Hills Bank Online





Online Investments Login

Application Center

Please select the account application that you are
interested in.

Sign up for the Trust Quarterly eNewsletter

Providing an overview of the economy and the markets.

* Required

*

*

*





Email Marketing by VerticalResponse

 

Do you feel safe with your retirement plan provider?

Do you feel safe with your retirement plan provider?

Hills Bank offers all-inclusive,
fully-bundled retirement plan services.

  • Local contacts
  • Local processing
  • Local community-bank responsiveness
  • Fully-disclosed fees that are easy to understand

Trust & Wealth eNewsletters

View archived articles from the Trust and Wealth Management newsletter "The Economy and Market from Here...at Hills."

January 2015 | October 2014 | July 2014 | April 2014

Some trust products and IRA contributions/balances are not a deposit, not FDIC insured, not insured by any federal government agency, not guaranteed by the bank, and may go down in value.

January 2015 Economy and Market from Here...at Hills.

Stock prices in the U.S. continued their climb to record highs during the quarter, but not without volatility. In early October, the S&P 500 Index experienced its second correction of 5% or more this year, nearly reaching 10% in intraday trading. This sell-off was short-lived and the index rebounded sharply by more than 11% by early December. Some of that was retraced by month-end, but domestic stocks ended the year in positive territory. The S&P 500 returned 13.7%, the third consecutive year of double-digit results. Much of this continued strength was due to better than expected corporate earnings, improving consumer sentiment and dramatically lower oil prices.

International stocks did not fare as well as Europe and Japan grapple with difficult economic conditions. The MSCI EAFE Index, a common international benchmark, declined 4.2% in 2014.

The rapid decline in the price of oil was the main headline during the quarter. A barrel of West Texas Intermediate Crude cost $53 at year-end, down from $107 in late June Ėa 50% decrease. Improved extraction technology has led to a proliferation of new wells, as well as old wells coming back online in North Dakota, Texas and elsewhere increasing domestic supply. This increased extraction, accompanied by decreased demand from slowing economic growth in Europe and China and a recent OPEC announcement that current production levels by member countries will remain the same, has accelerated the price decline.

Interest rates have also continued to decline during the quarter. The yield on the 10 Year Treasury dropped from 2.40% on September 30 to 2.21% on December 31. Despite low long-term rates, there is not a notable increase in lending, which means interest rates could continue to remain low. Much of the decline in rates is driven by factors outside the United States. Whereas the Fed has ended their Quantitative Easing program, Europe and Japan are just beginning to embark on their own extraordinary stimulus measures to revive growth in their regions.

Outlook
It is our view that the global economic recovery is a work in progress. The expansion in North America seems to be well-established. Equity markets in the U.S. and Canada reflect this relative economic strength. While the Fed is moving toward a normalization of monetary policy with an end to quantitative easing, we expect a cautious approach when it comes to raising interest rates. As long as inflation pressures remain subdued, the Fed will likely focus on boosting employment and economic growth.

Lower oil prices will have a positive impact on the consumer and manufacturer alike. This should translate into increased spending and greater profits. There will be pockets of disruption in oil producing regions as weaker operators shut down. Other risks to lower oil prices include increased political unrest in Russia and the Middle East.

We expect U.S. equities to continue their upward trek, although that advance may become more sedate compared to the past three years. Equity prices should advance more in line with profits. In other words, stock multiples should hold steady or perhaps shrink slightly even as profit growth accelerates on the back of an improving economy.

The fourth quarter has seen volatility return to normal levels after a long period of calm. We believe this trend will continue heading into 2015. For investors, a key to riding out the natural volatility inherent in the stock market is to have a portfolio with a carefully constructed asset allocation. If you have not been in for an account review in some time, please give us a call. It is always good to get together to discuss strategy and to confirm that your asset mix is in line with your expectations.

 


October 2014 Economy and Market from Here...at Hills.

After an unusually long period of market calm, investorsí anxiety was piqued early in the quarter by the escalation of geopolitical tensions in Ukraine, a number of intensifying conflicts in the Middle East, the failure of a major Portuguese bank, and the Argentine governmentís technical default. The accompanying resurgence of stock market volatility did not come as a complete surprise. Markets bounced back in August on positive economic reports including a pick-up in the manufacturing and non-manufacturing indices, falling ongoing unemployment claims, accelerating motor vehicle sales, and rising consumer confidence. The S&P 500 closed at an all-time high of 2011.36 on September 18 but retreated by quarter-end, finishing just slightly positive for the quarter. So far this year through September 30, the S&P 500 is up 8.33%.

European stock markets experienced a decline, which may have been due to the continentís more challenging economic environment prompting the European Central Bank to expand their stimulus program. Developed markets as measured by the MSCI EAFE Index are slightly down for the year shedding -0.81% through September 30.

Global interest rates continued to move lower, especially in Europe where the yield on the Spanish ten-year Treasury is now below that of the U.S. Treasury Note Ė remarkable considering that only a few years ago Spain was considered to be near default on its debt. At home, Federal Reserve Open Market Committee (FOMC) Chair, Janet Yellen, continued her dovish stance indicating to markets that short-term interest rates may remain at historic low levels for much longer than most expect. The ten-year U.S. Treasury Note ended the quarter nearly unchanged. The September 30 yield was 2.51%.

Outlook
Although stock market valuations look a bit elevated in developed markets, we believe they are fairly valued when the low interest rate and low inflation environment is taken into account. In the U.S., valuations are further supported by the continued upward trend in corporate profits. While Europe is not seeing the same profit trends, the region is stabilizing economically and the recent stock market corrections have brought valuation to more attractive levels. Although we anticipate some market volatility, we remain overweight in common stocks as we believe earnings growth, dividend growth, and economic improvement support higher stock prices.

The critical factor at this stage isnít whether or not stock prices experience a temporary decline. Experience tells us that (at some point) they will. For investors, a key to riding out the natural volatility inherent in the stock market is to have a portfolio with a carefully constructed asset allocation. If you have not been in for an account review in some time, please give us a call. It is always good to get together to discuss strategy and to confirm that your asset mix is in line with your expectations.

†††††††


July 2014 Economy and Market from Here...at Hills.

Where is the elusive correction? Historically, a correction of 10% or more occurs every twelve months. The S&P 500 has not suffered a 10% correction since October 2011. Corrections of 10% or more are common. The important thing to remember is that they are temporary.

The S&P 500 continues to reach new highs, closing at 1962.87 on June 20. The S&P 500 ended the quarter up 5.2% and has returned 7.1% year-to-date. Interest rates have moved lower as well in recent months, resulting in positive total returns for the bond market. The yield on the 10-year Treasury was 2.52% on June 30, down from 3.03% at the beginning of the year. The BarCap Aggregate Bond Index, a broad measure of bond market returns, returned 3.9% during the first half of the year.

U.S. business activity continued to improve during the quarter. May vehicle sales surprised to the upside, reaching an annual rate of 16.8 million units sold - the highest since 2006. The Institute of Supply Management (ISM) reported that production reached its highest level of 2014, and also reported that the non-manufacturing sectors of the economy accelerated more than anticipated in May. The labor department reported job growth at a pace greater than 200,000 per month. The unemployment rate is now at 6.3%, a level many economists did not expect to be achieved until year-end.

Other economies have not fared as well. Europe continues to recover at a slow rate, and many recent European economic reports have come in below expectations. These outcomes prompted the European Central Bank (ECB) to announce that it will lower the deposit facility interest rate to -0.10% effective June 11. This, in effect, means that European banks will have to pay to lend their money to the ECB. The hope is that this will promote increased economic activity through capital investment and expansion. In Asia, China, and Japan also reported a slower pace of business activity in May. Despite the disappointing economic results abroad, returns on international equities, as measured by the MSCI EAFE Index, are up 5.2% year-to-date.

Outlook
As equity markets continue to reach new highs, stock valuations are beginning to return to what we feel represent fair value. Even so, we believe stocks offer greater return potential relative to bonds in the intermediate to long-term as domestic and international economic conditions and corporate balance sheets continue to improve from low levels of output and employment.

As the economic cycle continues to progress we have reduced our moderate overweight to growth stocks and tilted slightly toward value stocks. Growth stocks have outperformed value stocks over the last three years and, as the current bull market matures, we anticipate a leadership change from growth to value.

Strong market returns have pushed seasoned accounts to the top of the strategic equity allocation range set forth in our investment policy statements, and we have been trimming stocks where appropriate. Though we believe the stock market is the avenue to better long-term results, an adherence to the investment policy range provides an objective framework for taking profits when stocks are at their highs.

Interest rates have declined since the beginning of the year, but we anticipate that the trend in rates will be to move higher going forward as a result of accelerating economic growth and higher expected levels of inflation. Direction is often easier to forecast than timing. So while we believe rates will trend higher, we recognize that rates may continue to stay at low levels for much longer than anyone anticipates.

We believe that it is important to occasionally review your account and determine if the current allocation is still appropriate for your circumstance. If you have not recently done that with your relationship officer, we encourage you to do so. Please give us a call. We would enjoy getting together.


April 2014 Economy and Market from Here...at Hills.

Volatility returned to the market during the first quarter. The S&P 500 declined 5.76% between January 15 and February 3, marking the first notable correction since June of last year. Profit taking and disappointing reports from the emerging markets were the main contributors to the sell-off. However, markets quickly rebounded. The S&P 500 once again gained new highs during the quarter and ended in positive territory up 1.6%.

Record snowfall and frigid temperatures throughout most of the nation have likely distorted economic data, at least in the short-term. Employment and housing data have been affected most by the weather. Conversely, manufacturing and sentiment reports continued to show signs of continued expansion. Modest GDP growth is expected in the first quarter, but will pick up as we enter the summer months.

Interest rates fell for most of the quarter. The 10-year Treasury began the year yielding 3.03% and fell to 2.72% by March 31. The new Federal Reserve Open Market Committee Chairperson, Janet Yellen, reiterated the Fedís commitment to slowly taper quantitative easing should economic conditions continue on the current path of improvement. Yellen indicated that the Fed may begin to raise the fed funds rate six months after the end of tapering. Fed futures predict the Federal Reserve will begin to raise the fed funds rate from near zero by the middle of 2016.

Outlook
Equity markets have rallied substantially over the last several quarters. While earnings have been strong, valuations (as measured by price-to-earnings multiples) have returned to average levels. We continue to believe that stocks provide the best opportunity for growth over the intermediate and long-term horizons. However, we recognize there is greater vulnerability to negative surprises such as global events including those that are occurring on the Crimean peninsula in Ukraine.

A 10% market correction has not occurred in more than three years, and one typically occurs on average every twelve to eighteen months. The Trust and Wealth Management Investment Committee has maintained an overweight position in customersí common stock portfolio allocations for several quarters. We are also using record market levels to rebalance accounts that have grown outside of their strategic range. It never hurts to reward the market by harvesting gains.

We expect interest rates on bonds to reverse course and continue on an upward pace, dampening total returns in bonds for the next few years. It is hard to say how quickly or dramatically rates might rise. We happen to think it will occur slowly. While rising rates will mean that bond values will decline, the more positive view is that income will return to more meaningful levels. This will improve the bond allocationís ability to cushion portfolios during times of stock market stress.

Please feel free to contact your account administrator to review your account and determine if the current allocation is still appropriate for your circumstance.


From 1904 until the 1980s, this safe was used to secure money and important documents. The design of the safe door was unique in that it was actually screwed into the safe with a hand crank. Advertising by the Mosler Safe Company claimed it was dynamite proof. Top photo features the gears of the safe's door.


Spacer Image