A look at some of the market movers from the week:

• Nonfarm payrolls increased by 243,000 in January as the unemployment rate fell to 8.3%
• European Union leaders came to an agreement on a permanent bailout fund
• Eurozone unemployment hit a record of 10.4%
• Greek officials continue to laboriously work toward a debt deal

• ABB agreed to buy Thomas & Betts for $3.9 billion
• Japan’s TonenGeneral agreed to buy 99% of ExxonMobil’s Yugen Kaisha unit for $3.9 billion
• ProPublica reported that Freddie Mac may have been betting against homeowners
• Amazon.com reported lower profits as it continues investing in growth
• The Senate approved a bill that would explicitly prohibit Congressional insider trading
• Facebook took the next step towards becoming a public company
• European Union regulators blocked the merger of NYSE Euronext and Deutsche Boerse
• Mitt Romney won the Republican primary in Florida

Commentary               

The week kicked off with the S&P 500 falling 0.3%, but after that small loss the market took off and didn’t look back for the rest of the week. By the time the dust settled on Friday, the S&P index had gained 2.2%, with much of that coming from a 1.5% jump in Friday’s trading. The index has now run up 6.9% year to date.

U.S. economic data was the primary driver behind the strong market action this week. At the beginning of the week, personal income showed better-than-expected growth, while construction spending rose more than anticipated. On the downside, consumer confidence posted a surprise fall and the Case-Shiller home-price index dropped more than expected.

The centerpiece of the week’s economic data though, was the various employment reports. ADP painted a less-than-hoped-for picture early in the week when it said that 170,000 private jobs were created in January. That was well short of the 292,000 in December and the 200,000 that were estimated for January. A day later though, initial unemployment claims continued to work towards lower levels as they clocked in at 367,000, down from 379,000 the week before.

On Friday, markets jumped on the release of the government’s reports on employment. The Department of Labor reported a total of 243,000 jobs added, with 257,000 workers added in the private sector. The stronger-than-expected payroll additions helped push the unemployment rate down to 8.3%. The unemployment rate has now fallen 0.8% since August. Growth in hourly earnings grew 0.2%, which matched estimates, while the average workweek held steady at 34.5.

Digging further into the DoL’s release, employment services was a particularly strong sector with 33,000 jobs added, while the restaurant industry added a similar number. The healthcare sector continued to be one of the top industries in the report, with 31,000 new jobs in the month. Department stores added 19,000 jobs, manufacturing employment expanded by 50,000 jobs, and the construction sector increased by 21,000 workers. On the losing side, clothing stores shed 14,000 workers, while employment in the information sector fell by 13,000, with 8,000 of those jobs coming from the entertainment industry.

Fourth-quarter earnings season continued on as well, but it’s unlikely that it was a significant contributor to the market’s bullishness this week. While many companies continue to top earnings forecasts, they’re doing so at a lower rate than we’ve seen in recent quarters. More than half of the S&P 500 constituents have reported to date and only about 60% have beaten analyst estimates. While this is on the low side, it could also simply reflect analysts’ increasing optimism and, therefore, a higher bar for companies to jump over.

Overseas the picture was decidedly less sanguine. The EU’s statistical office, Eurostat, reported that unemployment in the Eurozone has hit 10.4%, which is the highest rate since the euro was introduced 1998. Unemployment is 23% in Spain and 20% in Greece.

On the bright side, EU leaders did come to an agreement on a permanent bailout fund. The fund will come into effect in July of this year, sooner than the 2013 introduction original discussed. The lending capacity of 500 billion, however, is seen by some as too little to be able to head off the debt crisis in the region. That crisis, meanwhile, pressed on as Greece headed into the weekend still lacking an agreement with lenders that would pave the way for the next phase of the country’s bailout funding.

Finally, back in the U.S., investors prepared themselves for what may be one of the largest IPOs on record as Facebook filed paperwork with the Securities and Exchange Commission. Reports suggest that the company could be looking to hit the public markets with a $100 billion valuation.

Looking ahead

With the U.S.’s big employment report now in the rearview, investors may turn their attention back to the turmoil in Europe. For weeks now, Greece has been working towards an agreement with lenders and hopes were high going into the weekend that a deal could be forged before the new week begins. Markets may react to the details of that deal on Monday, or react to the lack of a deal if Greece is still empty handed at that point.

The U.S. economic calendar will be decidedly lighter next week, but there are a few reports worth keeping an eye on. Consumer credit will be released on Tuesday. While consumers are broadly in need of deleveraging, it’s their spending that forms the backbone of the U.S. economy. Market watchers will look to this report for signs that consumers still have a stomach for shopping. As always, initial unemployment claims have the potential to move markets if they come in drastically different than the 370,000 estimate. Finally, the week will conclude with the University of Michigan consumer sentiment survey. With consumers playing such a key role in the economy, their state of mind is a big concern for investors. Current expectations have that measure falling from 75 to 74.

Earnings season will also continue to soldier on next week. Though it’s not likely that it will have a huge impact on the broad market, there will nonetheless be some key companies reporting December-quarter results. Notable reports will come from Sysco, Yum! Brands, Coca-Cola, Walt Disney, CVS, PepsiCo, and NYSE Euronext.

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About Smart401k

Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.

Regardless of party affiliation or your interest in politics, here are three topics receiving mention in the address that could affect you and your finances in some way:

Taxes

President Obama proposed a tax rate of no less than 30% for anyone making over $1million dollars, while stating taxes should not go up for anyone making less than $250,000 per year.  While the details of this plan remain unclear, most would agree that some level of tax reform could be beneficial.  With the current level of political division in Washington it’s difficult to imagine any type of meaningful reform could gain bipartisan support, at least in the near future.

Throughout 2011 most employees benefited from a 2% reduction in the social security tax withholding rate.  This provided slightly larger pay checks for many.  This tax reduction was set to expire at the end of 2011, but after much political bickering was extended through February 2012.  This means another large-scale political battle is likely on the horizon about whether to extend this payroll tax cut beyond February.  Without agreement on an extension, the social security tax rate for employees will return to 6.2%.

Housing

The housing market continues to drag on an economic recovery struggling for traction.  With mortgage interest rates at historical lows, the President stated he is sending Congress a plan allowing every responsible homeowner a chance to refinance and save approximately $3,000 per year. The hope is this will free up money for homeowners and encourage them to remain in their homes.  Potentially, this could help stabilize the market and boost confidence for weary homeowners and homebuyers.  The concern for some is that because of the decline in home values many owe far more than what their homes are currently worth, a potential obstacle for refinancing.

Student Loan Interest Rates

We have heard a lot of talk lately about students burdened with mountains of student loan debt.  The College Cost Reduction and Access Act of 2007 provided for annual reductions in the interest rate charged on new subsidized loans starting in school year 2008-09 and ending in 2011-2012.  This act reduced the interest rate on subsidized loans originated in 2011-2012 to 3.4%.  Currently, this is set to expire at the end of July 2012 which means the interest rate on subsidized student loans originated after July this year could see interest rates up to 6.8%.  With the cost of a college education soaring, students and parents are relying more and more on loans to meet financial obligations.  A significant increase in interest rates means more costs for an already costly higher education.

If history is any indicator we can look forward significant political debating regarding these issues and many others in the coming months. As we frequently remind our readers, have a plan based on your own financial needs and goals. Try to steer away from making decisions based on the latest headlines

Randy Schaller

Investment Adviser

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About Smart401k

Smart401k is a web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans.  Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at www.smart401k.com.

 *Photo Credit Secretary of Defense

The Pension Research Council at the Wharton School recently released research indicating that people allow their peers to influence their 401(k) investing. According to the study, 401(k) investors tend to increase their equities allocations when co-workers are experiencing good returns and decrease them when co-workers lose money.

This behavior is part of a larger investing phenomenon commonly called herd mentality. Our ancestors survived by adopting a herd mentality. They stuck together because there was safety in numbers.

Our common desire to follow the herd and stick together is a carryover from days long passed, but the herd isn’t safer when it comes to retirement investing. Actually, your retirement saving and investing strategy should be personalized beyond any need to think about your co-workers’ investment returns.

Why? If Susan with the window office and Larry from two cubicles over are seeing good returns, why shouldn’t you jump to follow their lead?

Reacting to others’ portfolios is akin to reacting to short-term market fluctuations. In both instances, you’re allowing recent events, rather than the big picture, to dictate investing decisions. And being reactionary has not, historically, worked well for investors.

Chasing returns means you’re moving your money into an investment, sector, or asset class that performed well during the previous period without researching how it’s likely to perform in the coming months. In fact, moving into an investment that’s already been performing well means you’re probably buying high and hoping it goes higher.

This is a risky endeavor. You’re relying on your retirement savings to allow you to live comfortably when you can no longer work—or don’t want to. Retirement investors should take a long-term view to guard and protect their nest eggs. Don’t be concerned about co-workers’ returns or one day’s market performance.

Because retirement investing is a long-term activity, it requires some patience. Here are steps you can take to help stay focused on your personal objectives:

Think about how you want your retirement to look. Be realistic. Where do you plan to live? What do you want to do with your time? At what age do you plan to retire? What might you want to buy? What living expenses will you have? How will your health history affect your retirement spending?

Decide how much money you’ll likely need to cover the costs you anticipate during retirement. If your goals and expectations are unrealistic, either adjust them or find a way to save more money.

Determine your tolerance for investment risk. Risk tolerance is a personality trait. It may change as you change as a person, but it shouldn’t change because the market is doing better or worse.

Choose an appropriate asset class allocation to suit your situation. Diversifying your portfolio into several asset classes is instrumental in decreasing your overall risk, but the percentage of your money you allocate to a given asset class will vary depending upon your risk tolerance, time line to retirement, investing biases, and the current economic conditions.

Choose the funds within your 401(k) that best match your allocation. Be sure to research each fund to figure out how it’s performed relative to peers. Also consider fund manager track records and look at whether funds have stayed true to their investing goals.

Decide how much you’ll need to save now and by how much you’ll need to increase your savings over time. Consider how your investments might perform using historical numbers tied to your asset class allocation and future economic forecasts.

Establish a plan that includes calendar reminders. The plan should contain the dates when you’ll:

• Increase your contribution. It’s good to do this every year or two.
•  Re-balance your portfolio to ensure you maintain your desired asset class allocation. Do this quarterly or twice yearly.
• Reassess your asset class allocation. You should do this every couple of years, or more often if you’re within 10 years of retirement or if economic conditions are changing rapidly. Continue to reassess throughout retirement.

If this seems like a hassle, consider working with a professional. Don’t just bury your head in the sand; your retirement nest egg is too important. There are better options than looking over the shoulder of your office-mate.

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Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.

A look at some of the market movers from the week:

• The U.S. economy grew more slowly than expected in the fourth quarter
• President Obama delivered his State of the Union address
• The Federal Reserve convened its rate-setting meeting and released its inflation forecasts
• Talks to avoid a Greek default dragged on

• In response to sanctions, Iran is considering cutting off EU oil exports
• Thorsten Heins stepped in as the new CEO of Research in Motion
• Newt Gingrich pulled off a surprise victory in the South Carolina GOP primary
• Apache agreed to buy Cordillera for $2.9 billion
• SPX agreed to sell its auto tools business to Robert Bosch for $1.2 billion
• Apple’s earnings blew past expectations
• Japan reported its first trade deficit in more than 30 years
• Netflix shares soared as the company resumed subscriber growth
• HSBC is under investigation by a Senate panel for money laundering
• Eastman Chemical agreed to buy Solutia for $3.4 billion
• Ford profits were short of expectations

Commentary               

After a red-hot start to the year, markets slowed markedly over the past week. Though the S&P 500 still managed to eke out a 0.1% gain for the week, three of the five trading days ended in the red, including both Thursday and Friday. The weekly gain continues 2012′s winning streak and puts the year-to-date gain at 4.7%.

Domestically, economic views took a hit as reported GDP growth was slower than expected and the Federal Reserve offered its own lackluster view. For the fourth quarter, the government’s advanced reading of GDP growth came in at 2.8%, a marked increase from the 1.8% growth rate in the third quarter, but short of the 3.2% rate that was expected. The Bureau of Economic Analysis’ advanced reading uses an incomplete dataset — a more complete dataset will be used in the late-February second estimate.

The fourth-quarter GDP growth shows a U.S. economy that is picking back up, but is still growing at a relatively sluggish rate. The breakdown of the quarter’s growth, however, continued to highlight the contrast between private markets, which have been experiencing a stronger recovery, and federal, state, and local governments, which have struggled. For the quarter, federal consumption expenditures and gross investment fell 7.3% while state and local government spending dropped 2.6%.

Meanwhile, as the Federal Reserve wrapped up its January rate-setting meeting, it offered its own lackluster view of the country’s economic prospects. The central bank highlighted forecasts for inflation and employment — the two ends of the bank’s dual mandate. Pointing out that inflation has stayed at low levels while unemployment has remained stubbornly high, Fed Chairman Ben Bernanke suggested that the central bank may need to step in with further accommodative policy.

Other economic releases during the week provided some positive notes as durable goods orders increased more than expected and the University of Michigan sentiment survey climbed more than anticipated. On the other hand, both pending home sales and new home sales missed expectations, while leading economic indicators grew more slowly than estimated.

Overseas, Greece was still front and center as debt talks continued to drag on. Private bondholders butted heads with government officials as the two sides sought an agreement that would sidestep a default. Meanwhile, other European countries — notably Germany — have been stepping up their own rhetoric, pushing the country to take extraordinary steps to come to an agreement and avoid defaulting.

Meanwhile, the situation in Iran continued to unfold as the European Union approved a stepped program to reduce Iranian oil imports, while Iran fired back with a possible ban on exports to the region. Let by U.S. urging, countries around the world are applying sanctions to Iran in an effort to bring the country to the negotiating table over its nuclear arms program.

Finally, fourth quarter earnings season pushed on. Thus far, 169 of the S&P 500 companies have reported and roughly two thirds of them have topped analysts’ expectations. That companies are still surprising Wall Street to the upside is a positive, but the proportion of estimate-topping companies is notably lower than the previous few quarters. Among the companies topping estimates this week were Texas Instruments, EMC, Coach, Johnson & Johnson, McDonalds, Yahoo, Apple, Netflix, and Boeing. Meanwhile Travelers, Verizon, Stryker, and Exelon were among the companies that fell short of expectations.

Looking ahead

Once again, many market watchers will have their eyes on Greece as the week kicks off. As the country continues debt negotiations through the weekend, hopes are high that an agreement will be reached before the new week starts.

Earnings have provided a strong push for the market over the first few weeks of the year and announcements will continue next week. The schedule will be jam packed featuring results from Gannett, Aflac, Amazon.com, Archer-Daniels-Midland, Eli Lilly, Exxon Mobil, Illinois Tool Works, Mattel, Pfizer, UPS, Hershey, Las Vegas Sands, and Whirlpool in the first part of the week. The final two days of the week will include reports from Deutsche Bank, Dow Chemical, Gilead Sciences, Kellogg, Mastercard, Merck, Unilever, and Clorox.

And with the first month of the year closing out, investors will want to keep a close eye on economic reports as well. The centerpiece of the week will be the numbers on employment. On Wednesday, payroll giant ADP will release its read on January employment change — it’s currently expected to show 175,000 new jobs added in the month. On Friday, the government will follow with its read on employment. Estimates call for 170,000 payroll additions, including a private payroll increase of 145,000. That compares to respective increases of 200,000 and 212,000 in December. The unemployment rate is seen holding steady at 8.5%.

Also worth watching are reports on personal income and spending, the Chicago Purchasing Managers Index, consumer confidence, construction spending, and factory orders.

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About Smart401k

Smart401k is a web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans.  Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found atwww.smart401k.com.

I’ve had several recent conversations about the lackluster performance we saw from most sectors last year.

Discussions start with someone expressing frustration about slow investment growth, and they devolve into a round of Twenty Questions about big returns.

In retirement investing, there will be up years, down years and flat years. I know it’s easy to become frustrated like these folks. However, when you start to feel blinded by a hunger for big growth, I encourage you to read through this particular set of posts from the Smart401k blog rather than seeking information about the next big thing. And think about this investment:

The Match

What if there was one investment that could consistently deliver an outstanding return – an investment that wasn’t dependent upon stock and bond returns? An investment like this does exist. It’s right under the noses of 401(k) investors, and many don’t take full advantage. The investment, of course, is your employer’s matching contribution.

How else can you invest money out of every paycheck and have it instantly earn a 25%, 50% or even 100% return? All you have to do is ensure you’re contributing enough to max out your employer’s matching contribution.

There are a couple things to keep in mind:

(1) Understand the vesting schedule for your employer’s contributions. Vesting refers to the amount of time you must work at a company before you have full ownership of employer contributions.

(2) In some cases, if you contribute a large portion of your pay for the first few months of the year then halt contributions for the remainder of the year, you may not receive the full match. Keeping your contributions consistent throughout the year ensures you don’t reach the maximum allowable contribution before you’ve received all the matching funds your employer is willing to give.

(3) If you truly can’t afford to max out your employer match, increase your contribution each year. A 1%-per-year increase, or even a fraction of a percent, means you’re moving in the right direction. Increase your contribution by more when you get a raise.

So, during the flat years, take comfort knowing your company match is one truly great investment.

If you’d like to discuss matching contributions or general retirement planning, our adviser team is available at 877.627.8401 or info@smart401k.com.

Charlie Koch

Senior Investment Adviser

*The availability of an employer matching program does not guarantee that investments held in any particular employee retirement plan will be profitable.

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About Smart401k

Smart401k is a web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans.  Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at www.smart401k.com.

At first glance, the diet industry and financial services industry seem to have nothing in common, other than being multi-billion dollar markets.

But they share a common goal: making consumers believe there’s an easy solution to issues that typically take time, focus, and determination. The problem with chasing the easy way is that it usually doesn’t work.

Too frequently there are quick-and-easy fads that claim dieters will lose weight without healthy eating or exercising habits. Similarly, there are always new financial products claiming to help investors reach goals with magically (read: unsustainably) high returns.

In other situations, diets and financial plans are too restrictive and impossible to maintain. Here’s the problem: Diets end, and people fall back on the unhealthy eating habits that led them to need the diet in the first place. Plus, the diet that helped someone lose weight rapidly probably wasn’t, itself, all that healthy. Likewise, the latest-and-greatest in investing products will have bad days or months. It could also have hidden fees or be structured to prohibit investing flexibility.

There’s no magic diet, nor is there one single investment that will help you realize your hopes and dreams.

So where does that leave us? We can’t control external forces, but much of our financial and bodily health is in our hands. It’s time to stop looking for quick fixes and realize that healthy eating habits and retirement planning are lifelong pursuits that require continued attention and focus. There will be good times and bad, but one day or month won’t ruin everything.

Here are some tips to help you take control and improve your financial health:

Increase your savings. To do this, you need to spend more money on retirement (by putting it in retirement savings) and cut back on frivolous spending. It’s the financial equivalent of eating more fruits and vegetables while cutting back on fatty fried foods. You’ll have more money for retirement, assuming it’s invested the same as your current savings. Additionally, you’ll need to reduce the cost of your current lifestyle in order to increase your savings. Learning to live on less now means you might be able to live on less during retirement.

Establish short-term savings and retirement goals. When you want to lose weight, it’s easier to think about short-term goals. The same goes with your finances. If you aren’t working toward a specific goal, it’s easier to spend money on things you don’t need. Short-term goals provide positive reinforcement while you work toward longer-term goals, increasing the likelihood of you sticking to your plan. Focus on a fun short-term goal, like saving a specific amount of money for a vacation fund. Then divide retirement savings goals into segments in time, each reflecting the different lifestyle needs you’ll have at different points in your life.

Don’t be discouraged by a slip-up. Even the health nuts among us will occasionally eat poorly, and everyone has periodic budgetary blunders. Learn from mistakes, and don’t let them derail your efforts. All too often, people allow missteps to hinder progress toward important goals.

Don’t overcomplicate things. At the end of the day, you need to eat fewer calories than you burn if you want to lose weight, and you need to eat healthy foods for long-term fitness. Similarly, you need to spend less money than you make if you want to build a retirement nest egg, and you need to select appropriate investments to grow your account in a healthy way. Creating complicated plans and running after “perfect” investments only increases the likelihood of making mistakes and quitting. Your retirement plan should contain an investment strategy that’s easy to use in your 401(k) account or IRA—a strategy that you can follow in good times and bad times.

If we set easy-to-implement plans and stop looking for easy-way-out quick fixes, we can learn to focus on long-term goals. That translates into more time to spend on interesting pursuits and less stress associated with long-term unknowns. All good things.

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Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.

A look at some of the market movers from the week:

• Sumitomo Mitsui Financial Group and Sumitomo Corp agreed to buy Royal Bank of Scotland’s aircraft-leasing business for $7.3 billion
• China’s GDP growth slowed in the fourth quarter, but was still 8.9% and ahead of expectations
• Shares of Carnival plummeted after its Costa Concordia cruise ship capsized
• Pembina Pipeline agreed to buy Provident Energy for $3.2 billion

• Founder Jerry Yang stepped down at Yahoo
• The International Monetary Fund is looking to raise $600 billion in new capital
• On Friday, Greece was closing in on a deal with creditors
• Wikipedia shut down for 24 hours to protest the Stop Online Piracy Act
• The World Bank lowered its global growth expectations
• Eastman Kodak declared bankruptcy
• President Obama rejected the plans for the controversial Keystone XL pipeline
• Intel reported better-than-expected earnings and shook up its management team
• Microsoft topped expectations, but highlighted falling PC sales
• Strong results from Bank of America and Morgan Stanley helped lift financial stocks
• Google shares slipped as results missed targets
• The market cheered strong results from IBM
• New York area manufacturing showed gains
• Initial unemployment claims fell to the lowest level in almost four years

Commentary               

The 2012 surge continued over the past week, racking up another 2% gain by the close of trading on Friday. It was another holiday-shortened week, but following the Martin Luther King Jr. holiday on Monday, the S&P 500 managed to post four straight positive trading sessions, with a particularly strong 1.1% gain on Wednesday. The index has now tacked on 4.6% so far this year.

The week’s biggest gain on Wednesday came as the International Monetary Fund proposed raising $600 billion and Goldman Sachs reported better-than-expected earnings. The IMF may target raising $500 billion in new funds to increase its lending capacity, while taking in another $100 billion as a capital buffer. The organization has been focused on the Eurozone and its need for capital as it faces a crippling debt crisis.

Markets rallied as the move would provide some further firepower to help the Eurozone find its way out of its current rut. However, the plan could face significant hurdles as many of the G20 nations are averse to pumping more money into the Eurozone bailout. In particular, the U.S. has expressed that it has no plans to offer additional funding to the IMF.

Meanwhile, Goldman Sachs’ fourth-quarter earnings soared past analysts’ estimates and encouraged investors on the financial sector in general. Goldman’s earnings were down significantly from last year as it dealt with an increasingly inhospitable environment for both trading and capital raising, but cost cutting helped the investment bank report more profit than expected. Later in the week, Bank of America and Morgan Stanley underscored the stronger-than-expected results from Goldman by reporting better-than-expected earnings of their own.

As investors cheered the IMF’s capital-raising proposal, Greece worked to come to an agreement with its creditors that would pave the way for its next round of bailout funds. At week’s end, reports on the progress suggested that a deal may be close and could be struck over the weekend. In the deal being discussed, private bondholders may lose 65% to 70% of their investment, but it would avert a nasty default by the struggling country.

Other good news from outside the U.S. borders came from China as fourth-quarter GDP growth was higher than expected. Economic growth for the quarter clocked in at 8.9%, which was the weakest showing in two and a half years, but topped the anticipated 8.7% rate. As a high-growth giant on the global stage, the fate of China’s economy looms large for other major economies including the U.S. and European Union.

Balancing out some of the positive news from overseas was a dour global growth forecast from the World Bank. The bank cut its outlook for world economic growth from 3.6% per year in both 2012 and 2013 to just 2.5% in 2012 and 3.1% in 2013. While the World Bank said that the crisis in Europe appears to be contained, it noted that if it is allowed to get out of control there’s the potential for a wider crisis to drag down global growth by as much as 4%.

Back in the U.S., earnings season surged ahead. As with Goldman, B of A, and Morgan Stanley, there were quite a number of expectation-topping announcements that helped drive the market forward. Tech played a particularly prominent role, with eBay, IBM, Intel, and Microsoft all positing earnings beats. Other notable estimate-topping reports included BB&T, Southwest Airlines, Unitedhealth, American Express, and Freeport McMoRan.

On the other hand, there was a significant number of earnings disappointments including Citigroup, PNC Financial, Google, and Capital One. Thus far through earnings season, 60% of S&P 500 companies have topped analysts’ estimates. While that may sound good, it’s actually notably lower than the share of S&P companies that topped estimates in recent quarters. To be sure, the fact that companies aren’t topping estimates as often as they have could simply mean that Wall Street has gotten more optimistic and raised the bar for reporting companies. The data is based on just 14% of the index’s constituents having reported thus far, but is definitely a trend to watch.

Looking ahead

Starting off the week next week, the progress — or lack thereof — on the Greek debt talks may be what investors are most focused on. If an agreement is reached, there’s good reason to expect stocks to rally. If, however, bondholders balk at the terms of the proposal, global markets could end up fretting about the potential for a Greek default.

While Greece and Europe may play a prominent role in market movements next week, they’ll have to compete with a flood of earnings reports in the U.S. Fourth-quarter earnings season will be in full swing and there will be plenty of reports for the market to react to. Early in the week, significant reports will include Halliburton, Texas Instruments, Apple, EMC, Johnson & Johnson, McDonalds, Verizon, Yahoo, Abbott Laboratories, Boeing, United Technologies, and WellPoint. In the final two days of the week major announcements will come from 3M, AT&T, Bristol Myers Squibb, Caterpillar, Colgate-Palmolive, Lockheed Martin, Starbucks, Chevron, Ford, and Procter & Gamble.

The economic calendar will add a few additional events for investors to keep their eyes on. The Federal Reserve will make its rate decision on Wednesday. That will offer little surprise as far as where the central bank targets its key rate, but the commentary from the Open Market Committee will be closely watched. After a big surprise to the downside last week, it will be worth watching the weekly reveal of initial unemployment claims. Finally, we’ll get a very important first read on fourth-quarter GDP. Current estimates expect the quarterly growth to clock in at 3.1% after a lackluster 1.8% in the prior quarter.

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Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.

Last week, after Kansas City received a dusting of snow, my 20-minute drive to work became an hour-long journey. I found myself dreaming of places where winter is defined by long-sleeve shirts rather than expedition-weight parkas.

I’m still a few decades away from retirement, but it’s never too soon to create retirement goals and use my 401(k) investment plan to reach them. Part of my retirement plan is to become a ‘snowbird’ and journey south for the winter. Since I know what I want to do, it’s easier to create a strategy to reach my goals.

Whether you’re already a snowbird, within a few years of starting your migratory lifestyle or just dreaming and strategizing, here are some things to consider as you do your financial planning:

Buy or Rent – Probably the biggest decision a snowbird has to make is whether to buy or rent. The real estate bubble hit snowbird destinations hard – think Florida, Arizona, Nevada and parts of California. Depressed prices create buying opportunities if, and only if, you can comfortably afford to purchase a second home.

If you rent, look for a furnished place so you won’t feel like you’re moving into a storage unit each year when you prepare to journey northward for the summer.

Property Upkeep – If you’re gone several months at a time, have someone look after your home(s). Take steps to avoid burglary and prevent your home from appearing vacant:

• Have newspapers and mail forwarded to your new address, or ask friends/family to pick them up regularly.
• Contract with someone to mow the lawn, water plans and shovel snow.
• Offer your driveway and/or garage to neighbors looking for an extra parking space.
• If you’re able to find a trustworthy house sitter, this can be a mutually beneficial arrangement.

Update Your Address – Inform banks and credit card companies when you leave in order to avoid service interruptions. If a bank sees lots of out-of-state charges with no explanation, your accounts could be temporarily frozen.

Also, avoid missed payments and miscommunications by taking advantage of the Internet:

• Sign up to receive bills and bank statements via email rather than paper mail.
• Use online banking to manage address changes and pay bills from anywhere.
• Establish auto-debits for bills that will cost the same amount each month.

Bills – Your utility bills will be lower in your home-based property. But continue to budget for these items because it’s inadvisable to completely eliminate utility services for six months of the year (think burst pipes in the winter and mold in the summer). Also, check with your cable and Internet provider(s) to figure out whether you can suspend service during the months you’re gone without incurring major penalties.

Insurance – Inquire about the details of your health insurance policy to be sure you understand how it works when you’re out of your primary network. Some providers may have multi-state plans while others charge higher co-pays, deductibles and out-of-network fees.

If you leave a car behind when you head to your vacation home, you may be able to suspend or lower some of your coverage levels and save on expenses. Alternately, taking a car with you could mean changing the state of your coverage.

While the initial logistics may be stressful, I’ve never spoken to a snowbird who regrets the decision to leave cold winters behind. If you have experience being a snowbird, we’d love to hear your stories and advice. Please leave your comments below.

Joe McCulloch

Senior Investment Adviser

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About Smart401k

Smart401k is a web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans.  Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at www.smart401k.com.

A look at some of the market movers from the week:

• Bristol-Myers Squibb agreed to buy Inhibitex for $2.5 billion
• U.S.-Iran tensions mounted amid concerns over the country’s nuclear program
• As it kicked off fourth-quarter earnings season Alcoa had an optimistic outlook
• Electronics companies showed off their wares at Las Vegas’ Consumer Electronics Show

• Global auto makers strutted their stuff at the Detroit auto show
• Fitch urged the European Central bank to head off a cataclysmic euro collapse by buying more Eurozone debt
• German GDP shrank in the fourth quarter
• Republican Presidential candidate Mitt Romney became the first non-incumbent Republican to win primaries in both Iowa and New Hampshire
• Chevron warned that fourth-quarter earnings would be softer than expected
• CIT Group cut off financing to Sears’ suppliers
• The Federal Reserve’s Beige Book report showed resumed moderate growth
• A prohibited fungicide was found in imports of orange juice
• Siemens and Philips both warned about lower earnings
• Consumer credit surged
• Retail sales grew much more slowly than expected

Commentary               

So far so good. Through the close of trading on Thursday, the S&P 500 was continuing to treat investors well for 2012. After the index closed roughly flat for 2011, it has tacked on 3% so far in the new year. In the week-to-Thursday, the S&P had added 1.4% after reporting gains in all of the first four trading days of the week.

The gains came despite some notable economic disappointments on Thursday as retail sales were reported to have grown just 0.1% in December, while retail sales excluding auto sales fell 0.2%. Economists were anticipating total growth of 0.4% and ex-auto growth of 0.3%. The data is a significant disappointment as the U.S. economy leans heavily on consumers. Should their pace of purchasing continue to slow, that could drag down the entire economy.

Also on Thursday, initial unemployment claims jumped to 399,000 from 375,000 in the previous week. It was expected that claims would stay at the 375,000 level. While this is a concerning increase, it’s notable that unemployment claims tend to be volatile from week to week, so it’s best to look at a longer progression.

So with those disappointments in front of investors, what was it that was sending stocks higher? Surprisingly, Alcoa. At the end of last week, Alcoa preempted its earnings-season-starting financial report by telling investors that its results would be worse than previously expected. When the company officially announced results though, as is often the case, investors were far more focused on the company’s outlook than its previous results — and the outlook was distinctly positive. Aluminum is a widely-used metal associated with global growth and economic health, so Alcoa’s view that demand is strong reasonably encouraged investors on the broader economic outlook.

The following day, the Federal Reserve bolstered the positive sentiment with its Beige Book report — a region-by-region run-down of the U.S. economy. The central bank said that reports from the 12 Fed districts showed “modest to moderate” growth. By contrast, in the previous report, the Fed described growth as “slow to moderate.” In particular, New York and Chicago noted a pickup in the pace of growth.

In Europe, the concerns over the debt crisis affecting the region’s economy was underscored when Germany reported a 0.25% drop in GDP for the fourth quarter. For all of 2011, the country managed a peppy 3% growth pace, but the fourth-quarter results may show that the crisis is beginning to put a serious drag on even the strongest of the European Union’s economies. Balancing out the news from Germany was Fitch’s reiteration that it won’t downgrade France’s AAA rating. The credit-rating agency confirmed that it does not see France as a country in crisis.

Finally, just as we thought that the European Union was our biggest overseas risk, Iran has been making serious waves. The U.S. has been increasingly concerned over the possibility of nuclear weapons in Iran and that’s led to mounting tensions between the two countries. To date, the primary escalation appears to be rhetoric, but investors may want to keep an eye on developments in that showdown.

Looking ahead

Don’t expect much action next Monday — the U.S. markets will be closed for the Martin Luther King Jr. holiday. When the markets reopen on Tuesday though, earnings season will be in full swing.

After the typical slow start to reports hitting the wires, next week will start the onslaught of earnings reports for the fourth-quarter reporting period. On Tuesday, major reports will include Citigroup, Delta Air Lines, M&T Bank, and Wells Fargo. Wednesday will feature Bank of New York Mellon, Charles Schwab, eBay, and US Bancorp.

Thursday will be particularly active, bringing AMD, American Express, Bank of America, Capital One, Freeport McMoRan, Google, Intel, IBM, Johnson Controls, Microsoft, Morgan Stanley, Southwest Airlines, Union Pacific, and UnitedHealth. Finally, the week will close on Friday with General Electric, Schlumberger, and SunTrust Banks.

In addition, there will be a few notable economic reports during the week. In the front half of the week investors should keep an eye out for the Empire Manufacturing report, the Producer Price Index, and industrial production growth. In the second half of the week, key reports include initial unemployment claims, the Consumer Price Index, housing starts, the Philadelphia Fed’s manufacturing report, and existing home sales.

While the above should be more than enough to keep investors hopping during the week, it’ll also be important to keep a close watch on developments overseas and in particular in the European Union and Iran.

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Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.

It’s a new year. With 2012 underway, many of you have received retirement account statements or a notice to view your information online. (If you haven’t yet, you will soon.)

This provides the perfect opportunity to spend some time examining your investment strategy, and make sure you’re on track to reach your goals. This is also a good time to review appropriate benchmarks to see how your investments stack up.

But finding that appropriate benchmark seems to bring about confusion. Some turn to ‘The Market’ to compare their investments. But what does that really mean? There’s typically a big difference between ‘The Market’ and someone’s diversified portfolio.

Your portfolio and the market

The term market tends to be thrown around loosely by various media outlets, which can lead to confusion and misinterpretation. So let’s look at the two most common measures of the U.S. stock market for 2011:

• The S&P 500 Index was essentially flat on the year, with a fractional downside move of less than 0.01%.(finance.yahoo.com, 12/30/11)
• The Dow Jones Industrial Average was up 5.5%.(finance.yahoo.com, 12/30/11)

The indexes above are the most commonly cited indicators of market performance in the U.S., but it’s important for investors to realize the difference between indexes and personal account performance.

• The S&P 500 is an index that tracks the stock prices of 500 large-cap U.S. companies from various sectors of the economy.
• The Dow Jones Industrial Average (or just Dow to save time) is a price-weighted index that tracks the performance of 30 of the largest U.S. stocks. The Dow 30 are mainly industry-leading companies with large market caps and a history of stable earnings.

It’s important for investors to realize that comparing the performance of your own investments with a market index like the S&P 500 or the Dow is like comparing apples with oranges – or even more like comparing apples with fruit salad. As stated above, both indexes reflect the performance of only one asset class – large-cap U.S. stocks.

However, if you’re a diversified investor with an investment plan intended to stay in-line with your personal goals and risk tolerance, your portfolio could hold investments from additional asset classes, like small-/mid-cap companies, bonds, international stocks and cash. If you’re looking to use benchmarks as a way of tracking the performance of your investments, one suggestion would be to create your own portfolio of benchmarks that matches your mix of personal investments. For example:

Your Portfolio                                                    Suggested Benchmark Portfolio

20% Bonds                                                            20% Barclays Capital US Aggregate Bond Index

15% International Stocks                                     15% MSCI EAFE Index

5% Cash                                                                5% US Treasury T-Bill Auction 3-month

60% Large Caps                                                     60% S&P 500 Index

The performance information for the above listed benchmarks can be obtained using market data sites like Morningstar.com. There are also a number of Target Risk Indexes available to compare with on Morningstar’s website using your own personal risk level. However, a benchmark will never perfectly reflect your personal asset allocation and your own account’s performance since there are so many other factors involved.

The purpose of diversification is to minimize volatility and reduce risk by holding investments from different asset classes since each asset class will behave differently in particular market conditions.

Market volatility can bring short-term periods of outperformance and underperformance, and a diversified portfolio won’t look exactly like the indexes.

Here is an example: If you’re a diversified investor with your money spread across multiple asset classes according to your risk level, you are protecting yourself from the risk associated with a decline in any one category. If 20% of your portfolio is an asset class that suddenly declines 5%, only that small portion of your account will decline by that 5%. At the same time another category may have performed fairly well recently, which may completely offset that 5% decline. Thus, showing the advantage of diversification.

This isn’t to say you shouldn’t compare your investment results to a benchmark, quite the opposite. You should absolutely track performance. But take care to choose the right comparisons so you’re making informed decisions. Make sure you understand what your asset class allocation is and why you’re invested in that manner (e.g., your time until retirement, your desire to keep risk to a minimum, etc). Then find the right benchmarks for your asset mix. There could be several to track, but you’ll have a better idea how your investments compare.

If you want to talk about your portfolio allocation or learn more about the benchmarks most appropriate for your account, contact the Smart401k team at 877.627.8401.

Andrew Thomas

Smart401k Associate Representative

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Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.

A look at some of the market movers from the week:

• Payroll data was better than expected and the jobless rate fell to 8.5%
• France’s Total is investing $2.3 billion in U.S. shale gas reserves
• Greece faces getting pushed out of the euro if it doesn’t close on its bailout deal
• ExxonMobil received a small fraction of the compensation it sought for seized assets in Venezuela

• BP continues to press Halliburton to pay spill costs for the Gulf of Mexico disaster
• Yahoo hired former PayPal chief Scott Thompson as its new CEO
• The Federal Reserve took another step towards becoming more transparent
• Eastman Kodak may be preparing for a Chapter 11 bankruptcy filing
• Alcoa announced that it will take a restructuring charge that will push fourth-quarter earnings into the red

Commentary               

After a distinctly uninspiring flat finish for 2011, the S&P 500 started off on a positive note with a 1.6% gain for the first week of the year. Investors rang in 2012 with a heartening 1.5% boost on Monday and then allowed the major indexes to tread water through the rest of the week. Of course while a gain is better than a loss to kick off the year, the past week was a holiday-shortened one and trading volume was still a bit light. So it’s difficult to read too much into the week’s performance.

The lack of any broad market gains in 2011 reflected the lack of serious economic progress in the global economy during the year. The U.S. took some halting steps forward, but the environment remained shaky. Meanwhile, the situation in Europe went from bad to worse during the year as bond investors became increasingly concerned about large countries like Italy and Spain and their ability to repay heavy debt loads. Leaders in the region struggled to come to an agreeable solution and global markets were whipsawed as momentary glimpses of progress were overwhelmed by bouts of doubt.

As we move into 2012, the first major data release of the year — December’s U.S. payroll numbers — showed definite promise. Nonfarm payrolls rose by 200,000 during the month, above the 150,000 that were expected. Private payrolls were up by 212,000 against estimates of 170,000. Hourly earnings rose 0.2%, which was in line with estimates, while the average workweek unexpectedly rose to 34.4. The unemployment rate, which has been on a stead downtrend, fell to 8.5% from 8.7% in November.

Initial unemployment claims and ADP’s payroll report seemed to confirm the laudable numbers. ADP showed 325,000 jobs added, well above the 180,000 that economists were expecting. Initial unemployment claims fell to 372,000, down from 387,000 the week before.

If there is a less optimistic aspect of the report, it was that November’s payroll gains were adjusted down from 120,000 to 100,000. Also, some of the jobs added in December were likely seasonal and will disappear in the beginning of the new year.

Among other positive economic reports were the Institute for Supply Management’s index, which rose from November and beat estimates, and construction spending, which grew 1.2%. Factory orders gained 1.8% in November but that was less than the 2.1% that was estimated.

The Federal Reserve also released minutes from its most recent rate-setting meeting. The most significant note from the meeting may have been the decision by the Fed to continue increasing its transparency. The central bank has taken many steps in recent years to pull back the curtain on what actions it’s taking and how it will target interest-rate changes. This most recent step will likely go down as one of the most significant as the Fed will begin providing detailed information on its interest rate forecasts, including projections from each of the 17 members of the rate-setting committee. Since the Fed’s target interest rate is a key benchmark that impacts everything from interbank lending to mortgages and credit cards, the change in policy is definitely one to keep an eye one.

Looking ahead

If you’ve been pining for the chaos of earnings season, your wish is about to be granted. On Monday, earnings bellwether Alcoa will kick off fourth-quarter earnings season with its report after the closing bell. As is typical, the first week of the season won’t be overly active, but there will be some notable companies to watch. That short list includes Lennar, JPMorgan Chase, and M&T Bank.

Investors will want to cross their fingers that while Alcoa will kick off the earnings season, it won’t necessarily be setting the tone for other companies’ reports. Just a few days before reporting fourth-quarter results, Alcoa announced that it’s shuttering 12% of its global capacity and taking a restructuring charge in the quarter. Looking ahead, the move could also cost jobs that the U.S. economy so desperately needs.

Coming off a fairly positive week of economic data, there will be a number of reports to keep an eye on next week. Wholesale inventories are expected to show 0.5% growth for November. While a lagging report, growth in inventories could reflect rosier expectations from businesses. Mid-week, the Fed will release its Beige Book report, a region-by-region look at how the economy is progressing.

Retail sales for December will be released on Thursday. As the U.S. economy is run largely on consumer spending, this is a key indicator. Current estimates have that measure growing 0.4% for the month. Closing out the week, we’ll see the University of Michigan’s consumer sentiment survey. As with retail sales, any signs that U.S. consumers are more sanguine are worth getting excited about. That index is expected to rise to 71 for early January from 69.9 in December.

And of course we can’t close the look ahead without mentioning that any activity in Europe that swings expectations in either direction — that is, that the European Union will be able to handle the debt crisis or will be swallowed whole by it — will likely have a significant impact on market movements for the week.

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Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.

17 Tips for End of Year Tax Planning

From My Dollar Plan, by Madison

It’s time for end of year tax planning! Time to get your financial house in order for tax season! What could be more fun that taking a break from holiday festivities and shopping to start thinking about taxes?

 

How to Cure a Holiday Spending Hangover?

From Frugal Dad, by Jason

Did you indulge in a few too many purchases this Christmas? Between sales for pre-Black Friday, Black Friday, early-bird Christmas, and the day after Christmas, it was almost hard not to overspend, unless you possess an iron frugal will.

 

 Mobile Banking Security

From Five Cent Nickel, by Lisa White

When is the last time you were inside your bank? It’s probably been awhile. With ATMs and online banking, and mobile banking, there’s rarely ever a need to visit a teller. And with the growing number of banking apps, we can virtually carry our banks in our pockets and purses. But at what cost?

 

Your Finances: 4 Emotional Decisions to Avoid

From Wisebread, by David Ning

Personal finance concepts are generally straightforward and simple, but some people struggle with building a solid financial foundation when emotions get involved. Here are four ways people often act emotionally instead of logically that you should watch out for.

 

The Value of Tax-Deferred Savings

From Mint Life, by Matthew Amster-Burton

Sometimes, we in the personal finance game are good at telling you what to do but not why. So much of our advice is obvious: Save your money, don’t take a payday loan and don’t buy derivatives with funny names. Well, duh. It occurred to me, however, that I’m always telling people to take advantage of their 401(k), Roth IRA and other retirement accounts, whether or not they receive an employer match, but it’s far from obvious why this is such a good idea. In fact, it wasn’t entirely obvious to me until I went through the math.

 

Protect Yourself From Identity Theft

From Boomer and Echo

Amy Adams filled out a rental form and handed it to her prospective landlord.  She never dreamed the information would fall into the wrong hands.  She started to receive hefty bills for services and merchandise she had never purchased.  When a warrant was issued for the arrest of the imposter, the real Amy was wrongly accused.

 

* Blogs we follow and admire sometimes endorse specific investments, general investing strategies or other products/services/ institutions that we do not recommend or have not analyzed. Reviews and endorsements in posts from other blogs represent the views of those bloggers and should not be interpreted as a recommendation/endorsement by Smart401k.

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About Smart401k

Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.

A look at some of the market movers from the week:

• The Department of Justice cleared the way for legal online gambling
• Yields fell drastically for Italy in a nine billion euro bond auction
• President Obama announced his nominations for two Federal Reserve Board seats

• European banks borrowed liberally from the European Central Bank after the central bank’s liquidity injection
• Bank of America closed 2011 as the Dow’s worst performer
• U.S. consumer confidence hit an eight-month high
• Initial unemployment claims rose from recent low levels

Commentary               

Sandwiched between the Christmas and New Year holidays, the final week of the year was especially quiet. Volume for the S&P 500 index stayed at around half of the 2011 average through the week and movements were relatively muted. The week finished with a 0.6% loss as drops on Wednesday and Friday offset a moderate gain on Thursday. December managed to eke out a 0.9% advance, which was just enough to park the S&P at unchanged for the year.

There wasn’t much economic data released during the week, but on balance it was a bit worse than recent weeks. Initial unemployment claims managed to stay below 400,000, but they posted an unexpected rise to 381,000 from 366,000 in the prior week. The Case-Shiller home price index fell more than expected in October, highlighting the continued woes of the housing market. On the bright side, consumer confidence poster a larger-than-expected gain, rising to 64.5 versus the expected 58.

On the European Union front, Italy provided a bit of good news as it was able to sell bonds with a yield markedly lower than what it’s been forced to pay during other recent auctions. Demand was strong for the notes, suggesting that fixed-income investors are feeling a bit more sanguine about the country’s ability to continue paying its obligations. Meanwhile, the European Central Bank followed its recent liquidity injection by announcing that its balance sheet had expanded to a record $3.55 trillion. Over the past three months, the central bank has added more than $700 billion to its balance sheet.

Turning to individual stocks, the S&P 500 finished the year split almost precisely down the middle with 251 stocks closing out with gains and 249 ending the year in the red. The oil and gas sector was well represented as Cabot Oil & Gas and El Paso Corp. were the S&P’s two top performers with respective gains of 101% and 94%. Joining those two at the top of the S&P performers were robotic-surgery specialist Intuitive Surgical, credit-card giant Mastercard, and drug developer Biogen Idec.

On the other end of the spectrum, solar equipment manufacturer First Solar managed the worst performance in the S&P with a 74% drop for the year. And while oil explorers may have had a fine year, it wasn’t quite so nice for coal miners and Alpha Natural Resources ended up the second-worst S&P performer with a 66% loss. Among the year’s other big losers were movie maven Netflix, beleaguered banking giant Bank of America, and the long-suffering retailer Sears Holdings.

Looking ahead

The beginning of next week will likely be slow. Monday is the observed New Year holiday and U.S. markets will be closed. When the markets open back up on Tuesday, investors will want to be prepared shake off their New Year’s hangover and get right back in action.

With December drawing to a close over the weekend, we’ll get the month-end data dump next week, including the all-important employment numbers. On Thursday, payroll giant ADP will release its estimate of the employment change for December. Currently it’s expected that they will show an increase of 180,000. The Department of Labor will follow on Friday with its nonfarm payroll number. That’s estimated to come in at 150,000 after a 120,000 increase in November. Investors may also want to keep an eye on hourly earnings — they’re expected to show a 0.2% rise for December after falling 0.1% in the prior month.

But it’s not just employment numbers that investors will need to digest next week. The Federal Reserve will release the minutes from its most recent rate-setting meeting on Tuesday. The same day we’ll see numbers on the Institute for Supply Management’s index and November construction spending. On Wednesday, factory orders and auto sales will hit the wires.

In the midst of all of this, we may see companies pre-releasing fourth quarter numbers as they prepare for earnings season to kick off. Alcoa is scheduled to begin the onslaught a week from Monday when it announces earnings after the market’s close.

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About Smart401k

Smart401k is a web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans.  Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found atwww.smart401k.com.

Without the benefit of a reliable crystal ball, it’s impossible to identify all of the factors that will affect the markets in 2012. If history is any indicator, there is a good chance that three factors could dominate headlines in the coming year.

European Debt Crisis-   The slowdown of the global economy, which started here in the U.S. at the end of 2008, began to shed light on the true debt burden facing many countries, starting with Greece. Since this time, we have seen the effect the crisis is having on the markets. Continued seesawing between optimism and pessimism for a potential solution will likely contribute to further market volatility in 2012.

Geopolitical Concerns- United States troops are pulling out of Iraq, while tensions with Iran seem to be escalating.  The recent overthrow of the governments of Tunisia and Egypt, as well as revolution in Libya and continued unrest in Syria has created questions about the future leadership in these countries. In addition to these situations, a continued slowing of the Chinese economy could affect markets in the coming year.

Political Bickering- If the debt-ceiling debates of 2011 are any indication, the 2012 presidential election year will likely include even more indecision, finger pointing and, most importantly, inaction. Before the end of 2012, big decisions will need to be made regarding the expiration of tax cuts as well as the significant spending cuts set to begin at the start of 2013. These matters alone create a great deal of uncertainty for businesses. If political leaders show an inability to address these issues in a timely manner, it could be impactful.

What to do?

The best place to start is to assess your risk tolerance and investment objectives.  Your investment strategy should focus not only on selecting investments, but properly allocating your assets.  Proper asset allocation can have a significant effect on the total return of your portfolio.

So, rather than trying to predict what will happen with the factors listed here or any other unforeseen events, start with what you know. Take the time to understand your risk tolerance, investment objectives and time horizon. Once you know this information, you can focus on asset allocation, diversification and investment selection. Having an investment plan in place can help avoid the urge to allow short-term market conditions to derail your longer-term strategy.

Randy Schaller

Investment Adviser

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About Smart401k

Smart401k is a web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans.  Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at www.smart401k.com.

A look at some of the market movers from the week:

• The European Central Bank pumped 490 billion euros into European banks
• Government officials continued battling over the payroll tax cut
• … but finally pushed legislation through
• Initial unemployment claims continued to fall

• Third-quarter GDP growth was reduced to 1.8%
• North Korea’s Kim Jong-il died
• AT&T abandoned its proposed takeover of T-Mobile
• Eldorado Gold agreed to buy European Goldfields for $2.4 billion
• Lockheed Martin won a multi-billion-dollar contract for F-35s fromJapan
• Oracle’s stock was crushed after the company reported earnings short of expectations
• Tokio Marine agreed to buy Delphi Financial for $2.7 billion
• AIG CEO Robert Benmosche has said he’d like to stay at AIG longer than planned
• New home sales improved sequentially in November, but were down from last year

Commentary                

The S&P 500 fell on Monday, but managed to post gains every day through the remainder of the week. The market surged on Tuesday, tacking on 3% and finished the week with a 3.7% gain. The week’s gains put both the S&P 500′s December month-to-date and year-to-date returns into the black, with the month now showing a 1.5% gain and the year scraping into positive territory with a 0.6% rise.

The big day for the markets was Tuesday and the market’s spike was driven in large part by optimistic signs out ofEurope. Most notably,Spainmanaged to raise $7.3 billion in a debt auction. The auction went much better than analysts had expected as investors were willing to accept an interest rate of 1.74%, down from 5.1% in November. The success of the auction suggested that bond investors are getting more confident thatSpainwill be able to manage its debt obligations.

In addition, also on Tuesday, measures of both consumer and business confidence inGermanyrose. In theU.S.meanwhile, data on housing added to the market’s optimism.

With Europe continuing to grab the global spotlight, the European Central Bank’s announcement that lent nearly $650 billion in longer-term loans to more than 500 banks in an effort to help shore up the region’s banking system. The government finances in some of the major European countries are largely what have spooked investors and it’s not expected that the ECB’s lending will have a major impact on bond prices. The move will, however, help the banks shore up their own finances and potentially head off a rapid banking-system deleveraging.

Back in theU.S., wage earners were given an early Christmas present as Congress pushed through legislation under the wire to extend the Social Security payroll tax cut and unemployment benefits. The rushed legislation also included a provision that will force President Obama make a near-term decision on the controversial Keystone XL pipeline.

The economic data in theU.S.was largely positive during the week. Though existing home sales lagged expectations, housing starts exceeded estimates, as did new home sales. Initial unemployment claims continued their downward trend, clocking in at 364,000 after registering 368,000 the prior week. TheUniversityofMichigan’s sentiment measure came in at 69.9 up from 67.7 and topping the expectation of 68. Leading economic indicators and durable goods orders growth were also better than expected.

There were, however, some significant disappointments during the week. Third-quarter GDP growth was revised down again, this time to 1.8%. Personal income and spending were also worse than anticipated. Personal income growth for November was 0.1%, below the 0.2% expectation, while personal spending was also 0.1%, lagging the 0.3% estimate.

Looking ahead

Investors should expect a very slow market next week. The Christmas holiday will be observed byU.S.markets on Monday, shortening the week to four days. Meanwhile, many investors will likely be either away from the markets for the holidays or playing defense to protect any gains they’ve managed for a tough-fought 2011.

TheU.S.economic calendar will also be light. Reports on consumer confidence, initial unemployment rates, and the Chicago Purchasing Manager’s Index will be notable, but are unlikely to lead to any sizeable market swings.

If there’s anything that has the potential to swing the markets next week, it’s — no surprise here –Europe. That said, it seems highly unlikely that there will be significant announcements coming out ofEuropeduring the holiday week.

What does this all add up to? A great week for investors to take a breath, tune out the wild markets, and enjoy the holidays.

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