Lots of changes with this month’s update!

Future Contributions have been updated as they always are on the first trading day of the month.

New Tactical Allocations have been updated.

Finally, you will notice that you need to click “I Agree” when logging into your Participant Dashboard.

We require this each year to comply with the Securities Exchange Commission (SEC) Annual Update requirements. Before April 1st of each year, we are required to go through all of our documents, agreements, processes, etc and update our filings with the SEC. We then need to file update versions of our legal documents with the SEC and offer to share them with you.

By clicking “I Agree” you are stating that you have received the most recent versions of any of our legal documents.

You can also access all our “legalese” at any time by going to https://www.planconfidence.com/legal

Enjoy this month’s version of the Confident Chronicles!

-Kevin T Clark, RF™ - CEO & ERISA Nerd

Market Returns:

Above is an oversimplification of the U.S. markets.

However, this is what we use to get an overall “feel” of where the markets are.

As you can see, stocks (S&P 500 & NASDAQ) were negative for the month and bonds were positive.

Volatility has returned with a vengeance in February.

Stock markets hate uncertainty. That’s what causes volatility.

Markets tend to behave as expected with good news and bad news. But they do not behave well with “uncertain” news.

Much of the uncertainty is being driven by a new administration taking over and the changing political nature. Hopefully, we will get certainty about their policies and how to proceed in the very near future. Then the markets will stabilize and create a new “trend” (either up or down) when this happens. But the volatility should subside.

Above are the Morningstar “style” boxes showing returns for the size of U.S. stocks (Large, Mid & Small) and the categories showing a stock’s potential (Value, Core & Growth) for the past two months.

In January, all the categories were positive.

In February the only positive category was Large Cap Value stocks.

This tells me there was a lot of “risk off” in February. Only the largest, most conservative companies in the United States were positive (Large Value).

The “riskiest” category (Small Cap Growth) was the biggest loser of the month (down 5.72%). And all “growth” categories were well into the red.

Combine the knowledge of this chart with the one in the previous section, and one would assume that many investors are getting out of stocks and into bonds. One would assume that the “risk off” trade has been turned on.

We don’t know if this is the beginning of the end to one of the greatest “bull” (up) markets we have ever seen that started in April 2009 or just regular volatility.

Only time will tell!

Cool Charts Explained: S&P 500 Chart:

Above is the S&P 500 chart for the month of January showing how it lost -1.30%.

As you can see, the general trend was “up” until February 20th.

Then the momentum indicator, the MACD (orange arrow) went into a negative indicator (the red line above the black line). This coincided with the S&P closing below its 50 Day Moving Average (blue arrow).

Both of these indicators are “negative” for the markets.

Combine this with the volatility index (VIX) being above 18 since February 21st, and we have ourselves a market selloff.

The only “positive” sign we have seen is the large bounce on the last trading day of the month when the S&P moved up 1.59% in one day.

This could be the sign of a trend reversal or this could be due to “window dressing” when many investment firms artificially purchase stocks to show their investors for month end (and then sell them when the new month begins).

PLAN CONFIDENCE MODEL UPDATES:

FUTURE CONTRIBUTIONS:

Future contributions are money that is added to your plan with every paycheck.

We monitor the future contributions monthly and are looking to direct these monies into investments that we hope to be “on sale” for the next 30 days.

If we are correct, this will allow you to buy more shares in your portfolio.

This month we are advising that you use the following:

· (Bonds) US Convertibles

· (Stocks) Mid-Cap Growth

· (Stocks) Small-Cap Growth

“Future Contributions” are an optional feature in Plan Confidence, and you may or may not receive this advice.

Please discuss this with your advisor if you have any questions.

The exact amounts you should allocate depend on the model that you are using.

These categories may or may not be available in your plan. If they are not available in your plan, we will recommend the closest available asset class and label it as a “proxy”.

You can find all substitutions on your “Proxy Page” within your dashboard.

Please log into your Participant Dashboard to see the exact allocations you should be using as of today.

CURRENT ALLOCATIONS - STRATEGIC MODELS:

Current Allocations are the monies currently in your plan.

Making changes to this money is commonly known as a “rebalance”.

Our “Strategic Models” combine the benefits of asset allocation and “buy and hold” strategies. These models rebalance quarterly back to their risk “targets” and remain fully invested through all market cycles.

Our Strategic Models rebalance the first trading day of every quarter.

Strategic Models – No Changes

The exact amounts you should allocate depend on the model that you are using.

These categories may or may not be available in your plan. If they are not available in your plan, we will recommend the closest available asset class and label it as a “proxy”.

You can find all substitutions on your “Proxy Page” within your dashboard.

Please log into your Participant Dashboard to see the exact allocations you should be using as of the last rebalance advice.

CURRENT ALLOCATIONS - TACTICAL MODELS:

Current Allocations are the monies currently in your plan.

Making changes to this money is known as a “rebalance”.

Some plans have trading restrictions on how often you can rebalance the money in your plan. Be sure to know your plan’s restrictions before implementing any tactical strategies.

Our “Tactical Models” combine the benefits of asset allocation and “momentum investing” strategies.

These models rebalance periodically back to their risk “targets” and the targets can be changed at any time given the current market conditions.

These models may go through periods of time while holding larger amounts of cash than the Strategic Models.

Our Tactical Models may rebalance on any given day.

Please be sure to look for an email from support@planconfidence.com letting you know when to make changes.

Tactical Models – New Changes Today!

Be sure to login into your Participant Dashboard to check out the exact advice for your plan.

You should have received an email at 9am EST letting you know to log in to your Participant Dashboard to review the new advice.

The exact amounts you should allocate depend on the model that you are using.

These categories may or may not be available in your plan. If they are not available in your plan, we will recommend the closest available asset class and label it as a “proxy”.

You can find all substitutions on your “Proxy Page” within your dashboard.

Please log into your Participant Dashboard to see the exact allocations you should be using as of the last rebalance advice.

On February 27th we received new allocation advice from BlackRock regarding the models we use to mirror their allocations. Most of the changes in the BlackRock allocations have been with the bond categories.

Also, the MACD and 50 Day moving average have moved into “buy” indicators for the bond categories. So, our tactical models will be moving money out of cash and into bonds with the new allocations today.

However, the stock allocations will continue to remain in a 50% cash position due to the negative indicators we are monitoring on a daily basis.

Below are the changes that are being made to the Tactical Models versus the last change recommended on January 14th.

If you have any questions, please contact your adviser.

BONUS: Trade Rationale from BlackRock

As of 2/27/25 Key Takeaways:

Trim equities overweight from 4% to 3%, maintaining a clear preference for stocks over bonds while recalibrating our risk-on stance

Increase overweight to U.S. over international developed market (“DM”) stocks, favoring large, high-quality U.S. companies with relative earnings strength while fading the recent DM rally as regional forward earnings guidance cools

Reduce the bet against Chinese equities, mitigating exposure to potential positive surprises from tariff negotiations and aggressive Chinese government stimulus

Add to scarce assets with another 1% to gold - funded from fixed income, as catalysts for global trade disruption and geopolitical conflict appear ripe

Shorten duration positioning within U.S. treasuries, expecting to capture similar term premiums and yields but with less volatility

Trade Rationale:

Markets dodged a series of tape bombs with remarkable poise to start 2025 - shrugging off “hot” inflation, a more hawkish Fed, a historic single-day sell-off in AI related stocks, and a number of trade policy announcements. Despite this episodic volatility, many market participants continue to show a determined willingness to “buy the dip.” This steadfast but increasingly erratic market behavior underpins our decision to maintain a strategic overweight to risk assets while at the same time taking some chips off the table. We expect these themes of market consternation will likely remain triggers of turbulence for some time.

Our broader macro growth outlook continues to support an overweight equity stance, though we are moderating this position as markets have moved closer to pricing in our above-consensus forecasts. Corporate earnings delivered an impressive encore to 2024's performance, handily surpassing what were already elevated expectations, but our earnings signals based on analyst expectations for 2025 have cooled considerably. This convergence, coupled with the recent frequency of earnings downgrades over upgrades, suggests a potentially bumpier ride ahead and increased vulnerability to disappointments.

“Tariff” has become a boardroom buzzword again (with mentions on earnings calls exceeding Trump 1.0-era levels), and our analysis suggests tariff increases could impact corporate margins and disrupt spending plans at least moderately. But we’d also note sentiment regarding tariffs (which remain highly uncertain as-is) has become excessively bearish – meaning the pain trade for any surprise could be to the upside.

Our preference for U.S. over DM challenges two increasingly fashionable narratives: that leading U.S. tech stocks represent an overcrowded trade, and that DM stocks offer contrarian value. A closer look at fund positioning and manager survey data reveals the opposite: mega-cap U.S. tech leaders are under-owned relative to historical patterns, while DM stocks have become a consensus long idea. While we added to international DM stocks in November and they have outperformed US stocks to start the year (benefitting from improved earnings and a lull in U.S. dollar strength), we think the relative momentum could stall out in the weeks ahead. Our DM earnings signals have since softened, and in our view the European economy remains meaningfully behind in AI infrastructure buildout and will likely continue to face challenging geopolitical issues in 2025.

This information should not be relied upon as investment advice, research, or a recommendation by BlackRock regarding (i) the funds, (ii) the use or suitability of the model portfolios or (iii) any security in particular. Only an investor and their financial professional know enough about their circumstances to make an investment decision.

This update has been written by Kevin T Clark, RF™.

All opinions expressed are those of the author and not that of Plan Confidence Corporation nor any other firm or individual.

Kevin T Clark, RF™ is the CEO and Co-founder of Plan Confidence Corporation.

Kevin is an “ERISA Nerd” and one of only a hundred(ish) Dalbar certified Registered Fiduciaries (RF™) in the United States.

He has been helping hard working Americans invest their money since 1997!

Plan Confidence Corporation is an SEC registered “internet only” investment firm specializing in providing advice to hard-working Americans investing in their employer’s retirement plans (401k, 403b, TSP, etc).

They have created proprietary software so hard-working Americans can receive professional, ongoing advice on their employer’s retirement plan from an adviser of their choosing!

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