Market Analysis Video – March 2014

Stocks were split globally in March with the S&P 500 gaining 0.8%, while foreign stocks as measured by the MSCI EAFE Index fell -0.6%. However, both indices managed small gains in the first quarter, up 1.8% and 0.8%, respectively.

Thanks to rising tensions between Russia and Ukraine, European stocks pulled back by -4.0% in the first few weeks of March. However, as history has often demonstrated, geopolitical risk is often digested quickly by investors and therefore typically short-lived. That proved to be the case this time, with the MSCI Europe Index recovering quickly during the last week of March to post a loss of just -1.0% for the month. Because we see last month’s weakness as transitory, we continue to favor European stocks…

Please watch the video below for our complete Market Analysis.

How the Financial Crisis Provoked Good Behavior in Greece

You may not have noticed, but there has been very little news coming out of Greece lately, and no news about Greece is good news. It means that Greece is no longer the focal point of international drama surrounding the Eurozone global financial crisis.

Although unemployment is at a record 28 percent with a deepening recession now in its sixth year, the March 25th edition of the New York Times reports that for many young people, the Greek economic crisis may be a blessing in disguise. Natalie Kontou, 32, always wanted to work in tourism, and after she lost her job at a magazine, she started Athens Insiders with three friends. Together, they offer custom tour packages. Tourism is on the rise in Greece, and after $6,900 in startup costs, Natalie and her partners are positioned to ride the wave.

Many young people in Greece appear to be discovering their own agency, meaning their personal capacity to act and exert power. Waiting for the government to put the country back on its feet does not seem to be working, but in 2013, 41,000 new companies were formed by entrepreneurs. Similar to new initiatives in France and Spain, the Greek government has made it easier to start a business by reducing the bureaucracy and paperwork previously required.

“I know it is a gamble, but we are going to stick at it,” says Ms. Kontou as her company plans tours in five different languages. She adds, “If we young Greeks don’t try and create something new, who will?”

Learn about Bell Investment Advisors’ events here >>

What’s Wrong with Emerging Market Stocks?

Up until 2013, emerging market stocks were riding the wave of the bull market that began just over five years ago in March 2009. And as you would expect for a higher-risk investment, emerging markets outperformed foreign developed markets in the first four years of the current bull market.

Then in 2013, in what was the best year for developed foreign stocks since the first year of this bull market, emerging market stocks managed to lose -2.3%, as measured by the MSCI Emerging Markets Index. That weakness carried forward into 2014 as emerging market stocks lost -3.4% in the first two months of the new year.

 Foreign Stocks: Emerging vs. Developed Markets
February 2009 to February 2014

Bell FinBlog2014-9The problems date back to mid-2012 when year-over-year earnings growth for emerging markets turned negative. This stemmed in large part to China’s shift in economic focus from infrastructure investment to stimulating domestic consumption. Large emerging economies like Brazil, Russia, and South Africa that benefitted for many years from natural resource exports to China are now feeling the effects of China’s new economic agenda. As a result, the MSCI Emerging Markets Index has seen year-over-year declines in earnings per share growth in six of the last seven quarters.

With the interest rate spike in the U.S. in mid-2013, emerging market nations and corporations experienced a sharp uptick in their cost of borrowing as bond market investors quickly turned risk averse facing the prospects of  a rising rate environment. The JPMorgan EMBI Global Index, a benchmark for emerging market bonds, saw its yield rise a full two percentage points—from 4.5% to 6.5% over the course of 2013. Such a sharp increase in borrowing costs only exacerbated the difficulty EM companies were facing growing their bottom lines.

When you add in the recent increase in geopolitical risk in Eastern Europe, the current environment has proven to be the perfect storm for emerging market stock weakness, a trend we view as likely to get worse before it gets better. As a result, we continue to avoid emerging market equity exposure.

The Women’s Roundtable: Money Talks. So Should We.

We know the adage, “Money talks.” Yet open discussions about money are rare. Sure, we women discuss money with our partners or spouses, but otherwise we can be uncomfortable or even anxious about discussing financial matters. We give each other relationship advice, share secret family recipes, support each other’s professional or personal successes, offer reviews of our favorite restaurants or services, and we do these things without even a hint of doubt or sense of impropriety. However, when it comes to finances, we are much less likely to share. We might keep a private “scorecard” and assign value to ourselves and others based on how much we make, how much we spend, how we save (or don’t), or how we invest (or don’t). We are apprehensive about sharing, lest we be judged. In addition, there can be a cultural bias toward avoiding the topic—stemming from the notion that talking about money is impolite.

Bell-womens-round-table-4-2-1Part of the purpose of The Women’s Roundtable is to change the conversation. Instead of being hampered by our old biases and anxieties, we intend to create a supportive environment in which we can learn from each other. Talking about money is important —let’s all be savvy together!

Research (The $14 Trillion Woman, by Kay and DiLeonardi, 2009) indicates that women not only like to do business with other women, but that they enjoy a level of comfort when conversing with each other in a down-to-earth, informal way about whatever concerns they have, and that includes talking about money.

The Women’s Roundtable at Bell Investment Advisors, provides the opportunity for these kinds of conversations to occur. Join a diverse and dynamic mixture of friends, family, colleagues, staff, clients, and professional women interested in learning more about how to build a financially-sound future by attending our next gathering on March 26—“Taking Charge of Your Financial Future”. Reservations for you and a guest are required. To RSVP or for more information, contact Jaye Roundtree at 510.433.1066, ext. 100 or

Market Analysis Video – February 2014

After the initial weakness to start the year, stocks recouped all of their January losses in February. The S&P 500 Index, which lost -3.5% in January, gained 4.6% in February. Foreign stocks, as measured by the MSCI EAFE Index, followed their -4.0% decline last month with a 5.6% increase this month.

In last month’s analysis, we maintained that the correction in global stocks would be short-lived. That appears to be the case with both U.S. and foreign stocks bottoming on February 3. In total the S&P 500 corrected by -5.8% while the MSCI EAFE corrected by -6.6%. The S&P’s -5.8% pullback exactly matched its worst correction of all of 2013, which shows how mild a year 2013 was in terms of volatility.

As a stock investor, you need to be prepared for corrections of at least 5% in any given year. Since 1960, there have been only three calendar years in which the S&P 500 did not pull back by at least 5%. So history suggests a 95% chance of a pullback of at least 5% in stocks in any given year. And in 29 of the last 55 calendar years—or more than half the time—there has been more than one correction of at least 5% within the calendar year. The lesson here is that these types of pullbacks are simply par for the course when investing in stocks.

Please watch the video below for our complete Market Analysis.

Saving for Retirement: A “How To” for 2014

Most CERTIFIED FINANCIAL PLANNERTM professionals encourage clients to start saving for retirement early in life . . . and for good reason. Consider that $25 in savings per month will grow to over $10,000 in 20 years and as high as $30,000 in 30 years if invested properly and earning a 5% compounded return. There are clearly great benefits for your retirement savings if the advice to start early is followed diligently. The complexities, however, of how much and which savings plan to use are often confusing and can cause paralysis, which may result in little or no change to your retirement savings plan. Here is some information to help you decide how much and where to save for your retirement, including limits for 2014 set by the U.S. Internal Revenue Service.

A truly great, if not the best, savings vehicle for retirement is an employer retirement savings account. You can set up regular monthly contributions so you don’t ever see the money allocated to savings in your take home pay. Your contributions go directly into your account before being taxed, and the money grows tax-deferred until you are ready to withdraw it. You have options depending on your particular situation, i.e. whether you are working for an employer or self-employed. There are many, including 401(k), 403(b), 457, and SEP-IRA (Simplified Employee Pension IRA).

Contributing to these accounts not only sets aside savings for retirement, but helps to reduce taxes. However, the IRS limits the amount you can contribute each year and can change those limits annually, usually to keep pace with inflation. Learning about the 2014 contribution limits is important so you can save more this year and give your retirement plan a boost.

How much can one contribute to an employer-sponsored retirement account . . . 401(k), 403(b) and most 457 plans in 2014?

  • Employees have an elective deferral (contribution) limit of $17,500.
  • Individuals age 50 or older are allowed to make an additional “catch-up” contribution of $5,500.

How much can one contribute to a traditional IRA and Roth IRA in 2014?

  • The contribution limit is $5,500.
  • Individuals age 50 or older are allowed to make an additional “catch-up” contribution of $1,000.

The IRS has established a phase out, a gradual reduction of one’s eligibility to contribute (ROTH IRA) or have the contribution be deductible for tax purposes (Traditional IRA), based on one’s adjusted gross income (AGI), starting at these income levels:

Traditional IRA Phase-Out for Contribution Deductibility
(assumes you are covered by a retirement plan at work)
Married – Phase-out starts at $96K; if AGI > $116K, not deductible.
Single or Head of Household – Phase-out starts at $60K; if AGI > $70K, not deductible.

Roth IRA Phase-Out Eligibility Range
Married – Starts at $181K; if AGI > $191K, not eligible.
Single or Head of Household – Starts at $114K; if AGI > $129K, not eligible.

How much can one contribute to a SIMPLE IRA (Savings Incentive Match Plan) for small businesses in 2014?

  • The contribution limit is $12,000.
  • Individuals age 50 or older are allowed to make an additional “catch-up” contribution of $2,500.

How much can one contribute to a SEP-IRA for self-employed individuals in 2014?

The contributions you make to either yours or your employee’s SEP-IRA each year cannot exceed the lesser of:

  1. 25% of compensation or
  2. $52,000 (subject to annual cost-of-living adjustments for later years).

Note: The limits to contributions you make for your employees apply to all defined contribution plans, including SEPs. If you are self-employed, there is a special calculation to determine contribution limits.

Tips for Savings Success

  1. For your employer retirement plan at work, contribute the minimum necessary to get a full employer match. If there is no employer match at your firm, make an annual goal of contributing 10% of your salary to your retirement savings.
  2. Take advantage of automatic monthly deferrals with your employer, bank, or payroll vendor.
  3. Review your investment accounts and update or rebalance at least once per year to ensure you remain diversified within your risk tolerances while meeting your return needs.
  4. If your employer retirement plan has limited investment options or doesn’t offer enough flexibility for your needs, consider either a self-directed retirement account (if offered through your plan) or an “In-Service Withdrawal” which allows you to move your funds into a Rollover IRA. Note: Before taking this big step, be sure to educate yourself on the pros and cons of doing an IRA rollover from an employer retirement plan.
  5. Talk with your CERTIFIED FINANCIAL PLANNERTM professional or investment advisor to ensure you are contributing an amount sufficient to reach your retirement or other financial goals.

Summary Tips (short version)

  1. Contribute at least 10% of your salary to your employer sponsored retirement plan.
  2. Set up monthly automatic contributions to your savings accounts.
  3. Consider an IRA or ROTH IRA contribution if you have plans to max out your employer plan contributions for the year.
  4. Review, update, and evaluate the efficiency of your investment accounts annually, and

Discover the positive effect on your retirement plan of a focused savings plan!

The Women’s Roundtable:
Prepare Now for Retirement Later

It’s common knowledge that many Americans—of both genders—are at risk of underfunded retirement. For women, the risk is intensified. Historically lower wages relative to men’s wages and time out of the paid workforce to care for family can mean that women save less and have less saved for their retirement. Women also, generally, live longer than men. On average, a female at age 65 can expect to live another 20 years, two years longer than a man the same age.* Savings can increase a woman’s chances of having enough money to last during her retirement.

Don’t let this risk define your future. Rather, use the information to inform the decisions you make, and actions you take, today.

Contribute the maximum amount to your retirement savings plan at work.
Save what you can, then save a little more. In 2014, you can defer up to $17,500 of your compensation. If you’re age 50 or older, an annual catch up contribution of $5,500 is allowed. Taking advantage of an employer’s 401(k) match is a critical piece of proper retirement planning. At a minimum, contribute enough to your 401(k) or other retirement plan to get the maximum employer match available (if applicable).

Look for other ways to save.
If your employer does not offer a retirement plan, or you are self-employed, discuss other options with your tax advisor. A traditional IRA or Roth IRA can provide retirement savings as well as tax advantages now and in the future. Simplified Employer Plans (SEPs) and Individual 401(k) plans offer higher contributions for self-employed individuals.

Put the money away, but make sure it’s working.
Seek the advice of an investment professional to align your investment choices with your financial goals. When it comes to preparing for your retirement, taking a little risk now can pay big rewards in the future.

Round up all the “eggs” as you build your retirement nest.
Consolidate retirement plans from previous employers by rolling them into an Individual Retirement Account. This will maintain the tax deferral status of the money and give you a clearer picture of your retirement portfolio.

* U.S. Department of Labor


Hold the date!
Join Marivic Hammond, Senior Investment Advisor, with colleagues and friends for a wine and cheese gathering, the next event of The Women’s Roundtable: “Taking Charge of Your Financial Future” on March 26, 6 – 7:30 pm in our Oakland office.

Market Analysis Video – January 2014

The New Year brought volatility back to the stock market. The S&P 500 fell -3.5% while foreign stocks, as measured by the MSCI EAFE, lost -4.0%. It was the worst month for both indices since May 2012.

Not only was 2013 a very profitable year for stocks, but it was also a very mild one in terms of volatility. The largest pullback the S&P 500 experienced during the course of the year was -5.8% in May and June, although the MSCI EAFE managed a -10.3% correction during the same time period. Additionally, both indices closed last year quite strongly with four consecutive months of gains and total returns close to 14% between September and December. A small correction like this one is healthy for the overall uptrend as it prevents the market from moving too high, too fast—a scenario which can create significantly overvalued conditions that increase the chances of a severe correction or bear market…

Please watch the video below for our complete Market Analysis.

How Do You Like Risk?

With the S&P 500 Index dropping 3.5% in the first month of 2014, this is a good time to think about financial risk.  Some media spokespeople were asking “How do you protect yourself from the slide in January?” This implies two assumptions:

  1. That all risk is somehow avoidable
  2. That short-term losses are important to avoid

A better question is, “What will January 2014 mean to me in 30 years? (or 10 or 20)?”

To be alive is to live with risk. Life is risk. The fictional character in literature and film, Zorba the Greek, said it this way: “Life is trouble, only death is not.”

Of course, there are ways to manage financial risk. For example, while the stock market declined 3.5% in January, the bond market gained 1.5%—so a balanced portfolio with some bond exposure fared better in January than a pure stock portfolio.

Most investors do not have a well-grounded investment plan or strategy. They don’t do the work (in many cases because they do not have the skills) to know how much is enough for them over the period of time they will be drawing income from their portfolios. Math and strategy tools exist to ground these important conclusions. These tools help to establish the minimal financial risk an investor needs to take to achieve their goals. It is impossible long term to preserve the purchasing power of your dollars (to beat inflation) without assuming some financial risk, without experiencing some periods of loss like January 2014. The skill is to know how much risk you should take to make your life work.

The January 25, 2014 issue of The Economist leads with the headline: Why some people like risk. The article posits that risk-taking in America is at a low point because of the emotional trauma caused by the Great Recession of 2008/2009. The Economist grounds this conclusion from data showing that the number of self-employed workers has declined, job creation from start-ups is down, and direct investment in business is low.

This situation is serious because long-term economic growth is driven by people willing to risk all they have in a start-up enterprise or in the bold expansion of a business already on the ground. Academics in behavioral finance like Ulrike Malmendier at the University of California, Berkeley and Stefan Nagel at the University of Michigan, have found that people who experienced high returns from the stock market early in life have a higher risk tolerance and appetite for stock market risk later in life. On the other hand, people who have been traumatized by financial losses or natural disasters demonstrate a very low risk tolerance.

The Economist concludes that the 2008/2009 financial trauma is likely to inhibit a wide range of people in America and Europe from financial risks that would help grow the economy and help get their lives back on track.

What do you think about risk in general and risk in particular in your own situation? Do you have a long-term financial plan for your future?  Do you know the degree of risk that is right for you?

The Women’s Roundtable:
Taking Charge of Your Financial Future

We women earn money, we save it, we spend it, and we donate it. Yet, very rarely do we really talk about it.

Therefore The Women’s Roundtable was launched by Bell Investment Advisors in 2013 as a resource for and by women. The roundtable’s mission is to provide a forum for learning and sharing ideas that impact our financial goals.

The top concern for women today is not solely about growing their money. Today, we need to manage multiple aspects of wealth and financial security: investing assets, managing debt, protecting assets and planning legacies. It can be an overwhelming responsibility—unless we develop a well-defined process that addresses these issues in a systematized way.

Last year we offered a number of gatherings and facilitated conversations around philanthropy, financial planning, and family issues. The theme that resonated most with our audience was how to prepare for a financially secure future. We’ll continue this theme in our exciting 2014 series: look out for blogs, webinars and live events, including quarterly wine and cheese gatherings with occasional guest speakers. Our program line-up and schedule is coming. So stay tuned!

Hold the date!
Join Marivic Hammond, Senior Investment Advisor, with colleagues and friends for the next event of The Women’s Roundtable: Taking Charge of Your Financial Future on March 26, 6 – 7:30 pm, wine and cheese gathering.