2022 Q2 Tactical Model Report

This report contains the 2022 Q2 quarterly allocations for your retirement plan’s tactical models.   As of this quarterly review, the U.S. equity trend indicator was negative, the international trend indicator was negative, and the Balance of Strength Signal recently turned positive.  Also, our long-term U.S. and International stock indicators turned negative last quarter.  This was the first time since 2016 that the U.S. long-term indicator was negative.  The Bond Bull-Bear Indicator remains negative.  

In late January, the stock indicators we use in these models turned negative and the models move to more conservative allocations just above each model’s minimum High Risk Category Exposure.  Models will maintain their current High Risk Category Exposure and we will update the holdings in the High, Medium, and Low Risk categories.  We will monitor the market action and will consider intra-quarter changes should the indicators change.  Changes to the model allocations will be made in April.  

Over the last quarter, there has been a lot of negative pressure on the financial markets.  The Federal Reserve is in the process of raising short-term rates and reducing their balance sheet, which typically has a contractionary effect on financial markets and the economy.  Inflation is at levels not seen for generations, and a war started between Russia and Ukraine.  Russia is one of the largest commodity exporters in the world and they export many commodities vital to the global economy and food chain.  The effects and side-effects of the war and the sanctions the West has imposed on Russia are unknown.  I am concerned that they may lead to negative consequences for U.S. citizens due to even higher commodity and food prices as well as causing an international move away from foreign countries using the U.S. dollar to settle international trades.  The dollar has long been the reserve currency.  If the U.S. losses its reserve currency status, it could have negative repercussions for the U.S. financial system and economy.  To summarize, we see several major macro trends that could put negative pressure on the stock and bond markets and few that could lead to near term positive outcomes.

If you are uncomfortable with your selected model maintaining its currently low High Risk Category exposure, we recommend that you look at other plan investment options or a more conservative tactical model. You can also contact your investment advisor representative, Stephen Hetrick at Hetrick@retirementc.com or 717-545-1447 to discuss your concerns and alternative options. Feel free to jump right to the model pages or first read our model and market commentary. As always, if you have questions regarding these models, your deferred compensation account, or retirement planning; do not hesitate to contact us.

2022 Q1 Intra-Quarter Tactical Model Report

This report contains the updated 2022 Q1 quarterly allocations for your retirement plan’s tactical models.   As of the week of 1/23/22, the U.S. equity trend indicator has turned negative, the international trend indicator remained negative, and the Balance of Strength Signal turned negative.  The Bond Bull-Bear Indicator remains negative.  Models will reduce their High Risk Category exposure.  The new allocations are listed in the in the report below.  The models will be close to, but not at their minimum High Risk.  Typically, when the stock market has had such a swift and substantial decline, there is generally at least a small recovery rally.   We will look at moving to the minimum stock exposure if the stock market recovers and our indicators remain negative.  The models have substantially reduced their High Risk category exposure, so this additional reduction would be a minor change.  We have submitted the trade instructions to Alerus and the changes should be made in the near future.  

2022 Q1 Tactical Model Report

This report contains the 2022 Q1 quarterly allocations for your retirement plan’s tactical models. As of this quarterly review, the U.S. equity trend indicator is positive and the international trend indicator is negative. The Balance of Strength Signal is positive. The Bond Bull-Bear Indicator is negative. Models will remain in their maximum High Risk Category exposure. Assets not allocated to the High Risk Category exposure will be invested in money markets, short-term bonds and high yield bonds. Quarterly allocation updates to the models will occur in January. For more information, please read the report below.

If you would like to review your account, please contact us.

2022 Plan Contribution Limits Increase

The 2022 plan contribution limits increased from $19,500 to $20,500. Participants age 50 or older can contribute an additional $6,500 a year for a maximum annual contribution of $27,000. There is also a special catch-up contribution available to employees who are within 3 years of their normal retirement age (please contact HR or us for additional information on the special catch-up contribution).

Remember, changes to contributions are implement the first pay of month after you submit your contribution change to HR. This can be done on the Alerus participant website or by contacting HR. Also, when computing the maximum contribution, you need to consider the employer contribution of $4 per pay. Below is an example on how to compute the maximum per pay contributions for 2022

Up to Age 49 and 26 pays

$20,500 - $104 (employer contribution) = $20,396 / 26 pays = $784.46

Up to Age 50 or Older and 26 pays

$27,000 - $104 (employer contribution) = $26,896 / 26 pays = $1,034.46

If you have any questions, please Contact Us.

2021 Q4 Tactical Model Report

This report contains the 2021 Q4 quarterly allocations for your retirement plan’s tactical models. As of this quarterly review, the U.S. equity trend indicator was positive, the international trend indicator was negative, and the Balance of Strength Signal was positive. Intra-quarter the Bond Bull-Bear Indicator turned positive, but at the end of September, the Bond Bull-Bear Indicator turned back to negative. Models will remain in their maximum High Risk Category exposure. There are no changes to the holdings at this time; however, we will monitor the holdings and may make intra-quarter changes.

Towards the end of September, the Plan fund changes were made, so some of the funds are different, but the fund category remains the same. The current portfolios have a diversified equity exposure with the fixed income portfolio maintaining a majority holding in the short-term bond index fund, so the switch of Bond Bull-Bear Indicator does not have a meaningful impact.

Last quarter, major stock indexes and the US bond market were both negative. Currently, many stock valuations are at extremes we saw before the tech bubble and the financial crisis. This does not mean there is an imminent stock market crash coming, but it is a sign that one should be aware of their portfolio’s potential downside risk and if the potential risk is not appropriate for their financial goals, they should look at other options. Our current thought is that the stock market is in a topping process. Maybe the top was already made, but we feel there is a good possibility that after the current decline there could be another push higher. After the final top is made, we would anticipate a multi-year period of declining stock market prices. The goal of these tactical models is to preserve principal (compared to a similar buy-and-hold portfolio) during these multi-year bear markets. We will continue to monitor the stock market action. Should the stock market decline intensify, and our stock indicators turn negative, we will reduce exposure to High Risk Category investments.

If you are uncomfortable with your selected model maintaining its maximum High Risk Category exposure, we recommend that you look at other plan investment options or a more conservative tactical model. You can also contact your investment advisor representative, Stephen Hetrick at Hetrick@retirementc.com or 717-545-1447 to discuss your concerns and alternative options. For more information, please read the report below.

If you would like to review your account, please contact us.

Alerus Updates Retirement App

Alerus Retirement mobile app is now updated.
The first update delivers seamless integration between the mobile app and online website – and streamlines device integration. This enhancement is the first step to creating a better, more user-friendly experience for participants.

More updates coming in 2021.
In the coming months, you can expect to see additional enhancements to the Alerus Retirement mobile app, including a new look and design, transactional capability, options for facial recognition/biometric login, and a Spanish toggle feature.

High Yield Bond Merger

Brandywine Global Acquires Diamond Hill Capital Management’s High Yield-Focused Funds and Adds Portfolio Management Team

From the press release:

“PHILADELPHIA — (August 2, 2021) — Brandywine Global Investment Management, LLC (“Brandywine Global”), a specialist investment manager and subsidiary of Franklin Resources, Inc. (NYSE: BEN), announced today that it completed its acquisition of the business of Diamond Hill’s high yield-focused U.S. corporate credit mutual funds following a previously announced agreement with Diamond Hill Capital Management (“Diamond Hill”) effective July 30, 2021. The acquisition expands Brandywine Global’s fixed income offerings and broadens its expertise in bottom-up fundamental credit research.”

The Diamond Hill High Yield Fund I (DHHIX) is now the Brandywine Global High Yield Fund I (BGHIX). The 5 Star Morningstar ranked fund will retain its current portfolio managers and add in the expertise of Brandywine Global. McClain (one of the managers of DHHIX) said, “We’re thrilled to join Brandywine Global. We’re confident clients will benefit from the marriage of our bottom-up fundamental approach with Brandywine Global’s global, macro-driven insights.”

Retirement Collaborative LLC and the Voluntary Employee Benefit Committee will monitor this merger. We hope the new fund will continue the excellent performance that the managers at DHHIX were able to maintain.

2021 Q3 Tactical Model Report

This report contains the 2021 Q3 quarterly allocations for your retirement plan’s tactical models. As of this quarterly review, the U.S. equity trend indicator and the international trend indicator were both positive. The Balance of Strength Signal was also positive. Models will remain in their maximum High Risk Category exposure. Quarterly allocation updates to the models will occur in July. This last quarter, stocks and bonds were both positive. During the quarter, bond yields fell helping the price of bond funds and many large cap growth stocks. At this time, our U.S. bond indicator is negative but very close to moving positive, so the models will add some exposure to the U.S. bond index fund. In the High Risk category, we are adding some real estate exposure. For more information, please read the report below.

If you would like to review your account, please contact us.

2021 Q2 Tactical Model Report

This report contains the 2021 Q2 quarterly allocations for your retirement plan’s tactical models. As of this quarterly review, the U.S. equity trend indicator and the international trend indicator were both positive. The Balance of Strength Signal was also positive. Models will remain in their maximum High Risk Category exposure.

In 2020, both bonds and stocks ended the year higher. In the first quarter, stocks continued to do well; however, bonds suffered losses as bond yields rose. At this time, our U.S. bond indicator is negative, so the models will be reducing their exposure to the U.S. bond index fund and will shift that exposure to bond sectors that traditionally fair better during rising bond yields and positive stock market periods. The models will be updated to their new allocations in mid-April. Please read the report for more details.

If you would like to review your account, please contact us.