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Q3 2024 Plan Performance

By Constantine Mulligan, Director of Investments Partner, Cerity Partners LLC

Equity and fixed income markets delivered positive total returns to finish the quarter, and the Plan’s investments performed as expected, aligning with broader asset class performance for each fund. July's unexpectedly light CPI report triggered a sharp rotation into previously overlooked equity segments, such as small-cap and real estate stocks, though most equity sectors were positive overall. As anticipated, rate cuts materialized, shorter-term rates dropped further, and fixed income returns were generally positive to the tune of mid-single digits.

The Plan’s American Funds target date funds—well-diversified portfolios based on approximate retirement dates—also posted gains for the quarter. Notably, funds with vintages closer to retirement outperformed their respective peer groups. These target date funds continue to demonstrate strong long-term performance, supported by competitive returns and low investment fees, providing a solid experience for participants.

The JPMorgan Equity Income Fund remains on the Watch List this quarter following the retirement of lead portfolio manager Clare Hart. While the transition to new managers has been smooth and well-planned, ongoing monitoring will continue for a few more quarters. To date, there have been no significant concerns regarding the fund’s management transition.

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.

3rd Quarter 2024 Economic and Market Recap

Inflation resumed its downward trajectory after a brief increase earlier in the year. The June Consumer Price Index (CPI) showed the first negative month-over-month result since May 2020, leading to investor optimism about disinflation. Year-over-year inflation continued to decline, reaching 2.5% by August, driven by decreasing energy prices and durable goods deflation. However, inflation in shelter costs remains persistently high, with a 5.2% rise over the past year, accounting for over 70% of core inflation. Market-based measures suggest rents are softening, but official shelter inflation metrics have yet to reflect this change. With core Personal Consumption Expenditures (PCE) inflation showing monthly increases of just 0.1% to 0.2%, the Federal Reserve's 2% target appears attainable soon.

The labor market continues to grow, though at a slower pace, with 142,000 new jobs added in August. The three-month average job growth of 116,000, falling into the 34th percentile of historical data, suggests the labor market is cooling but remains healthy. The unemployment rate has been steadily rising from its 3.4% low in April 2022, and wage growth has slowed from nearly 6%. One factor contributing to higher unemployment is the influx of new entrants and reentrants into the workforce, including immigrants, which is crucial for long-term economic expansion as domestic demographics weaken. Reduced employer demand is another factor, with job openings declining. Companies are not undergoing large-scale layoffs but are slowing hiring as they adjust to their new workforces following the rapid labor market recovery after the COVID-19 pandemic. This has allowed for a reduction in wage pressures without triggering significant job losses or a vicious cycle between unemployment and consumption.

With inflation easing, the Federal Reserve took proactive steps to prevent a labor market downturn from spiraling. In September, the Fed cut interest rates for the first time in over four years, ending its "pause" and starting a cycle of gradual rate reductions. The Federal Open Market Committee (FOMC) opted for a "jumbo" 50 basis point (bps) rate cut, which Fed Chair Jerome Powell framed as a "recalibration" rather than a response to a crisis. Powell emphasized that the Fed is not rushing to reach a neutral rate, despite market expectations for further cuts.

The Fed's "dot plot" projections indicated a moderate pace of additional rate cuts, with another 50 bps expected by the end of the year and 100 bps in 2025, leading to a terminal rate of 2.9% in 2026. Although financial markets initially priced in a faster pace of rate cuts, they began aligning more closely with the Fed's communications as the quarter progressed.

July's unexpectedly low CPI report spurred a rotation into previously undervalued sectors, such as small-cap and real estate stocks. Investors anticipated policy easing without an associated crisis, leading to gains in cyclical and interest rate-sensitive stocks. The Russell 2000 Index of small-cap stocks rose by 10% in July, while the Nasdaq-100 Index® of technology stocks declined by about 2%. As July transitioned to August, investor concerns shifted from inflation to the labor market, resulting in increased market volatility. Japanese markets were also affected by a surprise rate hike by the Bank of Japan, which caused a sell-off in Japanese equities and briefly shook U.S. markets.

Despite these fluctuations, small-cap stocks held onto their gains through the end of the quarter, while defensive sectors like consumer staples and interest rate-sensitive sectors such as real estate emerged as leaders.

Even with market volatility, corporate earnings for the S&P 500 remained solid, with year-over-year revenue growth of 5% and earnings growth exceeding 11%, driven by expanding profit margins. While technology led with 20% growth, other sectors like consumer discretionary, health care, financials, and utilities also saw double-digit earnings growth. Smaller-cap companies, however, struggled, with shrinking profit margins resulting in a 15% earnings contraction in Q2 2024. Nevertheless, expectations for an earnings recovery in small caps remain for Q4 2024 and 2025.

The 10-year U.S. Treasury yield (a common barometer for fixed income markets) declined throughout the quarter, falling to 3.60% before ending at 3.80%. Corporate credit spreads remained relatively tight, reflecting a positive outlook for credit fundamentals. High-yield spreads also performed well, particularly among higher-quality bonds.

The 2024 presidential election added to investor uncertainty. President Biden’s decision to withdraw from the race and endorse Vice President Kamala Harris heightened unpredictability. However, historical data shows little correlation between presidential elections and stock market performance. Election dynamics may influence day-to-day volatility in Q4, but financial market reactions to their results don’t tend to be overly extreme and usually take a backseat to underlying economic conditions.

September 2024 Fund Performance Chart

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Invest Early and Often!

Why You Should Invest in Your Vista 401(k) Plan Starting at a Young Age

Investing in a Vista 401(k) plan from a young age is one of the smartest financial decisions you can make. Many young adults overlook this crucial aspect of financial planning, often thinking retirement is far off in the future. However, starting early can yield significant benefits, ensuring you are well-prepared for the future. Here are several compelling reasons why you should prioritize your 401(k) investment.

1. The Power of Compounding

One of the most significant advantages of starting your Vista 401(k) contributions early is the power of compound growth. Compounding allows your investment returns to generate their own returns over time. When you contribute to your Vista 401(k), you not only grow your initial investment but also any gains made over the years. For example, if you start investing at age 25, your money has more time to grow compared to starting at age 35 or later. Even small contributions could grow into substantial sums over decades.

2. Lower Stress and Higher Security

Starting your retirement savings early means you can afford to contribute smaller amounts over a longer period, alleviating financial stress as you approach retirement. If you wait until later in life, you may need to save significantly more each month to catch up, which can be a daunting task. Early investment allows you to build a financial cushion, leading to greater peace of mind and security in your later years.

3. Tax Advantages

401(k) plans come with tax benefits that can help you save money. Contributions are often made pre-tax, which reduces your taxable income for the year. This could put you in a lower tax bracket, resulting in immediate tax savings. Additionally, the money in your Vista 401(k) grows tax-deferred, meaning you won’t pay taxes on any investment gains until you withdraw the funds in retirement. This allows your money to grow faster than it would in a taxable account.

4. Creating Good Financial Habits

Starting to invest in your Vista 401(k) at a young age helps you develop disciplined saving habits. It encourages you to prioritize your future and can instill a broader sense of financial responsibility. Regular contributions become a part of your budget, teaching you the importance of saving and investing. These habits can extend to other areas of your financial life, setting you up for overall financial success.

5. Preparing for an Uncertain Future

Life is unpredictable, and starting your Vista 401(k) early provides a safety net for unforeseen circumstances. Whether it’s job loss, medical emergencies, or economic downturns, having a solid retirement plan gives you options and stability. By building your retirement savings early, you create a buffer that can help you weather financial storms and maintain your quality of life.

6. Increased Financial Literacy

When you engage with your Vista 401(k) plan, you become more familiar with investment concepts, asset allocation, and market trends. This knowledge empowers you to make informed decisions about your money and encourages you to explore other investment opportunities. Understanding your retirement options will lead to smarter financial choices throughout your life.

7. Investment Assistance

When you open a Vista 401(k) account you automatically have access to Cerity Partners, a registered investment advisory firm available at no extra cost to the participant. Simply dial (866)-325-1278 and ask to speak to a Cerity investment advisor. They will guide you through the process and assist you on your retirement journey.

Conclusion

Investing in your Vista 401(k) at a young age is a wise financial move and a step towards securing your future. The benefits of compounding, tax advantages, and the development of good financial habits all contribute to a more comfortable retirement. By prioritizing your Vista 401(k) contributions now, you’re not only investing in your future self but also setting the foundation for a lifetime of financial security. Don’t wait—start investing in your Vista 401(k) today.

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.

Why Investors Should Stay Calm Before a Presidential Election

The period leading up to a presidential election is often fraught with uncertainty, and it’s easy for investors to succumb to panic. However, maintaining a level-headed approach during this time can be crucial for long-term investment success. There are several compelling reasons why investors should resist the urge to react emotionally and instead focus on maintaining a strategic perspective.

Historical Context

Historically, the stock market has shown resilience during election years. According to various studies, the average stock market performance in election years has often been positive. For instance, the S&P 500 index has tended to rise before and after elections, regardless of the party that wins. While past performance is not a guarantee of future results, it does indicate that markets are capable of weathering political transitions. Recognizing this historical trend can help investors avoid making hasty decisions based on short-term fluctuations.

Market Fundamentals Over Political Events

Investors often overlook that the stock market is driven by fundamental factors such as corporate earnings, economic indicators, and consumer confidence, rather than solely political events. While elections can create volatility, they are unlikely to alter the underlying fundamentals of the economy significantly. Companies still need to perform well to maintain their stock prices, and this fundamental reality remains intact, regardless of who occupies the Oval Office. Focusing on mutual funds made up of companies with strong fundamentals can provide a sense of security and encourage investors to stay the course.

The Role of Diversification

Diversification remains one of the most effective strategies to mitigate risk. By spreading investments across various asset classes, sectors, and geographical regions, investors can cushion their portfolios against the volatility that often accompanies election seasons. A well-diversified portfolio is less likely to be adversely affected by political developments, allowing investors to maintain their long-term strategies without overreacting to election-related news.

Long-Term Perspective

Successful investing is inherently a long-term endeavor. While elections can cause short-term market fluctuations, the real value of investments is realized over years, if not decades. Adopting a long-term perspective encourages investors to look beyond temporary political uncertainties and focus on their overall financial goals. By doing so, they can avoid the common pitfall of buying high during moments of excitement or selling low in a panic.

Behavioral Finance Insights

Understanding behavioral finance can also help investors manage their reactions to election-related anxiety. Cognitive biases, such as loss aversion and overreaction to news, can lead investors to make poor decisions. By recognizing these biases, investors can take a step back, assess their strategies, and make rational choices rather than emotional ones. Establishing a disciplined investment plan, including regular rebalancing and setting clear goals, can further guard against the urge to panic.

Conclusion

While presidential elections can create a climate of uncertainty, investors should remain calm and focused on their long-term strategies. By considering historical trends, understanding market fundamentals, maintaining diversification, and acknowledging behavioral finance principles, investors can navigate the election season with confidence. The key to investment success lies not in reacting to short-term volatility but in staying committed to a well-thought-out plan. In a landscape of uncertainty, patience and rational decision-making are invaluable.

If you wish to discuss these matters in greater detail, please contact Cerity Partners, your registered investment advisory firm, at (866) 325-1278.

The Importance of Periodically Reviewing Your Vista 401(k) Account

Your Vista 401(k) account can be a powerful tool for retirement savings. It offers tax advantages and the potential for long-term growth. However, simply enrolling in your Vista 401(k) and contributing to it, without further review, may not be wise. Periodic reviews of your account are essential to ensure that you are on track to meet your retirement goals. Here’s why these reviews are helpful.

Assessing Investment Performance

The financial markets are inherently volatile, and the investments within your Vista 401(k) account can fluctuate significantly over time. By reviewing your account regularly, you can assess how your investments are performing relative to your goals and the overall market. Are your funds underperforming? Are there better options available? A periodic review allows you to make informed decisions about whether to adjust your investment strategy, reallocate funds, or switch to different investment options that align better with your risk tolerance and retirement timeline.

Rebalancing Your Portfolio

As the value of different investments changes, your portfolio may drift away from your intended asset allocation. For example, if a particular stock or sector performs exceptionally well, it may take up a larger portion of your portfolio than originally planned. This can increase your exposure to risk, potentially jeopardizing your retirement savings. Regularly reviewing your Vista 401(k) account enables you to rebalance your portfolio, ensuring that it remains aligned with your financial goals and risk appetite.

Adapting to Life Changes

Life is full of changes—marriage, children, career advancements, or even health issues—that can significantly impact your financial situation. Each of these milestones can warrant a reassessment of your retirement strategy. For example, if you have a child, you may want to increase your contributions to your Vista 401(k) account to prepare for future expenses. Or if you just joined the Vista 401(k) plan, you may wish to roll over other retirement plans into your Vista 401(k) account. A periodic review helps you stay agile and adjust your retirement savings plan accordingly.

Evaluating Fees and Expenses

The fees associated with your Vista 401(k) account investments differ from fund to fund, with some fees being higher than others. These fees may include administrative charges, investment management fees, and fund expense ratios. By reviewing your account and its associated fees regularly, you can evaluate whether you are comfortable with the fees or wish to switch to lower-cost investment options. Understanding and minimizing these costs can significantly enhance your long-term savings.

Staying Informed About Plan Changes

401(k) plans are subject to changes based on employer policies, plan providers, and legislative updates. Regular reviews keep you informed about any modifications that could affect your contributions or investment options. Staying updated allows you to take full advantage of your plan’s offerings and make necessary adjustments to your savings strategy. For example, you may wish to contribute to a ROTH 401(k) Plan, which will be offered starting in 2025

Reinforcing Retirement Goals

Finally, periodic reviews serve as a reminder of your long-term retirement goals. Setting benchmarks and regularly revisiting them can help keep you motivated and focused on your savings strategy. Whether it’s aiming for a specific retirement age, a target savings amount, or a desired lifestyle, these reviews allow you to assess your progress and make changes if necessary.

Cerity Partners

Cerity Partners is a registered investment advisory firm that is available at no additional cost to you, the participant. It is as simple as calling (866) 325-1278 and asking to speak to a Cerity representative. They can help you navigate your investment options and make certain you are properly invested.

Conclusion

Periodically reviewing your Vista 401(k) account is a critical component of effective retirement planning. By assessing investment performance, rebalancing your portfolio, adapting to life changes, evaluating fees, staying informed, and reinforcing your goals, you can ensure that you are on the right path toward a secure and comfortable retirement. Make it a habit to schedule these reviews at least once a year and take proactive steps to maximize the potential of your retirement savings.

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 use this form to make any necessary changes and call us at (866) 325-1278 if you have any questions. You may also visit Vista401k.com to make changes.

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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.