Q1 2025 Plan Performance
By Constantine Mulligan, Director of Investments Partner, Cerity Partners LLC
A combination of question marks on fiscal, monetary, immigration, and trade policy drove increasing volatility in financial markets. Despite inflation fears, U.S. Treasury yields peaked in early January before rolling over and ultimately settling near the middle of a multiyear trading range. Investors also began to question the indomitable status of the Magnificent 7 companies and their lofty growth expectations. A re-rating of valuations for this handful of stocks dragged concentrated large cap indexes down into correction territory after reaching all-time highs in February. The pain was mostly limited to the tech giants’ respective sectors, while seven of the other eleven S&P sectors were up in the quarter. Money that flowed out of the Magnificent 7 began to find a curious new home in international equities.
Despite the growing threat of tariffs looming over their highly trade-dependent economies, enthusiasm about supportive fiscal and monetary policy as well as cheap valuations drove a wave of inflows into the previously unloved markets. With a strong reversal of recent U.S. dollar strength as an added tailwind, the MSCI EAFE Index’s gain of 6.9% in the first quarter was its best relative quarter against the S&P 500 in over 20 years.
While many U.S. equity strategies experienced negative returns, fixed income returns showed their strength and acted as a ballast of sorts to traditional equity in generating a positive return for the quarter. The funds included in the Plan participated in this resilience. Multi-asset portfolios, such as the Plan’s American Funds target-date funds, demonstrated a tail of two extremes, as the more conservative vintages protected investors well while the more aggressive versions were hit by the equity sell off. Over the long run, these funds continue to display peer-leading performance, driven by a combination of higher returns and low fees.
The JPMorgan Equity Income Fund was on the Watch List following the retirement of its lead portfolio manager, Clare Hart. The transition to new management has been executed smoothly, with a carefully planned handoff ensuring continuity in the fund's strategy. At this point, our analyst team is confident in the portfolio team going forward and has removed the Watch List status in favor of a Normal rating.
Overall, the Plan’s diversified investment approach is well balanced across market cap, region, and sector. Despite the poor results that capital markets experienced this past quarter, the Plan remains well positioned for its participants in offering the necessary investments to reach their desired outcomes.
FOR OUR CLIENTS WHO WISH TO TAKE A DEEPER DIVE, WE HAVE PROVIDED THE FOLLOWING ECONOMIC AND MARKET COMMENTARY. THIS WILL PROVIDE AN EXPLANATION OF THE OVERALL MACRO AND MICRO ECONOMIC FACTORS INFLUENCING THE MARKETS AND, IN TURN, YOUR VISTA 401(K) ACCOUNT. IF YOU HAVE ANY QUESTIONS OR WISH TO DISCUSS THESE MATTERS IN GREATER DETAIL, PLEASE CONTACT US AT (866) 325-1278 OR E-MAIL US AT 401K@VISTA401K.COM.
1st Quarter 2025 Economic and Market Recap
The first quarter of 2025 was characterized by heightened political and economic uncertainty, particularly due to the return of President Trump and his administration's renewed protectionist trade stance. Financial markets reacted to an array of policy shifts, especially around tariffs and immigration that significantly influenced investor sentiment, economic forecasts, and asset performance.
A central theme during the quarter was policy turbulence from Washington. President Trump’s first 100 days saw frequent and abrupt announcements of tariff plans, including an April 2 declaration dubbed “Liberation Day,” which promised sweeping reciprocal and sectoral tariffs. While the specifics remain unclear, the threat of deglobalization rattled consumers and businesses alike.
The uncertainty surrounding these policies weighed heavily on sentiment, despite resilient underlying fundamentals. Consumers, traditionally a key growth engine, began to show signs of wavering confidence. At the same time, businesses grew cautious in the face of unclear regulatory direction and potential cost pressures.
Despite the administration’s efforts to restructure parts of the federal workforce and the looming threat of mass deportations, the labor market remained balanced. The economy slowed from the robust 2.8% growth recorded in 2024, but job and wage data still pointed to an economy with underlying strength.
However, tariff fears and policy ambiguity kept the Federal Reserve from moving ahead with its expected rate cuts, contributing further to market instability. The economic impact of front-loaded purchases ahead of tariff implementation deadlines, along with anticipated drops in government employment and immigration-driven labor supply, are expected to weigh on GDP in early 2025.
U.S. equities experienced a meaningful correction mid-quarter—largely due to doubts over continued earnings growth for the Magnificent 7 tech stocks, which had previously powered the market. As these names fell out of favor, capital rotated into other sectors and geographies.
International markets, particularly developed economies in Europe and Japan, outperformed. This was driven by attractive valuations, weaker currencies, and expanding fiscal policy. Notably, the MSCI EAFE Index posted its strongest relative performance versus the S&P 500 in over two decades, supported by both local policy measures and a declining U.S. dollar.
Looking ahead, global economic momentum remains intact, albeit increasingly fragile. The U.S. is still expected to weather the storm better than most, but a cloud of uncertainty looms as key policy questions remain unresolved. The biggest risk on the horizon is that newly proposed tariffs will function as de facto tax increases. Businesses may try to pass higher input costs to consumers, raising inflation in the short term. Over time, however, those same tariffs could reduce profitability and consumer demand—raising the specter of stagflation (low growth and high inflation). The term has re-entered economic discussions and could be a key theme in 2025, especially if consumer behavior weakens in the face of both rising prices and growing political unease.
Countries around the world are responding with varying approaches. For example, in Europe, Germany is making a significant shift away from austerity, with plans to increase spending on defense and infrastructure. This fiscal boost, alongside continued accommodative monetary policy from the European Central Bank, should help buffer growth concerns. In emerging market China, the Chinese government is using targeted fiscal and monetary tools to stabilize its economy. However, demographic headwinds and the high U.S. tariff burden make achieving its 5% growth target challenging.
In the U.S., the Federal Reserve has delayed planned interest rate cuts due to sticky inflation and tariff uncertainty. Chair Powell has labeled the inflation spike as "transitory," but markets now expect only two rate cuts in 2025, likely starting after the June FOMC meeting.
The yield curve has returned to a more traditional upward slope. Short-term rates are expected to fall later this year as the Fed resumes easing, while long-term yields may stay flat or rise slightly due to growing U.S. budget deficits. High-yield bond spreads widened modestly during the quarter, reflecting growing recession concerns. Given the narrow risk premium and macro uncertainty, the asset class remains relatively expensive.
U.S. stocks corrected sharply in the first quarter, largely due to waning enthusiasm for mega-cap tech and AI stocks. While growth prospects remain, earnings expectations for 2025 are likely too optimistic given the cost of tariffs. Analysts currently forecast 10% earnings growth, though that may be revised downward.
Developed international equities, especially in Europe and Japan, outperformed U.S. markets thanks to improved fiscal outlooks and more reasonable valuations. Europe’s newfound fiscal flexibility, driven by increased defense spending, could mark a turning point for growth. However, continued uncertainty over global trade and tariffs suggests a cautious stance remains warranted.
In China, stimulus measures are helping stabilize markets, but structural issues such as demographics and lack of economic liberalization continue to limit long-term potential.
The first quarter of 2025 delivered a potent reminder of how policy uncertainty, especially around trade, can quickly shift financial market narratives. While the U.S. economy remains resilient, political decisions are beginning to weigh on business confidence and market performance. Equity volatility, sector rotation, and international market outperformance underscore the importance of diversification across asset classes and geographies. Committees should remain focused on long-term objectives, but remain alert to short-term risks, especially around inflation, policy delays, and earnings revisions.
March 2025 Fund Performance Chart
Investing in Your 401(k) During Trying Economic Times
Economic downturns, market volatility, and uncertain financial conditions can make it challenging to stay focused on long-term financial goals like saving for retirement. Still, maintaining a steady investment strategy—even during challenging times—can offer long-term advantages. While it may be tempting to pause or reduce your contributions, staying consistent with your savings plan, including your Vista 401(k), may help you stay on track for your future goals.
The Power of Dollar-Cost Averaging
One of the most effective strategies to navigate economic uncertainty is dollar-cost averaging. This technique involves investing a fixed amount of money at regular intervals, regardless of the market’s performance. In times of economic stress, stock prices can fluctuate, creating opportunities to buy at a lower cost. By sticking to a set contribution schedule—such as regular deposits to a retirement account—you’re purchasing investments at varying prices, which can lower your overall average purchase price over time. This method also helps reduce the temptation to time the market, which is notoriously difficult even for seasoned investors.
Time in the Market, Not Timing the Market
Market volatility can be unnerving, but history shows that markets tend to recover over time. Even during recessions or downturns, maintaining an investment strategy focused on the long term has often produced better outcomes than trying to predict short-term movements. For those investing for retirement, continuing contributions during market dips may offer opportunities to benefit from eventual recoveries. Avoiding reactive decisions—like selling investments during downturns—can help prevent locking in losses and missing out on future gains.
Reassess Your Asset Allocation
Periods of economic volatility may warrant a reevaluation of retirement account’s asset allocation. For example, if stock prices have seen large swings, you might consider whether a more balanced mix—including bonds or stable value funds—would better align with your current risk tolerance and time horizon. Younger investors may lean more heavily toward equities, while those closer to retirement often shift to more conservative holdings. Regularly reviewing and rebalancing your account can help keep your investments aligned with your financial goals.
Stay the Course
The most important reminder during economic uncertainty is not to let fear drive investment decisions. Patience and discipline are critical for long-term success. Retirement planning is a long-term endeavor, and staying consistent—even when the market is shaky—can pay off over time. If your financial situation allows, continuing your retirement contributions, avoiding emotional reactions to short-term volatility, and focusing on your long-term objectives can help you stay on track.
Trying economic times present challenges—but also opportunities. Staying committed to your goals and maintaining a long-term perspective can help you build toward a stronger financial future.
Contact Us
Invest in yourself today and achieve financial peace tomorrow!
Get started today by visiting Vista401k.com or calling us at (866) 325-1278.
Financial Wellness and Creating a Spending Plan
In today’s fast-paced world, maintaining financial wellness has never been more important. Financial wellness refers to a state where individuals meet their current and future financial obligations while also feeling in control of their money. It’s not just about how much money you have, but how you manage it. One of the most effective ways to ensure financial wellness is by creating a solid spending plan.
A spending plan, often referred to as a budget, is a strategic tool that helps individuals manage their income and expenses. It provides clarity on where your money is going and can help you make informed decisions that align with your financial goals. Whether you are saving for a major life event, trying to pay off debt, or simply want to ensure you're living within your means, a spending plan can be a game changer.
Step 1: Assess Your Income and Expenses
The first step in creating a spending plan is to analyze your income. This includes all sources of money you receive regularly, such as your salary, side gigs, investment income, or other streams. Once you’ve listed your income, it's time to track your expenses. This step involves recording both fixed and variable expenses.
Fixed expenses are those that remain consistent every month, such as rent or mortgage payments, car payments, and insurance premiums. Variable expenses, on the other hand, change from month to month and include utilities, groceries, transportation, and entertainment. Tracking your spending for a few weeks or months will give you a clear picture of where your money is going.
Step 2: Set Financial Goals
Before you start cutting expenses or allocating money to specific categories, it’s important to define your financial goals. These goals could range from short-term objectives, like saving for a vacation, to long-term goals such as retirement planning or building an emergency fund. Setting specific goals will help keep you motivated and focused on your financial wellness journey.
Step 3: Categorize Your Expenses
Once you have a clear understanding of your income and goals, the next step is categorizing your expenses. This step involves dividing your expenses into necessary categories, such as housing, transportation, food, savings, and discretionary spending. It’s crucial to ensure that you’re prioritizing essentials and that you’re allocating enough money toward your financial goals, such as savings or debt repayment.
Step 4: Create a Spending Limit for Each Category
Now that you have your categories, the next step is to set limits for each one. This is where discipline and self-control come in. If you find that you’re overspending in some areas, you may need to adjust other categories. For example, if you’re spending too much on dining out, you could allocate more money to savings or reduce discretionary spending. Spending limits should be periodically revisited and adjusted.
Conclusion
Creating a spending plan is a critical step toward achieving financial wellness. It empowers individuals to make conscious decisions about how their money is spent, ensuring that they are aligned with their long-term goals. By assessing income, tracking expenses, categorizing spending, and making adjustments, individuals can take control of their financial future and achieve greater peace of mind. Whether you're creating your first budget or refining an existing one, the key is consistency and mindful decision-making.
Maximizing Your 401(k): A Smart Investment Strategy for Your Future
For many people, contributing to a 401(k) account is one of the most effective ways to build wealth for retirement. As one of the most popular retirement savings plans in the United States, a 401(k) account offers tax advantages, making it a powerful tool for long-term financial growth. If you participate in the Vista 401(k) plan, contributing at a level that fits your budget and goals can help you take full advantage of these benefits. But what are the benefits of maximizing contributions, and what should you consider before setting your personal maximum?
What is the Vista 401(k) Plan?
The Vista 401(k) plan is the name of a 401(k) retirement plan sponsored by your school district employer. Through the plan, eligible employees can contribute a portion of their salary, pre-tax, and invest the contributions in a range of available investment options; any growth is tax-deferred until withdrawal. This structure can make it easier to build savings over time.
Why Contribute the Maximum Amount?
The maximum contribution limit for a 401(k) plan changes annually, typically set by the Internal Revenue Service (IRS). In 2025, the contribution limit is $23,500 for individuals under the age of 50, and $31,000 for those 50 or older, which includes a catch-up contribution of $7,500. While contributing the IRS maximum may not be feasible for everyone, determining and consistently contributing your own personal maximum—the highest amount that comfortably fits your financial situation—is an important step.
Benefits of the Vista 401(k) Plan
- Tax Benefits - One of the primary advantages of contributing to your Vista 401(k) account is the ability to defer taxes on the money you invest. This can reduce your current tax bill and allow your savings to grow without being taxed until you make withdrawals.
- Compound Growth -The earlier and more consistently you contribute, the more you can benefit from compound growth—where your investment earnings generate additional earnings over time.
- Retirement Security - Regular contributions to your 401(k) are a proactive way to prepare for retirement. Many Americans underestimate how much they’ll need to retire comfortably. Building your account steadily—even if you can't contribute the IRS maximum—can help reduce future financial stress.
Maximizing contributions to your 401(k) account is a smart long-term strategy for retirement savings. The tax benefits and compound growth all make it a powerful tool for retirement savings. While not everyone can contribute the IRS maximum each year, consistently investing your personal maximum based on your financial situation can help you build a more secure future. A disciplined approach—no matter the amount—can make a meaningful difference over time.
Nuts & Bolts: How to Invest Your DROP Funds
How to Invest DROP Funds in Your Vista 401(k) Account:
- Let the Florida Retirement System (FRS) know you would like to roll your DROP funds into your Vista 401(k) Account.
- FRS will provide the necessary form. Please complete that form and return it to FRS.
- Should you choose to roll your funds into the Vista 401(k) Plan, the Vista 401(k) Retirement Services Department sends a rollover form to you to complete and return to Retirement Services.
Note: If you do not have a Vista 401(k) Account, you need only set one up prior to retirement and fund it with at least one payroll contribution.
Why Roll Drop Funds into Your Vista 401(k) Account:
- Consolidation: Individuals often accumulate multiple retirement accounts over their career. Consolidating these accounts makes it easier to track performance, adjust asset allocation, and plan for your financial future. Consolidation not only streamlines your financial strategy but also provides a clearer picture of your overall retirement readiness.
- Tax Advantages: DROP funds are treated as income the year they are paid out to participants. If you do not place these funds in a tax-deferred account, the funds will be treated as income in that year. However, if you roll them into a tax-deferred plan like the Vista 401(k) Plan, taxes will be taken as you withdraw funds over the years. By then you may be in a lower tax bracket.
- Portability: Your DROP funds are portable. This means that should you choose to roll these funds out of your Vista 401(k) account, you can do so with no waiting period or penalty.
Please call us at (866) 325-1278 if you have any questions. You may also visit Vista401k.com to make changes.
Helpful Links
The material herein is provided for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. The material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations. Situations differ among individuals and you should not assume that these generalizations or information apply to you. Keep in mind that past performance is no guarantee of future performance, and investments involve the risk of loss of principal and earnings. Additionally, neither your employer nor the plan administrator nor FBMC is able to provide you with investment advice--if you would like specific investment advice, you should consult Cerity Partners or your own personal investment advisor.