Plan Confidence Software

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The Confident Chronicles: August 1, 2024

Cool Charts Explained:  Market Returns:

It looks like the summer rally lasted for about four weeks.

The month of July has been just as volatile as this whole year has.

The beginning of the month started out strong with the S&P 500 rising about 3.5% in the first two weeks.  Then it peaked around July 16th and started a decline of 4%, ending up almost where it started. 

It seems every day is being driven by the headlines that come out about inflation and a possible interest rate cut by the Fed before the election. 

Also, we are in the midst of “earnings season” (where companies report their 2nd quarter results and (most) provide an outlook for what they think the future looks like).

And the market reaction seems to be more concerned with their outlook than the results of the past quarter. 

Strong earnings and a weak outlook could move the stock market down. 

However, weak earnings and a strong outlook could move the market up!

So, in my (professional) guess is this roller coaster of a market is going to continue into August as well and until the election is over.

The rest of the charts in the Confident Chronicles supports this hypothesis. 

Starting the U.S. Market Barometer below. . .


The above “U.S. Market Barometer” chart shows that the markets have been very volatile for the past few months. 

Every category was down in April and then up in May.

However, June’s big winner (Large Growth stocks) was July’s biggest loser. 

What a frustrating and fast-moving market we have been dealing with all year!

And my guess is, this is what it’s going to be like with for a while.

This is why our Asset Allocation models use multiple categories for stocks and bonds.  The ability to find a consistent category with any direction for the past few months has been impossible.

So, be sure to pay attention to the emails letting you know to login to your Participant Dashboard and check out the new advice, especially if using the Semi-Tactical Models (which have been playing “defense” for some time now).

Please do not hesitate to reach out to your financial advisor if you have any questions about your asset allocation and if you should make any changes to your models, as it is my prediction that this volatility is what we are going to be dealing with for the rest of the year, and if you are uncomfortable with that, it could be time for changes.


Cool Charts Explained:  S&P 500 Chart:

From July 12th until July 17th, the Relative Strength Indicator (RSI), has been above 70. 

See the purple arrow above.

An RSI above 70 is a strong indicator that the S&P 500 is in an “overbought” status.  This is usually an indicator that the market will go through a short term “selloff” soon. 

And this proved to be true as the S&P 500 lost over 4% from July 17th to July 30th.

The green arrow above shows the price of the S&P 500 in relation to its 50 Day Moving Average (50 DMA). 

When the price remains above the 50 DMA, it’s a good sign of a positive market. 

When the price falls below the 50 DMA, it’s a negative indicator that a prolonged selloff could occur. 

On July 24th, the S&P 500 closed “even” with the 50 DMA.  And the following day it fell below.  On Friday, July 26 and Monday, July 29th the S&P was above the 50 DMA. 


And on Tuesday, June 30th, it went back to even. 

(I am currently writing this on July 31st and the S&P 500 is up 1.6% at noon EST.  So, it appears that we will start the month of August above the 50 DMA, which is a positive indicator).

We will see if August can keep the price above the 50 DMA, or if it will fall below it again.

And if it spends more than a few days below the 50 DMA, it will be a good predictor of a prolonged selloff that is starting.

Finally, if you look at the orange arrow above it shows that the market’s momentum is completely gone.

This is the Moving Average Convergence/Divergence (MACD) indicator. 

The MACD shows the “momentum” in the market. 

A red line above the black line is a negative indicator (like it has been since July 18th). 

Both MACD lines are trending downward.  This shows that the S&P 500 has lost its momentum.

So, heading into August, we have 2 negative indicators from the S&P 500 and one hovering just above turning negative (again).

This tells me that the market will need to see really strong earnings to regain it’s upward momentum. 

And since we are in the midst of “earnings season”, anything is possible!


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”. 

This would allow you to buy more shares in your portfolio. 

This month we are advising that you use the following:

·      High Yield Bond

·      Mid Cap Value

·      Small Cap Value

This is an optional feature in Plan Confidence and you may or may not receive Future Contribution 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.  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:

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.

 

There are currently no changes to the Strategic Models

The last update was on July 1, 2024

 

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

The categories we use may or may not be available in your plan. 

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

 

Our Strategic Models rebalanced on July 1st. 

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

 

There are currently no changes to the Tactical Models

The last update was on April 19, 2024

 

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. 

Also, be sure to keep our “push” notifications “on” if using our app.

 

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. 

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


Model Portfolio Rationale:

Plan Confidence relies on the research and model construction from BlackRock, Inc. (one of the largest asset managers in the world). 

We use their “Target Allocation ETF Multi-Manager” model and “deconstruct” their allocations back to their asset categories so we can program the Plan Confidence™ Software. 

We then map those categories as closely as we can to the available investment options that you have in your plan.  Below is an excerpt* of their most recent Market Review.  Please let us know if you would like the full report.


Market Review

“Amidst the usually sleepy dog days of summer, the block party in US stocks raged on, with broad market indices gushing to new record highs while stocks across the pond limped lower – a poetically well-timed flex of American independence. The rally was again fueled by a handful of giants in the tech sector, echoing a theme of top-heaviness that has become a staple in 2024's market narrative. Despite hints of easing inflation, renewed optimism of at least some Fed cuts later in the year, and now two consecutive months of falling rates, US small cap stocks have remained conspicuously off the invite list of the summer holiday rally.

Meanwhile, the broader US economic backdrop remained marinated in mixed signals. Unemployment remained historically subdued, but new job figures were again revised down and jobless claims have created a pattern of inching higher. Bond markets broadly rose, with longer-duration U.S. Treasuries standing out as the choice cuts, finding favor among quality-hungry investors while both


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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