Q1 2023 Plan Performance and Market Conditions
By Constantine Mulligan, Director of Investments Partner, Cerity Partners LLC
Vista 401(k) Plan Fund Performance
The positive closing of 2022 across capital markets continued into the first quarter of 2023, as traditional equity, and fixed income markets both experienced positive total returns when measured by broad benchmarks. On the equity side, there was a return to the growth style of investing that materially outperformed the value style, international equity markets slightly outperformed the US, and large caps were stronger than their small cap counterparts. Fixed income broadly was better, as the total return came close to 3% while overall interest rates were reined in, to an extent. Finally, many of the asset classes that are either directly or indirectly tied to inflation also generated positive total returns on the quarter.
The funds of the Plan continued to be competitive overall over the long-term on both an absolute and risk-adjusted basis, while continuing to come in at exceptionally low costs when compared to general peer averages. It is important to consistently monitor costs as they come directly out of investment returns of participants, so the lower the better especially when compared to similar peers.
The majority of Plan assets remain in the diversified target date offering (the American Funds Target Date Retire funds). They have routinely been one of the most competitive target date options from an absolute return perspective. These fund-of-fund strategies consist of all actively-managed funds, but are considered low cost all things considered. The funds have had some uncharacteristic underperformance over the last year or so, but nothing that would warrant any material concern.
The T. Rowe Price Blue Chip Growth fund has been on the watch list for an extended period of time due to management turnover issues, a concentrated portfolio and intermediate term underperformance. It will be removed from the investment menu on May 24th and will be replaced by JPMorgan Large Cap Growth fund. The JPMorgan fund has exhibited a tenured management team, successful philosophy, repeatable process, and strong performance.
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 2023 Economic and Market Recap
The highly anticipated recession has so far failed to materialize. The 2.6% GDP growth in the fourth quarter of 2022 has been followed by first quarter growth in 2023 that will likely come in around 3.0%. The US consumer continues to spend at a strong level, due to a strong labor market, increasing wage growth, and elevated consumer confidence. Businesses became somewhat more reticent during the quarter as higher interest rates and tougher credit conditions have dented the confidence of purchasing managers and CEOs. A notable trend in the US economy is the declining housing sector, which had fallen into recession last year and is now showing distinct signs of bottoming as we head into the second quarter.
Overseas, the European economy has been similarly resilient in defying a recession due to aggressive monetary tightening and sharply higher commodity prices. Some of this surprising first quarter strength can be viewed as fortuitous as the mild winter weather appears to have forestalled the depletion of natural gas supplies. However, the decline in energy prices due to continued production and distribution within OPEC as well as non- OPEC countries was also a contributing factor. The end of ill-advised “zero-COVID” policies in China helped revive an important source of demand within Asia and from some European economies. Eliminating extreme mobility restrictions also boosted production in the Chinese manufacturing sector, which helped finally bring global supply chain operations back to pre-pandemic levels.
When breaking down first quarter equity performance, there was distinct outperformance of growth stocks compared to value in the U.S. large cap space. The breadth of the quarter’s price appreciation was rather narrow as the communication services, information technology and consumer discretionary sectors garnered almost all the gains. Markets moved toward defensive growth stocks and stocks that benefit from lower rates and became more circumspect around cyclicals. Weakness in the energy sector, due to lower commodity prices, and in financial services, due to the banking turmoil, added to this rather large performance differential between equity styles.
All eyes continue to be on the Fed and the other developed market central banks to determine when they will finally end the tightening cycle. Markets will also be trying to assess if any meaningful economic damage has been inflicted on the economy due to the aggressiveness of the rate increases over the past year. The quarter-end drama surrounding the banking system is expected to lead to further tightening of financial conditions as banks may be more hesitant to extend loans. Investors will be looking at credit flows from small- and medium-sized banks to individual sectors such as the commercial real estate sector and to small businesses in general.
While there were concerns about an impending recession, both the U.S. and European economies showed resilience with growth rates exceeding expectations. Strong job security and wage growth led to continued high consumer spending. However, businesses became more cautious, and the housing sector struggled, although it began to show signs of recovery. Inflation remained a concern, particularly in the services sector, but the Federal Reserve increased the federal funds rate by 25 bps in March to curb it.
March 2023 Fund Performance Chart
Prepare for Retirement
Many people set personal goals for the new year, such as improving physical health. However, it's also important to consider financial health and retirement preparation. For those without a Vista 401(k) retirement account, it could be a good time to explore opening one. Those who already have a Vista 401(k) account and consistently invest might consider ways to enhance their financial position as they approach retirement.
WHY CHOOSE THE VISTA 401(k) PLAN?
The Vista 401(k) Plan offers low-cost options and a strong fund lineup, including reputable fund families. Cerity Partners, a registered investment advisory firm, regularly monitors these companies and provides performance updates. The 401(k) Plan is a supplemental employer-sponsored retirement option that you can use to strengthen your retirement nest egg through pre-tax contributions and tax-deferred growth for more efficient long-term savings.
OPEN AN ACCOUNT
Opening an account is a simple process. You can visit our website at vista401k.com and choose the “My Account Login” icon at the top of the page. The website will lead you through the process.
If you wish to complete a paper enrollment form, click here www.vista401k.com/401k-plan/forms/ and select “Vista 401(k) Enrollment Form.”
INCREASE YOUR CONTRIBUTION
For those with a Vista 401(k) account, there may be opportunities to increase contributions. The IRS sets annual investment limits for 401(k) plans ($22,500 in the year 2023), and participants can consider increasing their investments up to their personal maximum. Some potential strategies include:
- Increasing contributions when receiving a pay raise
- Changing contributions from a set dollar amount to a percentage
- Opting for an automatic annual contribution increase
Examining spending habits and making adjustments, such as bringing lunch from home or brewing coffee at home, could free up funds to contribute to a Vista 401(k) account.
TAKING ACTION
What better way to ensure your financial health than to plan for and contribute to your own retirement? We support your effort to be physically, mentally, emotionally, and financially fit today and in the future!
Remember to regularly monitor your account to ensure investments align with your risk tolerance and that contact and beneficiary information is up to date.
For questions or further discussion about the Vista 401(k) Plan, contact the Retirement Services Department at (866) 325-1278.
“Nuts and Bolts”: How to Use Spanish & Creole Features
Learn about the Vista 401(k) Plan and open an account using Spanish and Creole forms:
- Visit the Vista401k.com website
- Select “401(k) Plan” across the top of the homepage
- Select “Forms” from the dropdown
- Here you will find the Plan Highlights form and the Enrollment form in Spanish and Creole
- To enroll, complete the Enrollment form and submit it one of two ways: Fax to: Retirement Services Department at (850) 425-8345. -OR- Mail to: Retirement Services Department, PO Box 1878, Tallahassee, FL 32302-1878
How to convert the Vista 401(k) website to Spanish once enrolled:
- Visit the Vista 401(k) website at vista401k.com
- Choose “My Account Login” in the rectangular box at the top of the page
- Choose “Account Login” in the dropdown box
- Once logged into your account choose “My Profile”
- Choose “Language Settings”
- You may select to convert the website to Spanish and/or receive your statements in Spanish.
If you have any questions or wish to discuss the Vista 401(k) Plan in greater detail please contact the Retirement Services Department at (866) 325-1278.
The Importance of Account Maintenance
RISK TOLERANCE REVIEW
When opening a Vista 401(k) account, it can be helpful to determine your risk tolerance and invest accordingly. Thereafter, regularly reviewing your risk tolerance and investment strategy is wise to ensure your portfolio aligns with your current goals. As a Vista 401(k) participant, you can use the My Forecast tool on the Vista 401(k) website to take a risk questionnaire, helping you gauge the level of risk suitable for your portfolio. Additionally, Cerity Partners, an independent investment advisory firm, is available to provide financial education and advice to all participants.
CONSOLIDATION OF ACCOUNTS
Throughout your career, you may accumulate multiple retirement plan accounts. To simplify tracking and align your investment strategy, consider consolidating old accounts into your Vista 401(k) account. Current rules allow rolling various qualified plans into your Vista 401(k) account, such as 401(a), 401(k), 403(b), 457, IRAs, and DROP funds. To do this, visit vista401k.com and follow the instructions for the "Vista 401(k) Rollover Request Form."
CHANGE OF HOME AND EMAIL ADDRESS
Please ensure your correct home and email addresses are on file to receive essential information during the plan year. Update your addresses with your employer to receive statements and other important communications from the Vista 401(k) Plan.
BENEFICIARY DESIGNATIONS
Keeping your beneficiary designations up to date is crucial. Life events such as the birth of a child, marriage, divorce, and remarriage can quickly change your beneficiary status. Periodically review your account to ensure your beneficiary designations are accurate.
If you have any questions, please contact the Retirement Services Department via phone, (866) 325-1278, or email, 401k@Vista401k.com.
Financial Wellness: Creating a Spending Plan
Once you have a general idea of how much you need to save each month to reach your retirement goal, you need to determine where you will find the money. There’s one simple trick for saving for any goal: spend less than you earn. The first step is to get organized by creating a spending plan or budget.
Add up Your Monthly Income
wages, average tips or bonuses, alimony payments, investment income, unemployment benefits and so on. Don’t include anything that you cannot count on.
Add up Your Monthly Expenses
mortgage or rent, car payments, average food bills, medical expenses, entertainment and so on. Determine an average for expenses that vary each month, such as clothing, or that don’t occur every month, such as car insurance or self-employment taxes. Review your checkbook, credit card records and receipts to estimate expenses; you probably will need to track how you spend cash for a month or two. You may be surprised to find out where and how much cash “disappears” each month. Include the amount you want to save each month as an expense.
Subtract Your Income from Your Expenses
You may have more expenses than income. This is not uncommon. You have three choices: cut expenses, increase income or both. There are hundreds of ways to reduce expenses, from clipping coupons to bargain hunting to comparison shopping. Increasing income could mean taking a second job, improving your job skills or education to get a raise or a better paying job, making money from a hobby or jointly deciding that another family member will work.
Budgeting Tips
Pay yourself first. Put away first the money you want to set aside for goals. Have money automatically withdrawn from your checking account and put into savings or an investment. Join a retirement plan at work that deducts money from your paycheck. What you don’t see, you won’t miss.
- Put bonuses and raises toward savings.
- Make saving a habit. It’s not difficult once you start.
- Revisit your budget every few months to be sure you are on track.
If you have any questions or wish to discuss this matter in greater detail please contact the Retirement Services Department at (866) 325-1278 or via email at 401k@vista401k.com.
Financial Wellness: The Power of Compounding
Regardless of where you choose to invest your money—cash, stocks, bonds, real estate or a combination of places—the key to saving for retirement is to make your money work for you. It does this through the power of compounding. Compounding investment earnings is what can make even small investments become larger given enough time.
You are probably already familiar with the principle of compounding. Money you put into a savings account earns interest. Then you earn interest on the money you originally put in, plus on the interest you’ve accumulated. As the size of your savings account grows, you earn interest on a bigger and bigger pool of money.
Power of Compounding
This chart shows the value of $1,000 compounded at various rates of return over time:
The chart provides an example of how an investment grows at different annual rates of return over different time periods. Notice how the amount of gain increases each 10-year period. That’s because money is being earned on an increasingly larger pool of money.
The real power of compounding comes with time. The earlier you start saving, the more your money can work for you. For every 10 years you delay before starting to save for retirement, you will need to save three times as much each month to catch up. No matter how young you are, the sooner you begin saving for retirement, the better.
If you have any questions or wish to discuss this matter in greater detail please contact the Retirement Services Department at (866) 325-1278 or via email at 401k@vista401k.com.
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.