Back to the Future
It's January 1, 2016 and Great Scott! It feels like we've gone back in time to the beginning of 2015, at least in terms of the market. The markets rallied in the fourth quarter but still ended relatively muted for the year. The US market as measured by the S&P 500 and Dow Jones Industrial Average was up 6.4% and 7.0% respectively in Q4 and up 1.4% and .6% respectively for the year. International markets fared a little worse; the MSCI EAFE was up 4.7% for the quarter and -.8% for the year. All indices are now at similar levels as January 1, 2015.
In addition to the market gyrations, on December 16th Janet Yellen announced the first rate hike since 2006. The rate increase was small at .25%, but it was symbolic for the markets. It showed that the US economy was getting off the ground again. She indicated that the Fed will continue to be "data dependent" for future rate increases. We believe it will take a long while for rates to get back to a normalized level of 4% to 5%.
2016 and Beyond
As always, we are looking forward for new opportunities. In late 2015, we raised cash across the board and realized gains where appropriate. We will seek to redeploy the cash in lower risk strategies such as structured CD's, notes, and hedged investments. The energy sector and emerging markets both had a terrible 2015 and look quite depressed at these levels. If the slide in price continues, these sectors could become very attractive again. Our goal is to always maximize upside appreciation, minimize draw-downs as much as possible, and seek to capture special opportunities whenever possible. While uncertainty isn't great for the markets, it does create opportunities.
From the Tax Desk
The contribution limit for retirement plans remain unchanged for 2016. However, if your savings into your employer retirement plan as a percentage of your income and your income is changing in 2016, now is the time to review your deferrals. The maximum contributions are as follows:
We encourage you to maximize your retirement savings as much as possible. As Einstein once said, "Compound interest is the most powerful force in the universe." Save now and let your money work for you. A little now will go a long ways in retirement.
Furthermore, the investment custodians will start distributing tax forms by the end of January. We anticipate that the majority of the forms will go out by mid February. If you would like us to send a copy directly to your tax preparer, please let us know. Please note that items on the 1099 are subject to reclassification and revision. Typically, these changes are small and only have a minimal if any impact on taxes.
The Season of Giving
When we wind down a year it's always nice to look back and see how we have been able to give back to the community around us. It's been a pleasure of ours to help in the SF Bay Area via toy drives, sponsoring teams, mentoring children, bell ringing for the Salvation Army as well as working at the local Food Bank. We want to thank you all, our clients, for making 2015 such a success for us. Though the markets may incur some bumps along the way, we hope that 2016 will be a profitable year to come.
Your Team at Archvest,
Eric Lai, John Wenzel, and Kimberly Terry
Eric Lai, John Wenzel, and Kimberly Terry | Archvest Wealth Advisors