Michael Kimmel, Executive Director

I am thrilled to formally announce that Len Teitelbaum assumed the position of Chair of the Board of the RPB on January 1, 2016. Please take a moment to read Len’s message to participants on our website at www.rpb.org. Also, I invite you to read the “2015 Calendar Year-End (2016 Plan Year Q2-End) Commentary” below, about the market conditions investors have been navigating throughout 2015 and into 2016.

Over the past few weeks, I’ve been on the road meeting with participants. Their desire to continue learning about tools and strategies to help manage their retirement finances has prompted me to remind you that all RPB participants have access to professional financial counselors through Ceridian LifeWorks—at no charge. If you haven’t already taken advantage of this free service, you can contact Ceridian for a consultation on a range of subjects, including retirement planning, budgeting and debt management. Please contact us at the RPB office for Ceridian’s toll-free number. While the counselors at Ceridian have shown to be extremely helpful to many of you, as we’ve said before, they are not a true substitute for a personal financial advisor. If you do not have one and feel that you need more personalized financial advice or support than Ceridian can provide, I would encourage you to seek out a personal financial advisor in your local community.

QUARTERLY MARKET COMMENTARY: The Road from 2015 to 2016


For diversified investors, 2015 proved to be a difficult year. Most asset classes in most countries had poor returns. This reflected a world in which economic growth was slow in most of the major economies, and unemployment remained stubbornly high (except in the U.S.). China, now the second largest economy in the world, slowed markedly, and importantly, reduced its imports of commodities such as oil, iron and coal. This had a negative impact on commodity prices and was reflected in lower stock prices for companies involved in raw materials industries.

The slow economic growth led central banks in the major economies to keep interest rates at historically low levels. In the Eurozone, we witnessed what was previously thought impossible as interest rates turned negative in Germany and other countries. Yields on bonds, even out to maturities as long as twenty years, were under 2% in most markets.

In a world of ultra-low interest rates, stumbling economies and falling stock markets, the U.S. once again became the safe-haven destination for investors. This drove the value of the U.S. dollar higher against all major currencies, and allowed the U.S. stock and bond markets to eke out modest gains.

Now the details:

Global equities and bonds ended 2015 in negative territory, returning -2.2%[1] and -3.2%[2], respectively. Within the global equity markets, the U.S. stock market returned a modest 0.5%[3] while international stocks returned -4.6%[4], primarily the result of weaker economic growth overseas. Performance of U.S. bonds mirrored that of U.S. equities, returning 0.6%[5], while international bonds returned -6.0%[6], due mostly to an appreciating U.S. Dollar.


[2] Barclays Global Aggregate Index
[3] Russell 3000 Index
[4] MSCI ACWI IMI ex. U.S. Index
[5] Barclays Aggregate Index
[6] Barclays Global Aggregate ex. U.S. Index

Four key themes impacted performance of the global capital markets and the RPB funds in 2015:

1) Slowing Global Growth, 2) Oil, 3) China and 4) Interest Rates.

  1. Slowing global growth environment. While the U.S. Fed and its counterparts throughout the world have used economic and fiscal policy to promote economic growth, the reality is that global GDP, the measure of all goods and services produced, is growing at a lower rate than in years past. This slowing growth is the result of many factors, including high unemployment. For example, while U.S. policies have helped to keep unemployment low at 5.0%, the Eurozone is still experiencing unemployment rates above 10% with some countries closer to 25%.
  2. Low oil prices. The low price of oil weighed heavily on companies and countries that rely upon oil production and oil-related exports. Companies in the Energy sector experienced lower earnings and falling profits, resulting in layoffs and spending cuts.  Many countries such as Russia, China and Canada whose economic health is tied to oil exports, faced growing economic challenges. While somewhat immune to the actual price of oil, this negative sentiment towards the Energy sector led to a sell-off in Master Limited Partnerships (MLPs), the stocks of companies involved in oil and natural gas transportation and storage, which the RPB owns. As is often the case, sentiment can outweigh fundamentals and pricing reacts to emotion.
  3. China slowdown. China is now the world’s second largest and fastest growing economy, overtaking Japan at the start of the decade. The country is shifting from a manufacturing to a services-based economy. During 2015, China experienced slowing economic growth, a sharp stock market correction, and currency devaluation. These events triggered a ripple effect and caused other markets, particularly commodities, to sell off. The markets do not react well to uncertainty and surprise, two qualities that defined China’s policy actions during 2015.
  4. Rising interest rates. While low rates benefit consumers in the form of low mortgage rates and zero percent auto loans, lower risk investors (retirees) are finding it difficult to earn a rate of return in the fixed income markets sufficient to meet their obligations. In search of yield and higher rates of return, many investors looked to the stock market, driving markets to all-time highs over the last few years. As 2015 reminded us, this level of performance is not sustainable over the longer term. While no one can be certain, it is expected that rising rates within the U.S. will draw investors back into the fixed income markets over time, particularly if rates increase to levels that provide adequate income for retirees.

What’s Next:

This mix of complicated forces at work in 2015 is continuing into 2016. Yes, it has been a difficult start to 2016, but it really is too early to know how the markets will ultimately perform with so many factors at work. As such, the RPB will maintain its strategy of navigating this uncertainty by avoiding trying to time the market while also seeking higher risk-adjusted returns from multiple asset classes through diversification. We will also remain responsive to current market conditions, as we have in the past, and keep you updated about decisions regarding the allocation of the RPB portfolio. Our fundamental viewpoint is that investment decisions should be based on expected long-term performance and not driven by short-term market conditions. Staying invested and allocated is the proven way to realize the most gains over time.