How Millennials Can Save the World While Saving for Retirement


If you are a millennial investor—or just think like one—you are likely to have some very different attitudes about investing than previous generations. We conducted a survey and this one stands out for me: 67% of millennials say they want investments to reflect their social and environmental values. (For women, it’s 76%.)

Impact investing is more than just a feel good gesture—it drives real business. Today, clean energy is responsible for more jobs than the fossil fuel industry (source: Impact Alpha). What that means is your choice to invest for a better world can have a real, tangible impact.

And you can start with your 401(k). Our latest survey found that 72% of millennials feel on track with their retirement savings. It’s a good figure, but we want a great one. Maybe you’ll find extra inspiration by including a sustainable investing strategy that invests based on social or environmental criteria in your workplace retirement account.

Make an impact on your future now

This approach is not new; endowments and pension funds have used similar strategies for decades. What is new is that sustainable strategies are becoming much less expensive and more widely available than ever before.

There are many variations. Some screen out industries that conflict with social or environmental objectives. Others may evaluate potential investments based on their Environmental Social Governance (or ESG) profiles, creating a scoring system to guide the investment manager to the most values-positive companies. Others target positive social and environmental outcomes through pure impact investing strategies.

And that creates an exciting opportunity. By investing in a sustainable strategy through your retirement plan, you can do some good right now that will hopefully pay off later. If you are 30 years old today, that means your retirement dollars can be put to use for decades to build the kind of world you want to live in. That alone should get you energized about saving for retirement, no matter how far away it seems.

A little something extra

Ideally, sustainable investing should be your inspiration to make an additional retirement contribution above and beyond the money you are already saving in an appropriately diversified investment. Doing good should inspire you to do more for yourself.

The catch is that your workplace retirement plan might not have a sustainable option. But, that may be changing. Annual growth in these strategies has been approximately 33% in recent years (source: Global Sustainable Investment Alliance). That rate of growth may increase following last year’s Department of Labor guidance on impact investing, which should encourage more 401(k) plans to offer such options. Ask your employer about adding an impact option.

For those of you who are already engaged in retirement planning and savings, the sense of purpose from making a sustainable investment can be transformative. Combining your passion for social and environmental causes with the need to build for your future could give new energy to your retirement planning—and that applies whether you’re a millennial, a gen X-er, a boomer or any age.

Anne Ackerley is the Head of BlackRock’s U.S. & Canada Defined Contribution (USDC) Group and a regular contributor to The Blog.


Investing involves risks, including possible loss of principal.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of April 2017 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

BlackRock makes no representations or warranties regarding the advisability of investing in any product or service offered by CircleBlack. BlackRock has no obligation or liability in connection with the operation, marketing, trading or sale of any product or service offered by CircleBlack.

©2017 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

Family Members With Disabilities Need Special Planning

Kitchen 2

It’s not uncommon for families caring for loved ones with special needs to spend so much time ensuring the day-to-day needs of their child, spouse or sibling are met that they don’t consider how the academic, emotional, financial and physical support they provide will continue even after they, the primary caregivers, are gone.

However, the process of ensuring long-term needs of a loved one with a disability or medical condition are met can be complex, and delaying such planning can often result in more headaches and hurdles than are necessary. This applies not only to parents of a child with a disability, but to spouses whose partner suffers from something like dementia, too.

In fact, while a child is the traditional beneficiary in an estate plan, financial advisors are finding they are crafting estate plans for a growing number of families with someone who has age-related disabilities, such as Alzheimer’s disease or Multiple Sclerosis. Thirty million households provide care for a parent or other adult over age 50, and that number is expected to double in the next 25 years as more baby boomers age, according to AARP.

“Families are justifiably worried that if something happens to the primary caregiver of a child with special needs or an adult with a disability that care will continue, no matter how old that dependent is,” says Catherine Walker, a senior trust consultant for RBC Wealth Management-U.S. in Delaware. “Starting to plan early can give everyone greater peace of mind.”

Getting started

Families planning to leave an inheritance to someone with special needs should create a comprehensive plan that addresses not only the needs of their loved one, but of his or her future caregivers as well, says Tom Six, a wealth strategist for RBC Wealth Management-U.S. in San Francisco.

A plan should include: a will, financial power of attorney, a medical directive, and a trust. It should address the person’s long-term care and supervision, money management, guardianship or conservatorship, funeral arrangements and naming other people who want to help care for the person.

If the disabled child is young, parents might want to create a life care plan, or a road map with educational, living and career planning to help the individual transition to adulthood, Six says. Parents may also want to write a letter of intent that summarizes details, such as likes, dislikes, habits and aspirations of the dependent in order to help smooth their transition.

Such a plan is best crafted as an addendum to an estate plan, Six says, so that families and caregivers are working off of one document. Families should consult a special needs or disabilities lawyer to help plan and draft documents properly.

For families constructing a plan for children under 18, it’s usually wise to name someone you trust as a guardian or conservator. And it’s best to do it early, Six says, because it becomes more difficult once the child is legally considered an adult (between age 18 and 21 in all states).

Not everyone needs a guardian, however. The process of naming one can be costly and involves going to court, says Laurie Hanson, an elder and special needs lawyer with Long, Reher, Hanson & Price in Minneapolis. For disabled people who work and lead an independent life, a power of attorney and health directive may suffice.

“Our goal is to maximize the independence of the person with the disability,” says Hanson. “We have all of these tools to help people.”

Special trusts for special needs

Families that intend to leave an inheritance to loved ones with special needs should be aware that such gifts could jeopardize other important benefits that the individual receives.

Bequeathing money, retirement accounts or other assets directly could disqualify the beneficiary from receiving government benefits, such as Supplemental Security Income and Medicaid.

To prevent this from happening, parents often plan to leave funds to another child with the direction that they use the funds to care for their special needs sibling. However, the child with the funds cannot legally be compelled to use them for the other’s care.

Special needs trusts are one option open to parents, grandparents, friends or anyone else wishing to leave an inheritance or other assistance to care for someone. These trusts, by their very nature, may have restrictive distribution provisions and may require ‘Medicaid payback’ to the state when the individual passes away. However, special needs trusts funded with assets from a third party don’t require Medicaid reimbursement and allow the assets to pass to other beneficiaries upon the death of the special needs beneficiary, says Six.

For a smaller inheritance or for families who don’t have a reliable trustee candidate, a pooled special needs trust might work well, suggests Walker. Such trusts are managed by a nonprofit organization, but their fees, services and contracts vary.

Benefits of pooled trusts include working with managers who are knowledgeable and able to deal with the Social Security Administration and Medicaid. There are drawbacks, however. Such trusts can be expensive — there’s usually a one-time enrollment fee, plus an annual fee. As well, many don’t accept real estate or other nontraditional investments, and some distribute assets only at certain times of the year.

Beyond trusts and estate plans

While estate plans are critical to ensuring a loved one with special needs or a medical condition is cared and provided for in the event of their caregiver’s death, there are other financial tools families can tap into as well.

The new 529 ABLE (Achieving a Better Life Experience) Savings Plan lets families of disabled children save for certain disability expenses, including education, job training, healthcare and financial management, to supplement private insurance and public benefits.

Like 529 college savings accounts, state-administered ABLE accounts vary, but people can use any state’s plan. Since the 2014 law, most states have passed ABLE legislation and at least 18 have active programs.

“It’s really a great tool in some circumstances, but it only works if the person was disabled before age 26,” says lawyer Hanson. ABLE accounts also carry some restrictions, such as a one-account limit, contribution and account balance caps, and a Medicaid payback clause.

Despite the added estate planning complexities faced by families caring for dependents with special needs or medical conditions, those that begin the process early are likely to discover that there are multiple options and resources available to ensure the needs of their loved ones are met, no matter what happens down the road.


Trust services are provided by third parties. Neither RBC Wealth Management nor its Financial Advisors are able to serve as trustee. RBC Wealth Management does not provide tax or legal advice.

RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.

Small Caps Looking for a Catalyst

Sailing into a blue sea of future

U.S. stocks are off to another stellar year. Look below the surface, however, and the rally has had a somewhat unusual flavor. Some of the better performing stocks are in the more defensive industries, such as utilities and health care, while small caps—a strong performer in late 2016—are trailing. Year-to-date the S&P 500 has gained over 5%, versus barely 1% for the Russell 2000 Index. Nor is this just a U.S. phenomenon. Globally, the small cap rally has stalled (see the chart below).

What accounts for the reversal in fortune and will it continue?

Late last year I suggested that the small cap surge might struggle in 2017. Before focusing on why this should be the case, let me dispense with one suspect: the reversal in the U.S. dollar. In fact, this is a symptom rather than the cause of the recent underperformance.

Small vs Large

As I described late last year, since 2000 the relative performance of small caps has been largely independent of what happens in currency markets. While U.S. small caps have a slight tendency to outperform when the dollar is strengthening, the relationship is fairly weak and not statistically significant.

If a faltering dollar rally is not to blame, what is? I see two culprits.

1. Risk appetite turned.

The turn in the dollar, while not directly the cause of small cap underperformance, is indicative of a broader pattern: The “reflation trade” that began in mid-2016 has been struggling of late. One manifestation of this has been the recent pullback in credit, specifically high yield. This is important. Since 2000, monthly changes in high yield spreads have explained roughly 10-15% of small cap’s relative performance. If appetite for high yield bonds continues to moderate, this is indicative of a dampening in risk appetite, a scenario that does not favor small cap names.

2. Valuations are still stretched.

Neither large nor small cap U.S. stocks are cheap, but small caps look particularly pricey. The Russell 2000 was already expensive last December; at nearly 48x trailing earnings it is even more so today. Instead, many investors are starting to look for better bargains overseas. For those willing to take the incremental risk, at 15x trailing earnings emerging market equities seem the more interesting play, a fact reflected in their outperformance year-to-date.

What could reverse this recent trend? The most obvious catalyst would be events in Washington. Progress on tax reform and infrastructure spending would help convince increasingly skeptical investors that the long hoped-for fiscal stimulus will actually materialize. In the absence of that, investors may be looking at a more modest version of the reflation trade than many discounted last fall. Under this scenario, small caps may not regain their luster anytime soon.

Russ Koesterich, CFA, is Portfolio Manager for BlackRock’s Global Allocation team and is a regular contributor to The Blog.


Investing involves risks, including possible loss of principal. Small-capitalization companies may be less stable and more susceptible to adverse developments, and their securities may be more volatile and less liquid than larger capitalization companies. International investing involves special risks including, but not limited to, currency fluctuations, illiquidity and volatility. These risks may be heightened for investments in emerging markets.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of April 2017 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader. Past performance is no guarantee of future results.

©2017 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

Pairing Price with Fundamentals


If markets stumble as 2017 progresses, it is unlikely to be because of some unexpected political event, but rather because of a reversal in the coordinated upturn in world trade we’ve seen over the past three quarters. The stock market is reacting more to a synchronized global growth wave than to policy changes in Washington or elections in Europe. Japan, China, the eurozone and the US have gotten upside economic surprises in recent months and the market has reacted accordingly.

But now there are signs that this growth upswing — like three prior waves within this eight-year-old cycle— could falter. Here are the reasons another slowdown may lie ahead:

  1. China — the main driver of the synchronized improvement in the global economy beginning in mid-2016 — is beginning to show signs of strain. Year-over-year growth in both credit and money supply is slowing from the pace we saw in 2016. Furthermore, Chinese authorities have recently tightened credit for car and home purchases. In the past, credit has been both an economic accelerant and a braking mechanism within China, especially for commodity prices. Now we may be entering the braking phase.
  2. The star of world growth surprises in 2017, the eurozone, is also flashing warning signals. Like in China, credit growth is slowing. Additionally, inflation has lost its upward momentum. Further, European exporters are heavily exposed to a slowing China.
  3. Despite solid labor markets and upbeat sentiment indicators, trouble lurks in the United States, too. While wages have been rising modestly of late, inflation has been rising faster, squeezing real incomes. Moreover, surging health care outlays and high housing costs are combining to restrain consumer spending.
  4. Like consumers, US companies are faced with rising costs, which are squeezing once-lofty profit margins. Rising margins have been perhaps the most important underpinning of the eight-year bull market. But, the present margin squeeze, combined with unimpressive pricing power, are elements which threaten the positive free cash flow story that has propelled this economic cycle. In order for profits to grow in the later phases of a cycle, margins need to expand on the back of cost cutting, or on the wings of rising inflation. That way, pricing power can carry the day, driving year-over-year profit growth. Right now, we see no convincing evidence of either more cost cutting or better revenue growth.

Despite these headwinds, though, we don’t appear to be at risk of tumbling into recession.

Does Washington have our back?

So, with a recession unlikely, and the markets expecting a cocktail of tax cuts and regulatory rollbacks from Washington, shouldn’t investors hold an overweight in US equities? The answer is no. Against a fundamental backdrop of downward profit and revenue pressures, we must consider market pricing. While equities were relatively cheap for much of this market cycle, that’s no longer the case.

Here are some measures I use to gauge relative valuations. First, I examine the free cash flow yield of the S&P 500 Index. It has slowed to a pedestrian 2.6% today versus cash flow yields of 5% and 6% earlier in the cycle. This tells me that the market is no longer cheap compared to other cycles and that pricing dynamics have discounted lots of good news ahead.

Another measure I use to gauge valuations, the cyclically adjusted price-to-earnings ratio, is flashing warning signs. It has moved close to 30x, a very high reading, exceeded only twice in the gauge’s more than 100-year history. The price-to-sales ratio of the market is also high, while small companies have reached some of the highest price-to-forward-earnings ratios ever seen.

Not a lot of cushion

Even with these warning signs, the market continues to discount a very benign fundamental and macro backdrop. It discounts that firms will be able to raise prices faster than costs, boosting profit margins back to robust levels seen earlier in the cycle. It also discounts relatively stable interest rates, falling tax rates and that trade barriers will not rise. Add to this the implicit notion that the duration of this business cycle will be extended, perhaps for years.

When stocks have relatively low P/E ratios and low priceto- sales ratios, investors can absorb some disappointments, especially early in the cycle, as these setbacks tend to be overcome quickly. But eight years into a cycle, the days of cheap valuations are long since passed. The current high price of financial assets suggests that each step upward leads owners to a more precarious perch. To paraphrase Chris Bonington, famed Mt. Everest climber, each step towards the summit entails more and more risk. We can’t see the summit from here, but right now, it seems to be shrouded in clouds.

James T. Swanson, CFA is the chief investment strategist of MFS Investment Management.


Past performance is no guarantee of future results.

The views expressed are those of James Swanson and are subject to change at any time. These views are for informational purposes only and should not be relied upon as a recommendation to purchase any security or as a solicitation or investment advice from the Advisor.

Unless otherwise indicated, logos and product and service names are trademarks of MFS® and its affiliates and may be registered in certain countries.

April 2017 Investment Commentary

The first quarter of 2017 saw a strong U.S. equity market and a more challenged fixed income market.  The S&P 500 finished the quarter with an impressive 5.5% increase from where it started on January 1st.  The market increase was driven by two major factors:

  • improving corporate profits
  • the anticipation that the Trump Administration will be successful in lowering corporate taxes and reducing regulatory burdens on businesses

During the first quarter, there were a number of events that could have derailed the stock market ranging from the transition to a new U.S. President, to political upheaval in South Korea and missile launches in North Korea, to the official start of Great Britain’s exit from the European Union.  Yet, these were hardly speed bumps in a generally upward trend.


As we have mentioned in prior commentaries, the current bull market is the second longest on record.  We are entering our eighth year without a 20% correction signally a bear market.  While this market is impressive from a historic perspective, it does give pause to consider that no market goes up indefinitely and therefore there is a bear market in our future.  While we understand the rationale of such sentiment, and in fact agree that every great bull market will ultimately be followed by a correction in the normal fashion of economic cycles, the question is always when that bear market will begin?  Some thoughts to help put perspective on this question:

  • By a number of standards, the market is either overpriced or as some pundits say, “priced to perfection.”
  • Others believe that both expanding corporate profits and the likelihood of lower corporate taxes means that the market has room to grow.
  • Glen Eagle falls in the camp that we believe that caution is warranted for the following reasons:
    1. Markets do not go up continually
    2. When expectations are not met, there is often a substantial movement down.  This is true of companies that miss earnings and is likely to be true if the projected spending, tax cuts and regulatory changes do not materialize in the expected timeframes and/or are smaller than anticipated.
    3. The Federal Reserve tightens interest rates faster or greater than anticipated.  As the price of borrowing increases this acts as a brake on both the economy and the stock market.
    4. An unforeseen international event, such as a terrorist event or war can spook the market.
  • While it may be prudent to increase the amount of cash you are holding with the goal of buying into the market if there is a correction, often late cycle bull markets end with a spike up that you can miss if too much money is on the sidelines.  To further highlight this point, JP Morgan did a study in early 2014 that looked at the cost of being out of the market on the largest days of movement in the market over time.  They studied the period from 1993 to 2013 (20 years).  They found that being out of the market for just the ten best days during that market resulted in an investor’s return being 41% less than someone who remained invested for the whole period (see chart on the next page).
  • Consequently, we feel that investors should continue to maintain exposure to the markets, especially the U.S. markets.  Rather than time the markets we are focused on overweighting those sectors and individual companies that we feel are best positioned in the current economic environment.
  • For example, banks are expected to benefit from decreased regulation and increasing interest rates.  The largest banks (those deemed “too big to fail”) have some of the strongest balance sheets they have had in over 50 years and are positioned much better than competitors in Europe.


  • Also, at times when traditional valuations are high it is often useful to focus on more value-oriented stocks that show strong fundamentals.  While this does not mean that they are risk-free from a market correction, it usually does indicate that they are less risky than companies that are being priced to anticipate substantial growth.
  • As interest rates rise, real estate companies (REITS), utilities, and high dividend paying stocks will no longer be as sought after by as many investors because they will be able to find higher yields from bonds and even money market funds.  This effect will not be immediate, but will occur over time as the Federal Reserve continues to raise rates.
  • Those companies that have a history of increasing dividends will still appeal to investors that are concerned about inflation eating up purchasing power.
  • After an extended period of underperformance, we expect that international markets will begin showing more substantial growth.  For US investors, however, some of this growth may be offset by the strong dollar.


A Few Other Thoughts

  • Unless unemployment starts to creep up, which we see as unlikely at this point, we expect at least two more 25 basis points (1/4 of a percent) rate increases from the Fed this year.  Similarly, we expect to see inflation end the year in the 2.5% to 3% range this year.
  • Both the growing U.S. economy and the relative difference between our increasing interest rates ant the interest rates of other countries is helping to keep the U.S. dollar strong.  While this is a challenge for U.S. exports it might be a good time for a European vacation.

Wishing you a warm and happy Spring!

Susan McGlory Michel


Disclosure: This commentary is furnished for the use of Glen Eagle Advisors, LLC, Glen Eagle Wealth, LLC and their clients. It does not constitute the provision of investment advice to any person. It is not prepared with respect to the specific objectives, financial situation or particular needs of any specific person. Investors reading this commentary should consult with their Glen Eagle representative regarding the appropriateness of investing in any securities or adapting any investment strategies discussed or recommended in this commentary.