The Confident Chronicles: January 2, 2025
I would like to wish you and all your loved ones a very happy new year!
My wish is that 2025 brings you health, wealth and happiness like you have never seen before.
The end of a year is a great time to reflect and figure out what went well and what could have been better. Then many of us make resolutions of things we are going to change. Things we are going to eliminate that have been holding us back. As well as a resolve to incorporate new habits that will make us better.
The problem with resolutions is they normally don’t last into February.
If you don’t believe me, go to your local gym this morning. It will be packed with those that have new year’s resolutions of working out more.
Then check out the gym on February 1st and see if the gym is still packed.
It will not be.
So, instead of making “resolutions”, we need to make a written plan. Then break that plan down into actionable steps and schedule those steps into our calendars.
Using the gym example, we need to write down, “I will go to the gym four days a week, each and every week”. Then we need to open our calendars and schedule the days and times we will be at the gym.
Then we need to do it!
The same goes with your finances.
Maybe you want to save more in your 401(k) this year.
So, write it down. How much more do you want to contribute? Figure out the number and then adjust the percentage of money you contribute with each paycheck.
It’s really that easy.
And it’s effective, as small increases in your investments can make a big difference over the course of time.
So, write it down and then make it happen.
Don’t make resolutions, make written plans instead.
At Plan Confidence, we don’t have any resolutions for the year.
But we do have a plan on how we can make our service more valuable to those relying on us to provide professional, ongoing advice for their retirement plans.
We have reflected on 2024 and seen where we could have done things better and seen where we had great success.
Due to our reflection, we will be making changes to our Tactical Models in 2025 (see Tactical section below) while continuing the proven process of our Strategic Models.
We are committed to providing every hard-working American with professional, ongoing advice from an adviser of their choosing.
And we are looking to make the service better every year.
We know that a key to a successful retirement is having confidence in the decisions you make with your money while you are working and investing.
We know that small changes over time can make a huge difference!
-Kevin T Clark, RF™
CEO & ERISA Nerd
Market Returns:
Even though the last few weeks of the markets were volatile and negative, the markets ended the year on a very positive note.
The S&P 500, which is the index we use as an overall proxy for the US Market, was up over 25%.
The NASDAQ, the index we use to track the technology section of the economy, was also up over 25% for the year. This is a change of trends from the past several years when the NASDAQ far out paced the gains of the S&P 500.
And the Mutual Fund PIMCO Total Return, the fund we use as a proxy for the Intermediate US Bond market as it is in many 401(k) plans, was up just under 3% for 2024.
Cool Charts Explained: Style
Above is the Morningstar Style Boxes chart for the year 2024.
All styles (Value, Core and Growth) were positive for the year, as well as all sizes of stocks (Small, Mid and Large).
Growth and Core style were the main winners as they outpaced the Value style of investments. However, there was not any dominance in any one of the style boxes as they were all up double digits.
I interpret this chart as if investors wanted cautious growth last year.
Investors were looking for growth, but mainly in large, well-established companies. They were not overvaluing small companies which have the potential for outsized returns.
We will see if that trend continues into 2025.
Cool Charts Explained: S&P 500 Chart:
The above S&P 500 chart tells me that there was a lot of volatility in the last month of the year. We have seen the S&P fall below its 50 Day Moving Average (orange arrow). This is a negative trend for the market and can cause some panicked selling if it does not rise above it in the very near future.
We have also seen the MACD (moving average convergence/divergence) go into a negative trend (green arrow). This average is quick to move as it shows short term momentum. When the red line is above the black line, it shows more selling momentum than buying, which is not good for the price of stocks.
Even though both indicators are negative heading into the new year, I am not too concerned (yet).
As December is not the best month to get a direction of the market due to the Christmas and New Year’s holidays. Many traders take time off and the volume of trading is low. This means that it doesn’t take a lot of money (in either direction) to dramatically move the market.
So, as we hit the “reset” button for 2025, I will be keeping an eye on both of these trends and see if they continue or reverse course.
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”.
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:
· Long Government
· Small Value
· Utilities
“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 rebalanced as of today!
Below are the allocations for all the Strategic Models and the differences between the 4th quarter rebalance and today’s.
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.
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.
The tactical models have been updated today and are fully invested.
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.
Please log into your Participant Dashboard to see the exact allocations you should be using as of today.
TACTICAL MODEL UPDATE:
In 2024 the markets went through extreme volatility like we have not seen in the recent past. There were many months when the first week of the market was extremely negative, only to be followed by three weeks of positive gains.
This “whipsaw” effect on the markets wreaked havoc on our Tactical models.
Since we are giving advice to 401(k) and 403(b) participants, we have always been concerned about short term trading restrictions on many plans. So, we always had a policy of “holding” our advice for 30 days after recommending changes.
Due to this 30-day hold, our tactical models did not perform well as there were many times where “sell” signals were implemented at the beginning of the month, only to miss the three weeks of positive returns.
So, we have made changes to how we will be running the Tactical Models moving forward. We will no longer be implementing a 30-day restriction after recommending changes. Our advice will be true “tactical” advice.
This means that there could be more frequent trading and not suitable for plans with 30-day (or longer) trading restrictions. This could cause confusion or frustration by your clients as every plan sets their own policies on how frequently your clients can trade.
Our Tactical Models may best be suited for those that have self-directed brokerage windows, Individual K plans or plans without short term trading policies.
Please let me know if you have any questions or comments about how we are looking to enhance the Tactical Models for 2025.
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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