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.

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.

©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: December 2018.

Stocks finish down after a turbulent December.

Uncertainty translated into a roller-coaster ride for markets in December. Please read on to find out what happened and how you can plan for your future.

What happened.

Stock markets took a roller-coaster ride in December. Large-cap stocks, measured by the S&P 500, moved by +/-1% on 10 of the 21 days markets were open. And there were some remarkable days: the index fell by 3.23% on one day and rose by 4.96% on another. By the end of the month, however, U.S. stock markets were down. The S&P 500 closed down 9.03%, with small- and mid-cap stocks falling by more. Overseas stocks fell less. Developed markets were down by 4.85% and emerging markets by 2.66% (MSCI EAFE and Emerging Markets Indices). These were helped by the dollar falling against other currencies. Bonds were a bright spot, with the Bloomberg Barclays Aggregate Index up 1.84%.

Why it happened.

Markets tend to be calmer when things are predictable — when news is slow. Uncertainty can lead to volatility, and December had plenty of it. Market participants were uncertain about trade and tariffs, the outlook for economic growth at home and abroad, the government shutdown, and the Federal Reserve’s plans for interest rates. When news was reported amid this uncertainty, markets moved strongly in response.

This volatility is certainly unsettling, and declines in stocks are unpleasant. Markets are unpredictable: No one knows what markets will do tomorrow, never mind next month or next year. But it’s important to remember why we invest in stocks in the first place.

What this means for you.

Financial Engines builds portfolios tailored to your situation and preferences. The higher your level of risk — because you’re a long way from retirement or you’ve told us you want to take risk — the more you could be affected by the fall in stocks in December. If your risk level is lower, this fall could be somewhat cushioned by your higher holdings of bonds. Either way, it is important that the information you provide us is up to date and complete. The new year is a great time to log in to your Financial Engines account, or call one of our advisors, to make sure we have the information we need to best meet your needs.

 

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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. ©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.

Market summary: November 2018.

After a bumpy month, stocks close up.

The market volatility that kicked up in October continued through November — but this time, most major categories of stocks ended in positive territory for the month. Read more to find out what happened and what it may mean for you.

 

What happened.

November was another turbulent month for the stock markets. The S&P 500, an index of large-cap U.S. stocks, moved up or down by more than 1% on eight of the month’s 21 trading days. Markets around the world saw similar gyrations. But after all the volatility, most major categories of stocks ended the month up.

The top-performing categories in November were emerging-market international stocks, up +4.12% (MSCI Emerging Markets Index), and domestic large-cap stocks, up + 2.04% (S&P 500). The laggard was international developed-market stocks, which closed the month down 0.13% (MSCI EAFE Index). Bonds were up +0.60% (Bloomberg Barclays Aggregate Index).

Why it happened.

The month’s financial headlines were dominated by the Federal Reserve’s stance on future interest-rate increases and the direction of U.S./China trade policy. When news headlines suggested progress was being made in trade talks, stocks rose; when it appeared tensions had increased, stocks fell.

As for interest rates, the Fed indicated in early November the likeliness of continued hikes. Because this stance was expected, it garnered little market reaction. Later in the month, when Fed Chair Jerome Powell shifted to say that interest rates are just below “neutral” — suggesting they may not increase very much after all — markets reacted positively.

Why the response this time? Because markets tend to react to new information, not to what’s already known or anticipated. November was a good illustration of this: The month’s volume of news about topics important to the economy prompted markets to move up and down frequently.

Against the backdrop of market volatility, the U.S. economy continues to perform solidly. Growth remains strong at 3.5% per year; the unemployment rate is still low at 3.7% (although new unemployment claims increased slightly late in the month); and U.S. retail sales growth beat expectations as consumers bought more electronics and appliances.

What this means for you.

In November, your portfolio will probably have seen an increase in value — the more of your portfolio that’s invested in stocks versus bonds, the greater that return may have been. This would be the case if you’re further from retirement or you’ve told us you have a higher risk tolerance.

In this month’s sidebar, we look at how taking advantage of the low fund expenses in many workplace retirement plans can help returns over time. At Financial Engines, we select from among the investment options your employer provides to build you as cost-effective a portfolio as we can while tailoring it to your circumstances. To do this, 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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©2018 Edelman Financial Engines. 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. 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. 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.

3 financial items to put on your end-of-year to-do list.

This time of year, our lives can become full of to-do lists — gifts to buy for loved ones, grocery runs to stock up for the next celebration, and let’s not forget the biggest to-do list of all: your New Year’s resolutions. With all the holiday whirl, however, it’s easy to forget about your financial to-do list. This year make sure you include these three important steps.

Max out your retirement savings plan contribution.

The maximum amount an individual can contribute to a 401(k) plan in 2018 is $18,500 if they’re under the age of 50 and $24,500 if they’re 50 or older. The maximum amount an individual can contribute to an IRA in 2018 is $5,500 if they’re under the age of 50 and $6,500 if they’re 50 or older. If you haven’t yet reached your contribution limit, try to direct some dollars into those accounts. Your future self will thank you.

Plan your charitable gifts.

Contributions are deductible in the year made. Thus, donations made via credit card before the end of 2018 count for 2018 even if the credit card bill isn’t paid until 2019. Also, checks count for 2018 if they are mailed in 2018. Contributions made by text message are deductible in the year your contribution is charged to your telephone or wireless account (even though you might pay the bill the following year).

Cash donations, regardless of the amount, must be proven by a bank record such as a canceled check or credit card receipt showing the name of the charity, or a written document from the organization showing its name, the date and the amount donated. For noncash donations worth $250 or more, including clothing and household items, get a receipt from the charity showing its name, date of the gift and a reasonably detailed description of the property. If a donation is left at a charity’s unattended drop site, keep a written record that includes that same information, as well as the fair market value of the property at the time of donation and the method used to determine that value.

Optimize taxes.

If you have a taxable brokerage account, your advisor can help you balance any losses with any gains you may have to help minimize the tax bill you’ll owe in 2019. Essentially, you’ll want to sell off taxable investments that have losses, which reduces the gain that other assets in your account may have produced throughout the year — which in turn can help shrink the amount of taxes you’ll pay on your gains for the year. Also known as “tax harvesting,” the process can be complex to do correctly, so you’ll want to seek the help of a professional to cross this item off your to-do list.

Lists can be an important part of staying on track at any time of the year, but they become especially important in December.

This year, don’t forget to include these key financial tasks on your to-do list. They may not be as festive as putting up lights or planning for the next holiday celebration, but they’ll ultimately be helpful in achieving a goal that can be enjoyable any time of year: financial security.

 

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Market summary: October 2018.

Volatility returns to the stock market.

Back in September, the S&P 500 didn’t move by more than 1% on any given day. But during October, the S&P 500 gained or lost more than 1% on 10 of the trading days in the month. Read more to find out why volatility returned to the stock market during October and what it may mean for you.

What happened.

After reaching new all-time highs in September, the stock market pulled back in October. Volatility returned to most markets, similar to the episode that unfolded earlier this year. Stocks and bonds, at home and abroad, generally ended lower for the month, but a rally at the end of the month helped to ease some of the uncertainty.

Large cap stocks, represented by the S&P 500, dropped 6.84%. The MSCI EAFE Index, which tracks developed market international stocks, dropped 7.96%. The bond market experienced some bumps, too, as the Bloomberg Barclays Aggregate Bond Index fell by 0.79%.

The historically riskier investments like U.S. small-cap and emerging-market stocks experienced some of the most extreme volatility during the month. The U.S. small-cap S&P 600 fell by 10.48% and emerging-market stocks, as defined by the MSCI Emerging Markets Index, dropped by 8.71%.

This past month was similar to the phase that the stock market went through back in February and March. While both periods saw the stock market trend lower, the nature of the day-to-day gyrations were extreme. The S&P 500, for instance, moved up or down by more than 1% on 10 out of the 23 trading days in October

Why it happened.

Trying to understand the specific causes of short-term fluctuations is often an exercise in futility. But in October, there seemed to be two major stories that may have influenced markets.

Ongoing worries about trade tensions with China, and the impact this conflict might have on economics and corporate profits, might have been one of the main drivers of volatility in October. The impact of the trade tensions on corporate profits came into focus this past month as companies began reporting financial results for the third-quarter.

Generally, corporate earnings reports were positive with many companies exceeding expectations. But some major firms, such as Amazon and Caterpillar, reported disappointing revenues and, perhaps more importantly, lowered expectations for the coming quarter. Part of this might have been attributed to the escalating trade tensions between the U.S. and China.

A second story that might have contributed to volatility during the month was the continued rise in interest rates. The U.S. economy grew by +3.5% in the third quarter, but this strong growth contributed to concerns about the Federal Reserve raising interest. The worry is the Fed could raise rates faster than had been previously expected.

Volatile phases in the markets, like this last month, can feel unsettling. During these stretches, it can be helpful to keep your sights set on your long-term goals and to remember that risk is part of investing.

It might also be helpful to remember that just a few months ago, the market reached a new all-time high. Of course, this was during the recovery through the summer, after the last stretch of volatility this past spring. In this month’s sidebar, we offer some perspective on dealing with volatile markets.

What this means for you.

It’s likely that your portfolio experienced a negative return in October. If you’re worried or feeling anxious about your portfolio, now might be a good time to revisit your risk tolerance. This is a measure of how comfortable you are with the risk in your portfolio.

If you don’t know what your risk tolerance is, we can help you determine your comfort level and build a personalized portfolio from the investment options in your employer’s 401(k) retirement plan. Along with finding a comfortable risk level, we can consider when you want to retire and with how much, along with other information that you provide about your situation.

The more you can share about what you want to achieve, the better we can help with a personalized financial plan to help you reach your goals. Please log into your Financial Engines account or call one of our planners to make sure we have the information we need to help you stay on track and find a risk tolerance that you’re comfortable with.

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©2018 Edelman Financial Engines. 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. 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. 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.