The volatility of recent markets forces us to remind ExxonMobil employees to be proactive about portfolio management,' says Michael Corgiat, a financial expert with the Retirement Group. Regular portfolio reviews and rebalancing could protect retirement savings against sudden market downturns and help you stay on track with your long-term financial goals,' he added.
With all the volatility in the markets, ExxonMobil employees need to create a resilient investment strategy, says Brent Wolf of the Retirement Group. A diversified portfolio that can ride economic cycles is essential for retirement financial security,' said Dr.
In this article we will discuss:
1. Market Volatility and Retirement Savings: Market fluctuations and how they affect retirement income challenge retirees. Factors
2. driving Market Volatility in 2021 & 2022: Exploring how the pandemic, economic policies and global events shaped market
3. changes. Strategies for Investors During Volatility: Advice on diversification and holding investment strategies during turbulent times.
Several studies suggest that extreme market volatility may be especially difficult for retirees or those approaching retirement age to recover from possible losses. According to a report in October 2021 from Fidelity Investments, market volatility could wipe out retirement savings of up to 26% for those in their 60s. That underscores the need for a diversified investment portfolio and a solid retirement plan that reflects possible market volatility.
During the extremely volatile first 100 trading days of 2022, the constituent equities of the S&P 500 continued to fall, and the benchmark index entered a bear market on June 13, 2022 - a decline of at least 20% in stock prices. The S&P 500 was down 21.8% from its January 3 peak and the tech-heavy NASDAQ, already in bear territory, was down 32.7% from its November 19, 2021 zenith.
Some investors nervous about the future of their portfolios seem to have gone defensive and sold riskier assets like growth-oriented technology stocks.
What drives market volatility? In 2021, companies throughout the US, including ExxonMobil, dealt with unpredictable demand shifts and supply shocks from the pandemic. Near zero interest rates and trillions in pandemic relief bolstered consumer spending, economic growth and record corporate profits. Profits from S&P 500 companies in 2021 were 75% higher than in 2020 and 33% higher than in 2019 - a nearly 29% total market return. (3-4)
In early 2022, however, investors feared that a planned loosening of monetary policy - meant to cool stubbornly high inflation - would choke economic growth and cause a recession. Demand, supply-chain issues and a labor shortage in the spring of 2021 drove prices up and wages went up. China's COVID-19 lockdowns impacted product supplies in the first quarter of 2022 and Russia's invasion of Ukraine pushed already high world food and fuel prices skyrocketing. May 2022 saw the fastest annual rate of increase in forty years, 8.6% (5).
The seemingly unstoppable acceleration of price increases puts pressure on the Federal Open Market Committee (FOMC), which meets June 14 and 15, to act aggressively against inflation. In May, the federal Open Market Committee raised the benchmark Federal funds rate by 0.5% (from 0.75-1.0%). That's the first half-percent increase since May 2000 and Fed forecasters expect more. (6)
High interest rate bond yields rise and higher returns from lower-risk bond investments make higher-risk stock investments less attractive. Stock investors also buy a component of a company's future cash flows that lose value in an inflationary environment. Higher financing costs may also depress the purchasing power of consumers and profits of debt-intensive businesses.
The downside of domination The S&P Information Technology Sector Index has fallen 29.2% more than the S&P 500 as a whole from its January 3 peak. Also, like most benchmarks, the S&P 500 is weighted by market capitalization - the value of a company's outstanding shares. This gives the largest companies - mostly technology - a disproportionate drag on index performance. As at May 31 the information technology sector had 27.1% of the market capitalization of the S&P 500, followed by 14.4% for health care and 11.2% for financials, the next two largest sectors. The four most valuable companies are Apple, Microsoft, Alphabet & Amazon; Nvidia is ranked ninth while Meta dropped to 11. (7)
The past few years saw tech stock gains lift the market. However, falling share prices of these companies dragged down broader stock indexes. In analyzing market data through May 17, just eight of the largest U.S. companies accounted for 46% of the 2022 losses (total return) of the S&P 500. (8)
Those famous technology companies have grown into huge multinational corporations affecting every day life. Some companies are so dominant in their fields - social media, smartphones, online search and advertising, e-commerce and cloud computing - that antitrust investigations and calls for tougher rules have been made in the US and abroad. And they do have plenty of cash on board to help them weather an economic slowdown better than their smaller rivals (8).
Takeaways for investors Stocks are often spread across the eleven S&P 500 sectors. Yet a once-diversified stock portfolio can become overly concentrated in a sector that has outperformed the market as a whole over time. TECH-sector equities posted huge total returns of about 50% for 2019, 44% for 2020 and 35% for 2021; therefore, some ExxonMobil employees and retirees may wish to rebalance if they are overexposed to this volatile sector. This involves selling some investments to buy others. Remember that the sale of investments from a taxable account may be taxed. (10)
Should you feel lost after more than five months of market volatility? our ExxonMobil clients should get perspective. Several market analysts see recent price declines as a painful but long overdue repricing of equities at overpriced valuations and a reality check from dwindling growth expectations. That ratio of forward price to earnings (P/E) ratio of S&P 500 companies fell from 23.3 at the end of 2021 to 17.8 in May 2022, closer to the 10-year average of 16.9.11-12.
It could be some time before investors can assess how the economy and corporate profits will fare with rising inflation and higher borrowing costs - and the stock market does not like uncertainty. Downward economic data and company earnings reports could fuel volatility in the months to come.
If you have a sufficiently diversified, all-weather investment strategy, sticking with it is often the best course of action amid grim headlines. When the market goes down, panic and leave it - you can't profit from its upswings. And if you still invest regularly to fund a long-term goal like retirement, a market decline could let you buy additional shares at a discount.
Stocks' return and principal value vary depending on market conditions. If sold, shares might fetch more or less than their original price. Investments that seek greater return usually involve greater risk. We recommend diversification as a risk management technique to our ExxonMobil clients. But that does not mean diversification guarantees a profit or protects against investment loss for ExxonMobil employees. The S&P 500 is an unmanaged index of stocks representative of the U.S. stock market in general. An unmanaged index does not represent any investment performance.
No one can own an index directly. The past does not predict future performance. The real results will differ. Dollar-cost averaging does not guarantee or prevent a profit or loss. These programs involve ongoing investments in securities irrespective of price movements. ExxonMobil employees and retirees should ask themselves whether they can afford to keep buying during low and high prices. But this may be a good way for investors to get shares to fund long-term goals.
A stock market investment is like planting a tree in your backyard. Just as you choose the location, type of tree, and soil conditions for your tree, you choose your investment strategy, stocks, and market conditions. And you also need to water and fertilize your investment just as you would your tree. With patience and an investment that grows over time, you can enjoy a healthy tree that produces shade and fruit for many years to come, just as your investment can provide retirement for you and your family.
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Sources:
1. 'Market Volatility - Fidelity Can Help.' Fidelity Investments , 2021, www.fidelity.com/misc/buffers/market-volatility.shtml .
2. Lannan, Kelly. 'Fidelity® Q3 2021 Retirement Analysis: Retirement Savers 'Stay the Course' in Spite of Stock Market Swings and Ongoing Economic Uncertainty.' Business Wire , 2021, www.businesswire.com/news/home/20211011005389/en/Fidelity%C2%AE-Q3-2021-Retirement-Analysis-Retirement-Savers-%E2%80%9CStay-the-Course%E2%80%9D-in-Spite-of-Stock-Market-Swings-and-Ongoing-Economic-Uncertainty .
3. Barry, Kevin. '401k Savers 'Stay the Course' Despite Market Volatility.' 401k Specialist Magazine , 2022, www.401kspecialistmag.com/401k-savers-stay-the-course-despite-market-volatility/ .
4. 'Retiring in a Recession, Downturn, or Period of Market Volatility? Things to Consider.' Fidelity Investments , 2021, www.fidelity.com/viewpoints/retirement/retiring-in-a-recession .
5. 'Fidelity® Q3 2021 Retirement Analysis: Retirement Savers 'Stay the Course' in Spite of Stock Market Swings and Ongoing Economic Uncertainty.' Fidelity Investments , 2021, www.fidelity.com/viewpoints/retirement/q3-2021-retirement-analysis .
How does the ExxonMobil Savings Plan compare against typical retirement savings plans, and what unique features does it offer that can benefit employees approaching retirement? Additionally, can you elaborate on the necessary steps ExxonMobil employees should take within the savings plan to ensure maximum contributions and employer match during their service years?
ExxonMobil Savings Plan: ExxonMobil's Savings Plan offers flexibility with pre-tax, after-tax, and Roth contributions, and features a 7% company match for the first 6% of employee contributions, a unique benefit compared to typical plans. Employees should contribute the maximum percentage to receive the full match and regularly review their investment allocations through the Voya platform(ExxonMobil_2024_ExxonMo…).
What are the eligibility criteria for employees to participate in the ExxonMobil Pension Plan, and how is the retirement benefit calculated? As employees consider their long-term savings strategy, how does the option of a lump-sum distribution versus an annuity influence their financial planning at ExxonMobil?
ExxonMobil Pension Plan: Employees are automatically enrolled and eligible for benefits after five years of service, with full retirement benefits offered at 55 with 15 years of service. The pension is calculated based on 1.6% of final average pay multiplied by years of service, minus a social security offset. Lump-sum and annuity options affect long-term financial planning, with lump sums offering immediate flexibility while annuities provide a steady income(ExxonMobil_2024_ExxonMo…).
In what ways does the ExxonMobil Employee Assistance Program (EAP) support employees during personal or family crises, and what confidentiality measures are in place to protect their privacy? Additionally, how can ExxonMobil employees access these services, and what are the key resources available through this program?
Employee Assistance Program (EAP): ExxonMobil's EAP provides confidential counseling services for personal and family issues like anxiety, addiction, and family conflict. Services are accessible by phone, video chat, or text, with privacy strictly protected. Employees can contact ComPsych for guidance and support through the GuidanceNow app or website(ExxonMobil_2024_ExxonMo…).
With the introduction of Flexible Spending Accounts (FSAs) at ExxonMobil, how do these accounts help employees manage their health care and dependent care expenses more effectively? What guidelines should employees follow to ensure they maximize their tax advantages while complying with IRS regulations during the enrollment process?
Flexible Spending Accounts (FSAs): FSAs at ExxonMobil allow employees to reduce taxable income by contributing pre-tax dollars to healthcare or dependent care expenses. Employees should estimate their expenses carefully during the enrollment period and comply with IRS rules, ensuring they submit claims by April 15th of the following year(ExxonMobil_2024_ExxonMo…).
How does ExxonMobil define "work-life balance," and what specific benefits and programs are in place to support this philosophy for employees? Can you discuss how employees can utilize these options, such as flexible schedules and leave of absence policies, without negatively impacting their career progression within the company?
Work-Life Balance: ExxonMobil promotes work-life balance with programs like “Flex Your Day,” allowing flexibility in work hours, and up to 20 days of back-up dependent care. Employees are encouraged to use these options strategically to maintain career progression while balancing personal obligations(ExxonMobil_2024_ExxonMo…).
In light of the various medical plan options offered at ExxonMobil, how should employees approach selecting the right plan to best meet their healthcare needs? What factors should they consider, including family health history and financial implications, when making their decisions?
Medical Plan Selection: ExxonMobil offers Aetna POS II and network-only options, allowing employees to choose between plans based on cost, coverage, and provider access. Employees should assess their family's healthcare needs, financial situation, and preferred providers when selecting the most appropriate plan(ExxonMobil_2024_ExxonMo…).
For ExxonMobil employees nearing retirement, what resources are available to help them understand the nuances of health benefits coordination through Medicare and their ExxonMobil coverage? How can they best navigate this transition, and what checkpoints should they be aware of to ensure they remain compliant with company policies during retirement?
Retirement Health Benefits and Medicare: ExxonMobil offers resources to help employees coordinate health benefits with Medicare upon retirement. Employees nearing retirement should explore their options through the Your Total Rewards portal and ensure compliance with company policies during the transition(ExxonMobil_2024_ExxonMo…).
What financial education resources does ExxonMobil provide to employees to promote informed decision-making about their retirement savings and benefits? Can you detail how programs like the Financial Fitness Program enable employees to strategically manage their finances and plan for retirement?
Financial Education Resources: ExxonMobil's Financial Fitness Program, provided in collaboration with Ernst & Young, helps employees manage their finances with resources such as EY Navigate and personalized financial planning. This program supports informed decision-making about retirement and savings strategies(ExxonMobil_2024_ExxonMo…).
As part of the benefits provided by ExxonMobil, how does the company facilitate employee participation in volunteer programs and charitable activities through the ExxonMobil Foundation? How can employees engage with these initiatives while also balancing their work commitments?
Volunteer Programs: Through the ExxonMobil Foundation, employees can engage in charitable activities via the Volunteer Involvement Program (VIP), which offers grants to nonprofits based on time spent volunteering. Participation in these programs is flexible, enabling employees to balance work commitments with volunteer efforts(ExxonMobil_2024_ExxonMo…).
How can ExxonMobil employees get in touch with benefits representatives to address specific questions about their retirement and savings plans? What are the recommended channels and best times to reach out for assistance to ensure they receive timely and relevant information about their options?
Contacting Benefits Representatives: Employees can reach out to the ExxonMobil Benefits Service Center at 833-776-9966 during business hours (8 a.m. to 4 p.m. CST) for assistance with retirement and savings plan questions. The Your Total Rewards portal also offers 24/7 access for reviewing and managing benefits(ExxonMobil_2024_ExxonMo…).
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