and other economic drivers.

Also, be sure to review the following articles for more market and wealth management information…

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Follow UMB‡ on LinkedIn to stay informed of the latest economic trends.

 Interested in learning more about our Private Wealth Management division? See what we mean when we say, “Your story is our focus.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Active, Passive or Complementary Investing?

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Most of the debate around passive versus active investing comes from those advocating for one approach over the other. We, on the other hand, believe they are complementary and not mutually exclusive. Based on our research, neither an all-passive, nor all-active portfolio, is the optimized portfolio. Rather, optimal appears somewhere in the middle. Blending both active and passive investing strategies can provide a more attractive risk-return profile.

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Read our full perspective by clicking here or learn more about our Private Wealth Management division. See what we mean when we say, “Your story is our focus.


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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Corporate Earnings and Fidget Spinners

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What do corporate profits and fidget spinners have in common?

Happiness.

While parents may never understand fidget spinners, kids sure love them. Trendy toys make kids happy, even if we don’t understand the intrigue. While we expect fidget spinner fascination to wane and follow the path of prior fads, such as the pet rock, Furbys and silly bands, we expect the opposite of corporate earnings.

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We believe corporate earnings are moving to trend status and have the staying power to grow for the next eight quarters. And this will translate to happiness in the market. Stock markets do well when corporate earnings are stronger than expected, as earnings are the lifeblood of the market.

July 10 marks the unofficial start to second quarter earnings season, and we expect earnings growth momentum to continue based on the following data.

Shift from Earnings Recession to Earnings Expansion

Beginning in the fourth quarter of 2014, corporate earnings evaporated, starting an earnings recession that lasted until the third quarter of 2016 when earnings finally posted a slightly positive gain.

The first quarter of 2017 recorded strong earnings growth of 17.8 percent and sales growth of 8.5 percent. Wage inflation, commodity costs, margins, and share repurchases boosted (and will continue to boost) earnings growth.

Additionally, easy year-over-year comparisons helped these numbers, as earnings declined 5.0 percent last year during the same time period.

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Industries We’re Watching

Technology and finance sectors are expected to have the highest growth rates among all S&P 500 sectors.

  • Strong demand for cloud-based services and cell phones are leading growth for technology.
  • In the finance sector, the recent increase in interest rates bode well for banks as expanding margins can make more profit on the money they lend out relative to their interest paid on deposits such as checking/savings accounts. Additionally, higher rates should help offset weaker than expected loan growth trends.

Key Drivers: A Look Ahead

Sustainable corporate earnings growth is driven by economic activity and GDP growth, and corporate earnings are highly correlated. Economic global growth continues to improve, with China and Europe’s economic data showing signs of green shoots, and we see a pick-up in domestic growth as well.

We expect second quarter earnings to increase eight percent and revenue growth to grow four percent.

Timing the Earnings Tailwind

The promise of fiscal stimulus is a tailwind for corporate earnings. Tax reform, reduced regulation and infrastructure spending have the potential to increase earnings by 10 to 15 percent.

However, there are two issues with fiscal stimulus. The first is timing—how quickly will things develop? Given current conditions, it appears this will be a 2018 event.

Secondly, fiscal stimulus has a short-term impact on economies and markets. Historically, when you are late in an economic cycle like we are now, fiscal stimulus is effective for only four or five quarters.

Therefore, while potential fiscal stimulus is positive for the long-term, investors will have to exercise some patience and understand that they may be shorter-lived when they are realized.

The Broader View

We have a positive view on the economy and expect GDP to grow at 2.2 percent in 2017. Over time, S&P 500 revenue growth has had a multiplier of 1.5 times GDP growth. This GDP multiplier, plus an expected rebound in oil, supports our 5 percent revenue growth for 2017.

All things considered, we believe the next few quarters of corporate earnings are going to be a trend that will bode well for the markets. Meanwhile, children will continue to play with their fidget spinners – or the next greatest fad – and everyone will be happy.

Follow UMB‡ and KC Mathews‡ on LinkedIn to stay informed of the latest economic trends.

Interested in learning more about our Private Wealth Management division? See what we mean when we say, “Your story is our focus.


K.C. Mathews is executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute.

Will Reese is a senior securities analyst for the Private Wealth Management division at UMB. He has an Bachelor of Science degree in psychology from the University of Kansas and a Master of Business Administration degree with an emphasis in finance from Avila University. In his role, Will monitors and maintains departmental equity working lists, recommends stocks for external clients, and provides equity research and analysis for internal customers.




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Is the Bond Market Wrong?

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After the surprise election results in 2016, domestic markets experienced the “Trump Bump,” which entailed a traditional risk-on shift—investors bought stocks and sold bonds to prepare for the presumed good times ahead. Stock values and interest rates both shot higher in anticipation of a boost to both economic activity and inflation.

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Trump Bump to Trump Slump

However, after a few months of treading water early in the New Year, interest rates began a steady decline. The 10-year Treasury note dropped from 2.60 percent to 2.25 percent in just a few weeks.

This occurred despite an early increase in overnight rates by the Federal Open Market Committee (FOMC) and clear messaging that they are prepared to continue the upward march in rates as part of a gradual “normalization.” All the while, stock prices remained resilient and repeatedly bumped up against all-time highs.

Debates and Head-Scratching

The drop in long-term rates created a flattening of the treasury yield curve, something that typically occurs near the end of a Fed tightening cycle, as the economy begins to slow down.

This rate drop and curve flattening has triggered a healthy debate throughout the

investment industry. It appears the bond market is signaling that the economy isn’t going to be nearly as strong as the equity market is discounting.

Historically, a flattening yield curve has been a strong, early indicator of economic deceleration—so the divergence between stock prices and interest rates has unleashed some serious head-scratching.

Disagreement Abounds

As a further complication, the Fed Funds futures market—the bond market’s estimate of where overnight rates are headed—is substantially below the FOMC’s estimates for where they’re planning to move rates. The FOMC expects overnight rates (and money market rates) to head to 1.50 percent in 2017 and rise to 2.20 percent in 2018, which is good news for savers. However, the futures market is placing overnight rates at only 1.25 percent and 1.50 percent in 2017 and 2018.

It appears that the bond market currently disagrees with both the FOMC and the stock market on the strength of the economy and the path of rates, raising the question, “Is the bond market wrong?”

Countering the Contrarian View

At this point, our answer is “yes, we believe the bond market is wrong.”  While it’s usually not fruitful to bet against the bond market, we believe several factors are causing it to paint a contrarian (versus the stock market) picture at this time:

  1. Assumption that the new administration will not get any stimulus plans enacted
    The bond market appears to be responding to the president’s early challenges with enacting campaign promises.
  2. Global interest rates
    Global interest rates are still well below the U.S. The glut of excess savings from around the world is still chasing U.S. rates whenever they rise, making it difficult for our rates to rise as much as they might otherwise.
  3. Normalization cycle
    Bond investors around the world are assuming the current Fed normalization cycle will play out in a similar manner to how the entire global financial crisis cycle has unwound—much slower than anyone anticipated. They are betting against any “upside surprises” for the economy or inflation, and it’s been a very long time since we’ve had either.
  4. Extreme caution in rising rates
    The bond market believes the FOMC will exhibit extreme caution in edging rates higher because it fears rising rates will tip the economy back toward a slowdown.The bond markets are not signaling that an economic slowdown is eminent, but rather that rate normalization will not be possible at the pace indicated by the Fed and most forecasters.

Why we believe the bond markets are wrong:

  1. We believe the new administration will succeed in enacting tax cuts and infrastructure programs—both will involve compromise and delays, but they will ultimately be accomplished, and both should point toward higher rates.
  2. We believe the global savings glut is in the very early stages of abating, so the artificial “lid” on interest rates may be slowly dissipating.
  3. While the last decade has been one of extremely slow movements from the Fed, it appears wage pressure is building throughout our economy—a precursor to inflation. Economic momentum is turning upward in Europe as well. These trends will allow the Fed to push forward with rate normalization at the pace reflected in most forecasts.
  4. Interest rates are exceptionally and unsustainably low, particularly given that we are experiencing a modest global upturn. Even after the Fed’s projected upward adjustments, interest rates will still be exceptionally low—modestly higher rates are not a threat to the economy or a barrier to normalization. For these reasons, we believe the bond markets are not properly reflecting the most likely path for interest rates over the next two years. There are risks to this outlook, but the most likely outcome is an upward shift of roughly 1.00-1.50 percent over the next two years.

Interested in learning more about our Private Wealth Management division? See what we mean when we say, “Your story is our focus.


Mr. Kelley is managing director of fixed income at UMB and is responsible for overseeing the product development and management of the fixed income holdings for the Wealth Management division. Mr. Kelley earned a Master’s of Business Administration from Baker University in Kansas City.



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Dust off Your Finances: Spring Clean Your Financial House

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Spring is just around the corner, and with that comes the proverbial spring
cleaning. While most people recognize the value of scrubbing their homes, we recommend dusting off your finances as well.

Consider these tips to help ensure your financial house is cobweb-free.

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Settle In for a Review

  • Review the titling and ownership of all financial accounts. Make certain any accounts owned and titled in a trust, or have a Payable upon Death designation, will meet desired intentions if a transfer were to take place.
  • Review your credit report to make sure
    you’re in positive standing. You can request a free copy once every 12 months from annualcreditreport.com.
  • Review insurance policy and retirement account beneficiaries. This is particularly important if there has been a recent change in marital status. A spousal waiver will be needed if the beneficiary is not the spouse.

 Prepare for the Future

  • Execute a will and a living will. If these documents already exist, they should be reviewed on a regular basis. Circumstances and viewpoints change, which can heavily impact desired allocations and intentions.

Check Up on Your Cards

  • Check the interest rates that are being charged on all credit cards. For individuals who carry balances, consider consolidating to the card with the lowest interest rate or even contemplate a Home Equity Line of Credit as the interest may be tax-deductible.
  • Utilize a credit card that offers rewards. Many of these now carry no annual fee and offer cash back in addition to the travel and merchandise rebates.

Evaluate Your Employer Benefits

  • If financially possible, make the most of your 401(k) by contributing to the level that takes advantage of the full employer match.
  • Review your health insurance coverage options to ensure you are making the best selections for yourself and your family. If you are currently enrolled in a High Deductible Health Plan coupled with a Health Savings Account, review your contributions to make sure you are maximizing your saving options.

Examine Your Life Insurance

  • Make certain existing coverage will meet the financial needs of your family if any member were to pass away, not just the primary income source for the family. Also, if the only secured life insurance is provided by an employer, consider pricing other term policies. Remember employer-provided insurance may not transfer if there is a change in jobs.
  • Research long-term care insurance. Ask your insurance provider about this coverage to ensure it offers home health care in addition to nursing home care. Life expectancy is much greater than it used to be, and in-home and community care continue to rise in price.

Freshen Up on Your Investments

  • Review or create an investment policy statement (IPS). This is an agreement with a financial advisor that states your investment purpose, time frame and risk tolerance. An IPS clearly states the investor’s goals and helps provide clear expectations, consistent communications and true accountability for both the advisor and the investor.
  • Conduct homework for obtaining professional services from investment consultants, estate planning attorneys and certified public accountants. Seek references from trusted friends and colleagues and stick with specialists. Professionals will be able to offer insights and guidance that will help individuals succeed in reaching their financial planning goals.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.pulation Survey/Housing Vacancy Survey, Series H-111, U.S. Census Bureau, Washington, DC 20233.


As a Private Wealth Management regional manager, Brent is responsible for the growth and support of new customer relationships as well as supervision of regional sales associates. He is also responsible for oversight and delivery of the financial planning discipline within the region. With nearly 30 years of experience private wealth client relationship management, Brent is a seasoned banking professional with deep Texas roots. He attended the University of Texas at Arlington, where he earned a bachelor’s degree in finance, and is a Candidate for CFP® certification. He serves as a board member of the Dallas Parks Foundation.



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Talk is not cheap when it comes to family money

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The most important concept to understand when transferring wealth is the communication plan. It may be difficult, but here’s why you need to focus on it.

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How to broach the subject of transferring wealth to your children and grandchildren

Money used to be a taboo topic—one your great-grandparents and grandparents would never consider discussing with the next generation. However, times have changed—and so has the thought on these conversations. People want to talk about it while they’re still able to, and there are many benefits to that.

Why the big shift? New wealth, complicated investing vehicles and legacy desires are a few reasons. Many people have seen the challenges that come with unexplained inheritance parameters and instructions. However, discussing your strategies with beneficiaries ahead of time can eliminate confusion, frustration and hurt feelings.

With money comes responsibility and expectations

Educating your beneficiaries on the responsibilities that come with inheriting wealth is important, particularly if you would like your wealth to live beyond the next generation. As you formulate strategies to leave your hard-earned assets to loved ones, you may wish to structure a plan that provides financial security for not only your immediate heirs, but theirs as well.

Start the conversation early

Your children need to be old enough to understand the information, but you can begin talking with them about areas like philanthropy as early as grade school. For example, if your family makes an annual donation, you can involve your children in choosing recipients. Discuss causes that are important to them. Maybe they love pets or want to help give other kids presents for the holidays. Talk about it and let them help pick who you support.

As your children enter the high school years, you can work with your financial advisor to help introduce fundamentals like budgeting and personal cash flow management. Then during their early to mid-20s, you can begin conversations about your estate plan.

Share the strategy

Wealth advisors, or financial planners, generally start the conversation with the older generation about how to share their estate planning details. This is one of the most significant services these advisors provide, because they assist in explaining the estate plan structure, and many times will facilitate the conversation about the strategy.

Inheritors have a lot of questions when discussing their trusts and the strategy behind them, sometimes misunderstanding the intent.  Wealth advisors are neutral parties who explain that securing assets until a certain age is a strategic step. Whether it’s done to ensure measured wealth disbursement or to enable the inheritor to mature before accessing funds, these decisions are made from a comprehensive planning standpoint.

Intergenerational wealth transfer is an extremely complicated process—it can be complicated to execute and emotions are always a factor. Talk with your wealth advisor—they can proactively counsel and assist in both building your strategy and communicating amongst generations. Having these conversations can be the difference in you leaving a gift and establishing a legacy.




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