Q4 2020 Plan Performance
By Constantine Mulligan, Director of Investments Partner, Cerity Partners LLC
My name is Constantine Mulligan, and I am pleased to take over the quarterly investment updates from Mr. Sheridan as he eases into retirement. Last fall, Cerity Partners was engaged to provide investment oversight for the Vista 401k Plan. I am proud to be a partner of Cerity Partners, serve on the firm’s internal investment committee, Director of Investments, and be part of a team of consultants that work closely with FBMC to ensure that the plan receives best-in-class investment advice. I look forward to getting to know the Vista 401(k) plan.
2020 – What a Ride!
We know financial markets can move sharply in one direction or the other, but no one could have anticipated what 2020 had in store for us. After hitting bear territory in March, when the country went into lockdown, stocks started a steady climb upward again, reaching new record highs by the third quarter.
The economy took us on a similar roller coaster ride. After a sharp third quarter rebound from the deep, pandemic-induced decline, the recovery momentum remained strong through the first half of the fourth quarter of 2020. However, the second wave of the virus, renewed business closures, and mobility restrictions caused the recovery to weaken towards the end of the year.
On the bond front, rates rose slightly during the fourth quarter. Additionally, stronger economic growth and inflation concerns led to a steepening of the yield curve. Returns on investment-grade corporate and municipal bonds remained positive for the quarter.
Vista 401(k) Plan Fund Performance
Overall, the investments in the plan have performed well over the long-term, with every fund falling in the top three quartiles of their respective peer group over a three, five, and ten year period, and the majority of them falling in the top half. In the shorter-term (one year) the T. Rowe Price Small Cap Stock fund and the American Funds 2010 Target Date Retirement Fund fell into the bottom quartile of their respective peer groups. This is almost entirely attributable to their larger-than-peers allocation to value-oriented stocks. Over the last several years, growth investing has far outperformed value and core stock investing. We view this underperformance as a cyclical, short-term, issue and recommend maintaining both investments. Finally, all index-based, passively managed, funds in the investment menu have continued to closely track their benchmark indices with low tracking error at a low cost.
We recommend no changes to the investment menu at this time.
2021 – Looking Forward
We remain optimistic about the year ahead. This outlook explores some of the things we’ll be watching throughout 2021 to help guide our investment strategy.
Slowing Recovery Picks Up Steam
Mass distribution of vaccines should allow the US to regain its lost output by the middle of 2021.
Hospital Capacity Utilization Rates
While the media tends to focus on the daily infection and hospitalization rates, government officials look to hospital capacity rates to guide their decisions about business closures and mobility restrictions. Overall, capacity shortages are not an immediate concern in most of the U.S.
Vaccines, Lockdowns and Fiscal Relief
The approval of several COVID-19 vaccines and their eventual mass distribution by the end of the first quarter should allow the economic recovery to continue. The impending delivery may embolden government officials to err on the side of caution in imposing lockdowns and business closures. However, the recently passed $900 billion fiscal relief package should help ease any economic pain inflicted in the first quarter, as well as additional promised relief from the new administration.
The Resilient Consumer
The speed of the rebound in the production sectors of the economy has helped fuel the U.S. recovery. Particularly impressive was the rebound in the services survey of U.S. purchasing and supply managers, including the travel, leisure, and hospitality industries. This positive showing may be a sign of the resilient U.S. consumer.
Will Inflation Raise Its Ugly Head?
Concern is growing that the economic rebound and aggressive fiscal and monetary policies will cause inflation to spike in 2021. While investors should expect cyclical price pressures in certain sectors, intense global competition should mitigate severe price pressures in the broader economy. Increased spending on productivity-enhancing capital equipment, especially technology, is key for maintaining the current low-inflation environment.
Supportive Congress and Federal Reserve
A combination of fiscal relief and easing monetary policy is needed to sustain individuals and businesses during the recovery.
Aid from Washington
Congress has learned that in a deep recessionary environment, it is better to provide fiscal support quickly and at a relatively high magnitude to stave off more permanent economic damage. In addition to the fiscal relief packages implemented earlier in the year, another $900 billion aid bill was enacted into law at the end of December, consisting largely of income replacement for consumers and assistance for businesses.
The Federal Reserve’s response has been equally dramatic. Its willingness to purchase other securities besides government and government agency bonds helped the country avoid a liquidity crisis in early 2020. At its last meeting, the Fed announced its intention to maintain its aggressive monetary policy until inflation moves past 2% for an extended time and the economy reaches full employment (roughly 3.5% unemployment). The current unemployment rate is around 6.5%. Given these targets, rates are not expected to increase until 2023 at the earliest. Of course, any sharp increase in inflation would warrant a re-examination of the Fed’s policies.
Global Economies Progressing at Different Speeds
The impact of the virus has varied by country, so too has the recovery.
The second wave of the virus and re-imposition of harsh lockdowns and mobility restrictions have placed more pressure on European economies compared to the U.S. The region’s greater reliance on the travel and leisure sectors will likely lead to a stunted economic recovery and perhaps a “double-dip” recession.
China Rebounds but Not Out of the Woods
Having been the first country affected by the virus and the first to reopen, China has virtually recaptured all its lost production going into 2021. However, the Chinese consumer has yet to return to previous spending levels. Lingering virus concerns have kept people from fully re-engaging.
If you have any questions or wish to discuss retirement planning please contact us at 866-325-1278.
December 2020 Fund Performance Chart
RESOLVE TO BUILD WEALTH
By Jim Matheu, Retirement Services Manager
Another year has come and gone. It seems like just yesterday that you were contemplating the start of 2020 and we were recommending that you evaluate your retirement plan. Many of you have diligently invested a portion of your salary in your Vista 401(k) account each pay period, year after year, and not withdrawn from your account. That places you in a strong position as you move toward retirement. However, there is always room for improvement. For those of you who do not have a Vista 401(k) retirement account, it is NEVER too late!
Once again, we recommend that you take this time to evaluate your retirement plan and determine if you have plotted the proper course.
OPEN AN ACCOUNT
If you do not have a Vista 401(k) account, it is time to make a change. Opening an account is a simple process. You can visit our website at vista401k.com and choose the “Open Account” icon at the top of the page. The website will lead you through the process. To print an enrollment form, click here https://www.vista401k.com/401k-plan/forms/ and select “Vista 401(k) Enrollment Form.” Once the form is complete you can fax it to us at (850) 425-8345 or mail it to us at: FBMC Benefits Management, P.O. Box 1878, Tallahassee, FL 32302-1878.
You can also open an account via the informational e-mails we send every month. If you scroll down to the bottom of these e-mails, you will see an abbreviated enrollment form. It can be filled out online, saved to your computer, and e-mailed to us at firstname.lastname@example.org.
If you open an account today, invest each pay period, and do not touch your investment, you are better positioning yourself to accumulate wealth over time. However, you must be disciplined and adhere to your investment goals. This is the only way your nest egg will grow and enable you to see and do things you only dreamed of while working.
INCREASE YOUR CONTRIBUTION
Although you already have a Vista 401(k) account, there may be room for improvement. Each year the IRS establishes parameters for investing in your 401(k) plan. In 2021, you can invest a maximum of $19,500 plus an additional $6,500 for individuals 50 years old or older. These are not small numbers, and few people have this type of disposable income. However, your goal should be to increase your investment to your own personal maximum. One way to do this is to increase your contribution every time you receive a pay increase. Another way is to analyze your spending habits. If you go out to lunch every day, consider packing a lunch a couple times a week or choosing less expensive restaurants. Perhaps you purchase coffee from a local coffee shop daily. If so, consider making a cup at home or drinking the coffee at your office. Then apply your savings to your Vista 401(k) account. If you do so and remain disciplined, your Vista 401(k) will, likely, better position you for financial freedom in your retirement years!
VISTA 401(k) INVESTMENT ADVICE
We are pleased to announce Vista 401(k)’s partnership with Cerity Partners, an independent investment advisory firm. Through the Retirement Services Department’s Help Desk, you can set up a one-on-one meeting with Cerity Partners' financial coaches. They are available to answer your questions and help you make sound Vista 401(k) retirement account decisions. This is an invaluable service that will strengthen your Vista 401(k) account—and this service is offered to you, the participant, at no additional cost!
Further, the 401(k) Investment Risk Profile tool allows you to analyze what type of investor you are, and it provides suggestions regarding the available investments that may best suit your needs. The Investment Risk Profile tool can be found here: https://www.vista401k.com/learning-center/401k-tools/investment-risk-profile/.
CONSOLIDATION OF ACCOUNTS
During an individual’s career, you may accumulate multiple retirement plan accounts from a variety of employers. These accounts can be difficult to track over the years. Further, old accounts will likely not be consistent with your current investment strategy. To avoid these issues, we recommend consolidating all old accounts into your Vista 401(k) account.
Current rules allow you to roll other qualified plans into your Vista 401(k) account. This includes 401(a), 401(k), 403(b), 457, and IRA plans. You can even roll your DROP money into your Vista 401(k) account. Consolidation will result in one retirement plan account and one investment strategy.
Please note that the Vista 401(k) is different from many other plans in that there are no sales charges or exchange fees.
CHANGE OF ADDRESS
While you are establishing a Vista 401(k) account or increasing your contribution in your Vista 401(k) account, please take a moment to make sure that we have your correct address on file. This is an extremely important housekeeping item. An incorrect address prevents us from providing essential information during the plan year. Therefore, please be proactive and update your address with your employer so that you can receive your statements and all other important communications from the Vista 401(k) Plan.
It is also important to stay current with your beneficiary designations. The birth of a child, marriage, divorce, and remarriage can change your beneficiary status quickly. If you have experienced any of these events, please review your account to make sure your beneficiary status is properly reflected. If you have not experienced any of the aforementioned events, we still recommend that you review your beneficiaries to make certain they appear as you wish.
If you have any questions or issues, please call the Retirement Services Department at 866-325-1278 or e-mail us at email@example.com.