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 Good morning.
The investment markets have improved a lot over the past two months. We're now in positive territory for the year with large cap US stocks up 3.15%. And, after the S&P 500's close yesterday at 2,094, we're within 2% of the all-time high reached in May of last year. International developed markets stock are still down 1.35% for the year and emerging markets are up 6.68%. The broad US bond market is up 3.38%. *
We're coming up on a deadline that's really important for people between the ages of 66 and 70 who are married and haven't yet filed for social security. The deadline to file and suspend your application under the old rules expires on April 30 because of law changes created last fall. Our full article on the topic is on our website. If you think this may apply to you or have questions for a friend or family member, please give us a call.
As always, please let us know of any suggestions for newsletter topics or questions in your financial world. Thanks for reading, and live well! |
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New DOL Rules Affecting 401(k)s and IRAs
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 First Quarter Investment Review |
 The first quarter of the new year has brought us small positive returns in many of the U.S. market indices, which means that investors survived the worst start to a calendar year ever for the U.S. stock market.
We ended the quarter on March 31 with the S&P 500 (large US companies) at 2,059, eking out a 1.35% positive return after being down nearly 11% for the year in mid February.
Small US companies (as measured by the Russell 2000) continued on their rough road, down 1.52% for the quarter. Value companies, on the other hand, had a nice recovery from a tough 2015 showing gains exceeding the broader market and growth stocks -- the Russell 1000 Value Index was up 1.64%.
Internationally, we saw divergence in developed and emerging markets. Emerging markets stocks were the superstar with gains of 5.71% for the quarter. Developed international market stocks were down 3.01%.
In bonds, we saw a continued drift downward in interest rates which resulted in strong performance for bond funds. The Barclays US Aggregate bond index was up 3.03%. Global bonds were up 1.14%.
The themes for the quarter included the high correlation of the price of stocks to the price of oil, speculation on the Federal Reserve's expected future interest rate moves, a falling US dollar, and concerns about China appearing to stabilize. We saw the stock market bottom on February 11, the same day that oil futures hit their low of $26.21 a barrel. We don't expect this level of correlation between stocks and energy prices to continue in lock-step indefinitely since many companies benefit from cost reductions when the price of oil is lower. Eventually, we would expect the stock market to revert back to reflecting the health of the US and global economy.
In the U.S., employment growth has remained strong, with 215,000 new jobs added in March, above predictions of 199,000. Overall, the economy has added millions of jobs in the last two years. Wage growth continues to be low-up 2.3% today over a year earlier-but while that's discouraging for workers, companies (and their bottom lines, and eventually their stock values) are benefiting from relatively cheap labor. It's worth noting that the Institute for Supply Management's manufacturing index reflected growth for the first time since last August, suggesting that manufacturing activity is picking up in the U.S. economy.
Does that mean the market will go up? We can't predict the future. Our mission as investors is to apply solid academic research and hang on to allow the millions of workers who get up every morning and go to work to do what they do best: incrementally, hour by hour, day by day, week by week, grow the value of the companies we own with their efforts. Investors will spook and sometimes flee stocks, driving their prices down, but for the long-term, the returns on your investments are invisibly, inexorably driven by the underlying value that is created in the offices, cubicles and factory floors all over the world.
The chart looks back to 1980 and shows the biggest intra-year drop (the red negatives) each year for the S&P 500, and the corresponding total return for the year. It's amazing to be reminded how we can weather such extreme volatility and still end up making money.
If you like this kind of information and would like more detail, we've published a quarterly market review on our website with more details.
Source of investment returns is Morningstar for the 3 months ending March 31, 2016. S&P 500 TR USD for the S&P 500. MSCI EAFE NR USD for developed international markets. MSCI EM NR USD for emerging markets stock. Barclays US Agg Bond TR USD for the US Aggregate bond index. Russell 1000 Value TR USD for Russell 1000 Value Index. Global bonds is the Citi WGBI 1-5 Yr Hdg USD.
Portions of this article adapted with permission of financial columnist Bob Veres.
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| New Rules Governing your 401(k) and IRAs |
 On April 6, 2016, the Department of Labor (DOL) issued new "conflict of interest" rules regarding financial advice as it relates to retirement plans and IRAs. The new DOL rules generally hold financial professionals to a fiduciary standard if they receive compensation for providing investment advice to retirement plan participants or IRA owners, which means they must act impartially and in their clients' best interests.
These new rules represent a giant step forward in protecting investors. While not perfect, the new rules will make it much more difficult for advisors giving advice on retirement plans and IRAs to place their personal self-interest ahead of their clients' best interests. We expect that over time this will bring down 401(k) fees and prevent abusive rollovers, and that's a very good thing!
At Keener Financial Planning, we've embraced the fiduciary standard since opening in 2008. As a result, these new rules will not change the advice we've been giving. There may be small affects on our service agreements and processes as we seek to operate fully within the letter and spirit of the new rules. As we determine if any administrative changes are necessary, we'll let you know of anything that affects how you work with us.
The new rules go into effect in April 2017, although some of the specific contract requirements are delayed until January 1, 2018. Alas, the rule specifically states that existing arrangements will be grandfathered, which means that if you're a participant in a plan at your workplace, you may not immediately feel the impact of new fiduciary obligations. But over time, most companies are expected to take a closer look at their fee structure, and, as they amend their plans, plan participants should start feeling the benefits.
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| Bogus IRS Calls |
 In honor of yesterday's tax filing deadline, I wanted to pass along a disturbing new trend that we should all be aware of.
Most people have seen bogus emails purported to be from the executors of the estate of Nigerian princes or other obscure foreign notables who want to give them millions of dollars, and sometimes they get bogus calls telling them they can win a lottery sweepstakes or receive debt relief.
But apparently one of the most effective and dangerous telephone scams these days involves what appears to be a call from the Internal Revenue Service. The phone rings, and a very aggressive person on the other end of the line tells you that you owe money to the IRS. This debt, you are told, must be paid promptly through a pre-loaded debit card or wire transfer. If you refuse to cooperate (as, of course, you should), you're threatened with arrest, suspension of a driver's license or revocation of a business license. In the case of recent immigrants, the caller may also threaten deportation.
In the most sophisticated calls, the scammer may know (and recite) the last four digits of your Social Security number, and may even use electronic spoofing to make it appear on your phone's caller ID that the calling number comes from IRS headquarters. A bogus follow-up email may be sent to support the bogus call, or sometimes a follow-up call from an individual who is pretending to be from the local police or the Department of Motor Vehicles.
The goal, of course, is to scare you out of your wits-enough so that you'll make a payment so the federal authorities will go away and leave you alone. In all, the IRS says that 5,000 victims have collectively paid over $26.5 million to bogus IRS scammers.
A more recent version of the scam involves a less aggressive phone call from somebody pretending to be an IRS agent, who says he or she wants to verify your tax information so your forms can be processed. The scam artists say they're looking at your tax return, and need a few additional. The goal is to get you to give up personal information such as your Social Security number, bank numbers or credit card information that can then be used for identity theft scams.
The IRS has assured the public that it never, ever asks for credit card information over the phone, and it never requests prepaid debit card or wire transfer payments. It never asks for you to divulge personal information by phone or email, or demands payments without giving you an opportunity to appeal the amount they say you owe.
If you receive a call that threatens police action and demands immediate payment, that is a certain indication that the caller does not represent the IRS. Generally taxpayers who have a legitimate tax issue are contacted by mail.
If you receive one of these bogus calls, you can report the incident to the Treasury Inspector General at 800-366-4484. And if you get an email that purports to be from the IRS, make sure you don't click on any attachments. Instead, forward the email, in its entirety, to [email protected].
Article adapted with permission of Financial Columnist Bob Veres.
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I hope you found this newsletter informative. KFP offers a free, no-obligation initial consultation to start the financial planning process for new clients. To learn more or schedule a time, call 817-993-0401 or e-mail [email protected]. Sincerely,
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Jean Keener, CFP�, CRPC�
Keener Financial Planning
Keener Financial Planning provides as-needed, fee-only financial planning and investment management services.
*Source for investment returns is Morningstar as of April 18, 2016. S&P 500 TR USD for the S&P 500. MSCI EAFE NR USD for developed international markets. MSCI EM NR USD for emerging markets stock. Barclays US Agg Bond TR USD for the US Aggregate bond index. |
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