Market update, Q1 2019: Markets Bounce Back

Coming off a profoundly negative and volatile fourth quarter, market sentiment reversed course with a vengeance for the first quarter of 2019. Better than expected global economic news, and muted inflation expectations served to boost asset prices across a wide range of investment categories. Large-cap stocks in the S&P 500 index gained 13.7% in the first quarter, erasing the sharp loss from the previous quarter. Stocks of smaller companies, represented by the S&P SmallCap 600 index also did well, posting a gain of 11.6% for the first three months of the year.

International stock markets also did very well, with the MSCI Europe, Australasia, and Far East (EAFE) index gaining 10.0% for the first quarter. Unlike the previous quarter, investors showed renewed optimism about the trade negotiations between the U.S. and China, and global growth remained solid.

Bonds posted their best quarter since the beginning of 2016. The Bloomberg Barclays U.S. Aggregate Bond Index  gained 2.9% in the first quarter, benefiting from a more accommodating outlook on future interest rates from the Fed.

The Financial Engines perspective.

Once again, markets surprised with a sharp turnabout in investor sentiment. What does this tell us? Predicting the future is difficult. New (and unexpected) information can change market expectations quickly. A new narrative around U.S./China trade negotiations, and a chastened Fed taking a more relaxed view on future interest rate changes helped put investors into a more positive mindset. A diversified portfolio once again delivered strong performance in the first quarter. The last two quarters have demonstrated that markets can be unpredictable, and that maintaining a consistent diversified allocation is the best strategy to deal with the uncertainty.

Have questions?

Financial Engines advisors are here to help.

©2019 Edelman Financial Engines, LLC. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Edelman Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Advisory services are provided by Financial Engines Advisors L.L.C. Call (800) 601-5957 for a copy of our Privacy Notice. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.
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Market Summary: March 2019

Central Banks Ease Up.

News from central banks spurred most markets in March. Read more to find out what happened and what it may mean for you.

What happened.

March was mostly a good month in the markets.  Large-cap domestic stocks (S&P 500 Index) and bonds (Bloomberg Barclays US Aggregate Index) saw the highest returns, up 1.94% and 1.92% respectively.  International stocks, both developed- and emerging-market (MSCI EAFE and Emerging Markets indexes), were up for the month by 0.63% and 0.84%.  However, domestic small-cap stocks took a hit, down 3.33%.  It was a comparatively low-volatility month, with the S&P 500 up or down by more than 1% on only three days.

The first quarter of 2019 was a positive one.  In contrast to the difficult fourth quarter of 2018, all major categories of stocks were up very strongly.  US large caps rose 13.65%, small caps 11.61%, developed-market international 9.98%, and emerging-market international 9.92%.  Bonds rose by 2.94%.

Why it happened.

News about the economy—domestic and international—caused concerns for market participants in March.  Early in the month, lackluster US job-creation numbers were reported, and it was reported that the 2018 trade deficit rose to its largest in a decade.  Later in the month, falling manufacturing in the eurozone, Japan, and the US added to the worries.

Why, then, did most classes of stocks rise?  The reason was that major central banks, notably the Federal Reserve and the European Central Bank, said that their policies would be more supportive of economic growth.  Until recently, the market was expecting higher rates to hold down anticipated inflation. This tends to dampen growth.  Now, however, the Fed said it will not raise rates this year and the ECB said it will take measures to stimulate lending.  The stock market reacted positively to the news.  Longer term interest rates fell (because rates in the future are not expected to rise), and this increased bond prices. We take a deeper look at the Fed’s impact on interest rates in this month’s side-bar.

What this means for you.

Financial Engines builds a portfolio that is personal to you, considering your situation, goals and tolerance for risk.  Your portfolio will probably have grown over March (though factors such as holdings of company stock can affect your individual return).  Although March was a positive month, you should still be sure to understand how comfortable you are with the inevitable ups and downs of markets and set your portfolio’s risk accordingly.  As always, it’s important that we know as much as possible about your personal situation and risk preferences. Please make sure that your account information is up to date.

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©2019 Edelman Financial Engines, LLC. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Edelman Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Advisory services are provided by Financial Engines Advisors L.L.C. Call (800) 601-5957 for a copy of our Privacy Notice. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2019 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

Social Security – Now or Later?

When Should You Take Social Security? You Can’t Just Rely on the Math.

“When should I start claiming Social Security benefits?” Years ago, the answer to that question was simple. But Social Security rules have changed over the years, making the issue quite complicated. Let’s begin by understanding how the Social Security Administration calculates your retirement benefits.

Benefits are based on your work-life earnings. Here’s how the math works:

Social Security benefits are based on your lifetime wages.1

  • Your highest 35 years of wages are divided by 420 months; this produces your average indexed monthly earnings (AIME).
  • Missing years count as zero.
  • The Social Security Administration then applies a formula to your AIME to determine the amount you’ll receive at full retirement age.

Here’s the good news: There’s no need to do the calculations yourself. Just create an account at ssa.gov/mysocialsecurity,2 and the calculations are done for you. While you’re there, you’ll notice the amount of your monthly check will also depend on when you decide to begin receiving benefits.

The later you wait, the more you’ll get.

The youngest age you can begin receiving Social Security retirement benefits, based on your own work record, is 62.3 But just because you can start receiving Social Security benefits doesn’t necessarily mean you should. That’s because the amount you receive will increase the longer you wait.

If you choose to retire at 62, you’ll get only 75 percent as much as if you waited until your full retirement age (FRA), which ranges from ages 66 to 67, depending on when you were born. In fact, your benefits will continue to grow 6–8 percent for each year you delay retirement up until age 70 when you would receive 132 percent of your FRA amount.

Should you take a smaller check at 62, wait for a larger check at FRA or delay even further to age 70?

The answer: It depends! There is no one-size-fits-all rule of thumb. You should begin by determining how much steady income you’ll need to meet your retirement needs.

    • What do you project your expenses will be?
    • How much will you receive in pensions or other retirement benefits?
    • How much money will your savings generate?
    • Will you continue working part time?
    • Are there any other sources of income you might have?

Taxes are another issue. If you don’t have a pressing need for a Social Security check each month, and that check might bump you into a higher tax bracket, you might want to delay filing for benefits. Your total income also determines Medicare4 and Medicaid5 premiums and eligibility and affects the taxes you’ll pay on investment income — all this can get complicated.

Personal factors can outweigh the math.

Your age, your spouse’s age, work history, life expectancy, survivor needs, taxes, give-backs, spousal benefits, survivor benefits, child benefits and possibly divorced spouse benefits — these are all factors that need to be considered.
In short, deciding on when to file for Social Security can be a very complicated process. There is a lot of information on ssa.gov, but they can’t answer your biggest question — that’s up to you. So, many folks rely on professionals such as accountants and financial advisors to help determine the best time to file. Just make sure that the professionals you hire are experienced, knowledgeable and working in your best interests.

1 https://www.ssa.gov/pubs/EN-05-10070.pdf /
2https://www.ssa.gov/myaccount/?utm_source=offsite&utm_medium=referral&utm_campaign=ocomm-eservices-fy19&utm_content=eservice
3 https://www.ssa.gov/pubs/EN-05-10024.pdf
4 https://www.ssa.gov/pubs/EN-05-10536.pdf
5 https://www.kff.org/report-section/medicaid-financial-eligibility-for-seniors-and-people-with-disabilities-in-2015-report/
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What Is Happening With Social Security? And What Does It Mean to You?

April is National Social Security Month and this year the Social Security system turns 84. A great deal has changed since 1935 and you may be worried about how the future of Social Security may impact your own future. Let’s start by understanding how the system works.

Social Security is a pay-as-you-go system.

Each week, payroll taxes are collected from workers and employers across the country. That money is used to purchase U.S. Treasury securities, which are held in the Social Security Trust Fund. (Congress is not spending your Social Security taxes; in fact, they can’t touch that money.) Then each month, the trust fund sells enough of its Treasury securities to pay out benefits to roughly 46 million Social Security recipients. That’s why it is called a pay-as-you-go system. Today’s workers pay taxes that are used to pay today’s recipients.

Is the system going bankrupt?

It’s important to understand that, despite what you may have heard in the media, the Social Security system is not going bankrupt. That said, the money that is currently held in the trust fund is estimated to run out in 2037. At that point, the Social Security Administration estimates that incoming payroll taxes will only be able to support 76 percent of scheduled benefits. This is because there will be more and more retirees (think baby boomers) being supported by fewer workers. The bottom line — we have a problem, and Congress has yet to decide how to fix it.

Will Social Security provide you with the retirement income you’ll need?

You should also know that Social Security was not designed to replace all your pre-retirement income. According to SSA, benefits at full retirement age (ranging from ages 65 to 67) will provide only 75 percent of a very low earner’s wages, 40 percent for medium earners and 27 percent for high earners. That means you will need to provide the rest.

Is anything being done about all this?

These problems have contributed to what many are referring to as a retirement crisis. In response to this crisis, Ric Edelman, co-founder of Edelman Financial Engines, helped create Funding Our Future — an alliance of organizations dedicated to making a secure retirement possible for all Americans. The alliance informs the public about the barriers to retirement security and calls on policymakers to make strengthening retirement policies a top priority.

In just its first year, Funding Our Future has advanced a number of ideas that could help to address the growing retirement crisis. Here are just a few:

• Provide more Americans access to simple, low-cost retirement savings products and services.
• Increase automatic enrollment in workplace retirement savings plans, individual retirement accounts and other existing retirement plans, perhaps even making it mandatory. States that have done this report positive results, he says.
• Increase tax incentives for people to save and help them understand it’s in their best interests to take advantage of such incentives.

Ric Edelman, other experts and leading organizations are working with Funding Our Future to find solutions to the retirement crisis. Meanwhile, your employer sponsors retirement benefits that can play a major role in providing for your future retirement. But, when it comes to ensuring the retirement security that you deserve, the ultimate responsibility rests with you.

1 https://blog.ssa.gov/its-national-social-security-month/
2 https://www.ssa.gov/OACT/ProgData/fundFAQ.html
3 https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html
4 https://www.ssa.gov/pubs/EN-05-10024.pdf
5 https://www.pbs.org/newshour/economy/making-sense/the-numbers-you-need-to-know-about-the-retirement-crisis
6 https://fundingourfuture.us/
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Market Summary: February 2019

Stocks ascend again.

February saw a continuation of January’s positive stock market returns. Read more to find out what happened and what it may mean for you.

What happened.

Holding stocks paid off in January and this continued into February. Once more, US small-cap stocks led the charge, rising 4.4% (S&P 600 Index) with large-caps following suit, up 3.2% (S&P 500 Index). Advances in international stocks were not as pronounced with developed-market stocks increasing 2.6% and emerging-market stocks progressing 0.22% (MSCI EAFE and Emerging Market indices). Volatility was muted for the second month in a row. The S&P 500 moved by more than +/- 1% on only two days in February. Bonds finished the month essentially flat, edging down -0.06% (Bloomberg Barclays US Aggregate Index).

Why it happened.

 

Investors again kept their eyes on trade news, Federal Reserve policy, and signals about global economic growth. The largest single-day drop of the month (-0.92%) occurred on February 7th when the White House confirmed that a meeting between President Trump and China’s President Xi Jinping would not occur prior to a looming March 1st tariff deadline. This was shortly followed by the largest single-day jump of the month (1.3%) on February 12th when President Trump suggested he might delay planned tariff increases past the March 1st deadline. The increases were delayed.
The Federal Reserve continued to suggest that it was not in a rush to increase interest rates. The Fed Governor, Jerome Powell, said this was because of “conflicting signals” in the economy and potential slowing global economic growth ahead. While US jobs data remained solid, consumer confidence and manufacturing data were not as good. Reports on the continuing slowdown in China and yet more uncertainty about Brexit also fueled the Fed’s concerns. In this month’s sidebar, we look at why worries about Brexit and tariffs move the markets.

What this means for you.

Financial Engines builds a portfolio that is personal to you, considering your situation, goals and tolerance for risk. While February was a positive month, it’s important to understand how comfortably you can stomach the inevitable ups and downs of markets and set your portfolio’s risk accordingly. Your portfolio will probably have seen positive returns this month. The more aggressive the portfolio—because you’re further from retirement or have a higher risk tolerance—the better it will likely have done. As always, it’s important that we know as much as possible about your personal situation and risk preferences. Please let us know of any changes by logging into your Financial Engines account or calling one of our advisors.

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©2019 Edelman Financial Engines, LLC. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Edelman Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Advisory services are provided by Financial Engines Advisors L.L.C. Call (800) 601-5957 for a copy of our Privacy Notice. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2019 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

In honor of Women’s History Month, let’s talk about women and retirement.

Women’s history month is a time to honor the women who have accomplished amazing feats and made great strides in equality (with still more work to be done). It is also a great time to look to the future – your future.

When it comes to retirement planning, women have greater challenges to overcome.

Here’s the situation:1
• Three out of four working women earn less than $30,000 per year
• Women earn less and therefore receive half the average pension benefits of men
• Women live longer than men, requiring their money to last longer
• Women have more sporadic work histories as a result of caring for children or elderly parents
• 71% of the nation’s 4 million elderly poor are women
• Women tend to be more intimidated about financial issues, less informed about ways to secure their financial future and are more conservative investors

Now for some good news! With a little early planning, you can make a huge difference.

Invest in yourself.

Employer-sponsored retirement savings plans allow for compound growth and many employers will match your contribution up to a certain percentage. Find out how much your employer will match and strive to save at least enough to get the full match — otherwise you could be missing out on “free money”.

Know when you can claim Social Security.

For most women, Social Security is a significant part of their retirement picture, and the right Social Security claiming strategy can make a huge difference. Just because you can start receiving Social Security benefits at age 62 doesn’t necessarily mean you should. Keep in mind that your benefits continue to grow 6-8 percent per year until age 70. That can make a meaningful difference in your income in retirement.2

Get help.

Getting advice from a professional can help you make the right decisions today and feel better about your future. Talking with an independent advisor can be a great first step for getting a personalized retirement plan in place.

1 The Money Conference for Women; YWCA Hartford Region with Honorary Chair Connecticut State Treasurer Denise L. Nappier, held Saturday, October 20, 2018 http://www.ywcahartford.org/what_we_do/money-conference/about/overview.html
2 https://www.ssa.gov/benefits/retirement/
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How to Teach Young Children to Save and Invest

It can be both fun and educational for your kids.

When it comes to teaching children about money, you should get them involved early…as young as 7 or 8 years of age. Have them help with the bill paying. Expose them to preparing your tax return. And, if you have the money, set up a brokerage account for them. Let them pick a stock or two. The neat thing about this concept is it introduces children to buying the companies that make the goods we want. For children, that means companies like Mattel or Disney. A kid who loves Mustangs might buy stock in Ford. Of course, they won’t know what really goes into stock analysis before investing money, so that’s where the educational process begins.

Another resource is popular mutual funds. Many fund families offer material designed for kids; some even offer actual mutual funds aimed directly at children. One company’s prospectus is written like a children’s book, with simple explanations about mutual funds and investing. (Whether the fund is worthy of your child’s money is another matter.)

Kid Friendly Resources to Learn About Money

If you yourself aren’t that familiar with stock or mutual fund investing, learn about it, because your kids are going to ask! If you can’t give them an answer, use the question as an opportunity to learn the answers together. It’s a great way to spend time with your child, as well as improving their education and your personal finances.

A great website that can help you teach your children about money is www.jumpstartcoalition.org, sponsored by the Jump$tart Coalition, a nonprofit organization committed to helping educate school children. You can access more than 150 nonprofit organizations and sponsors via this web site. It’s ideal for schoolteachers and others who want to teach students about money or investments.

Making Financial Education a Game

For example, there’s a game on the site that teaches children about earning money and paying bills (https://www.jumpstart.org/what-we-do/support-financial-education/reality-check/). The children first select the level of education they want (high school dropout, high school degree, or college degree). Based on the level chosen, a corresponding average salary is given. Then it’s up to the child to budget and plan for expenses, which include housing, food, car, and more. The site also lets the child build a lifestyle, such as choosing the kind of house and car he or she wants, and then it shows how much money the child needs to earn to support that lifestyle and the types of careers that pay such salaries. It’s a great opportunity for children to gain insight about what we grownups have to contend with.

The site also contains the only single source for finding publications and training aids designed specifically to teach kids about money. If there is a child dear to your heart, we strongly encourage you to check out this website. Just imagine how much more financially successful we all would be if this information had been around when we were tykes.

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Market Summary: January 2019.

Markets bounce back – at home and abroad.

January saw positive returns across markets. Read more to find out what happened and what it may mean for you.

What happened.

After a disappointing December, stocks surged in January at home and abroad. US small-cap stocks led the pack, up 10.64% (S&P 600 Index). Large caps were also strong, up 8.01% (S&P 500 Index). International stocks fared well, with emerging-market stocks up 8.76% and developed- market stocks up 6.57% (MSCI Emerging Market and EAFE indexes). Volatility was comparatively low: the S&P 500 moved by more than +/- 1% on only six days in January. Bonds were up as well, with the Bloomberg Barclays Aggregate Index rising 1.06%.

Why it happened.

The Federal Reserve loomed large over markets in January. The month’s biggest jump in the S&P 500 came on the day the Federal Reserve Chairman said the central bank was willing to adjust its policy to help the economy if needed. The second biggest jump was on the day the Fed kept interest rates unchanged and signaled there were no increases imminent.
Earnings news also affected markets. We’re now in earnings season, when companies report how they fared in the last quarter of 2018. So far, actual earnings for a large majority of companies have beaten expectations—and remember, markets react to what happens compared to what’s expected. US economic news was mostly positive too.

The US private sector added more jobs than expected and wages rose faster than expected, though there were some signs of weakening in manufacturing. Globally, the International Monetary Fund struck a more cautious note in a report forecasting weakening economic growth around the world.

What this means for you.

We build your personal portfolio to help you achieve your goals, while taking into consideration your tolerance for risk. In this month’s sidebar, we look at the lessons of December and January. It’s importance to understand your tolerance for the inevitable ups and downs of markets and set your portfolio’s risk level accordingly. In January, your portfolio will probably have seen positive returns. The more aggressive the portfolio—because you’re further from retirement or have a higher risk tolerance—the better it will likely have done. As always, it’s important that we know as much as possible about your personal situation and risk preferences. Please let us know of any changes by logging into your Financial Engines account or calling one of our advisors.

©2019 Edelman Financial Engines, LLC. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Edelman Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Advisory services are provided by Financial Engines Advisors L.L.C. Call (800) 601-5957 for a copy of our Privacy Notice. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2019 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

5 Myths About Credit and Debt

Whether it comes through a friend, a relative, or an ill-informed website, many folks have the wrong information about credit and debt. Here are five myths that many people share about credit and debt, according to Money Management International, a nonprofit credit-counseling agency. Let’s set the record straight on each of them:

There Is an Easy Way to Fix Bad Credit
Wrong. Some TV and radio ads claim their sponsors can “fix” or somehow improve your credit report in a few easy steps. The truth is that no person or company can remove accurate entries from your credit report. The Fair Credit Reporting Act says that information about a delinquent account (late payments, nonpayments) can remain on your file with the credit reporting agencies for seven years, starting 180 days after the account becomes delinquent.

If you do need help managing your debt, make sure to enlist the help of a legitimate firm. You can find a list of legitimate, government-approved credit counseling organizations, by visiting usdoj.gov/ust.

Bankruptcy Discharges All Debts
This is simply not true. A number of debts don’t go away through bankruptcy, including back taxes less than three years old, student loans, child support and debts incurred through fraud.

Debt Collectors Can’t Call Others About Your Debts
As unfair as it may seem, they can. The Fair Debt Collection Practices Act allows debt collectors to make such calls, but there are a few restrictions: They can call others only to find out where you live, your telephone number and where you work. They can’t reveal the reason for the call to anyone other than you or your attorney. And unless you tell them otherwise, they can call you at work.

A Divorce Decree Matters to Creditors
Again, that’s wrong. A divorce decree is between you and your ex-spouse; the creditors are not involved. While the decree may state how your assets and debts will be divided, the creditors were not involved in the settlement and had no input in the results. Therefore, the decree doesn’t change any contracts with them. Whoever signed the contract with them is still obligated to pay the debt, regardless of the divorce or its decree. If payments are not made, the creditors can sue the debtor and file the negative information with the credit agencies.

Your Credit Card Company Can’t Change Your Interest Rate
According to the Credit CARD Act of 2009, card issuers can indeed make key contract changes to your account terms and agreement, including rate increases, with 45 days’ notice. Many will raise your interest rates if your credit score declines — even if you have paid on time and according to the terms of your contract.
These are a few examples of misinformation about credit and debt. There are similar myths about workplace retirement plans, Social Security, college loans, mortgages, car loans and a host of other topics.

Before you act on what you “know,” make sure to check with a trusted financial advisor. They can make sure you’re acting on valid information, not inaccurate assumptions.

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Market update, Q4 2018: Happy New Year?

After spending much of the year seemingly on an upward escalator, global equity markets took a beating in the fourth quarter. Despite good economic indicators, policy tightening by the Fed and increasing concerns over future growth, especially in China, led to volatile markets and sharp declines in stock prices. It was a stark reminder that markets are forward-looking and unpredictable. Large-cap stocks in the S&P 500 declined 13.5% in the fourth quarter, erasing gains from the first three quarters, and ended the year down 4.4%. Stocks of smaller companies, represented by the S&P SmallCap 600, also dropped sharply, down 20.1% in the fourth quarter and ended the year with a loss of 8.5%.

International stock markets did no better. The MSCI Europe, Australasia, and Far East (EAFE) Index dropped 12.5% for the fourth quarter and finished the year down 13.8%. Concerns around the impact of the U.S. trade war with China negatively impacted investor sentiment.

Bonds were positive for the quarter as investors sought refuge from declining stock markets. The Barclays U.S. Aggregate Bond Index gained +1.6% in the fourth quarter, to end the year essentially flat.

The Financial Engines perspective.

2018 was a year where investor attitudes shifted suddenly. With a backdrop of strong GDP growth, employment gains, and solid earnings, the market rose for much of the year. But the fourth quarter changed the tune. Tightening policy moves by the Fed, an escalating trade war, and political turmoil in the U.S. and abroad all served to shift investor sentiment.

Markets are always trying to discern the future, and expectations can shift quickly. But, it’s important to put market returns in perspective. Remaining in a diversified portfolio at a risk level consistent with your goals is important to long-term success.

Have questions?

Financial Engines advisors are here to help.

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