The Markets February 5, 2009

Q408 Dark Time for Equity Investors

The fourth quarter of 2008 was not a good time for equity investors, according to the latest Mercer 2008 Defined Contribution Universe Summary data.
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Mercer data shows the fourth quarter saw losses in all equity markets during a period when Mercer said the S&P 500 lost 21.9%.

Value funds outperformed growth funds during the quarter, as the median large-cap value fund posted a loss of 21.4% compared with a loss of 23.1% for the median large-cap growth fund. The small-cap segment trended in the same direction as large cap stocks, as the median small-cap value fund outperformed the median small cap growth fund by 190 basis points.

The median large-cap fund underperformed the S&P 500 Index by 10 basis points during the period, according to Mercer’s data. Small-cap funds underperformed their large-cap counterparts for the quarter, as the median small cap fund lost 26.1% versus a loss of 22% for the median large cap fund.

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International Equities

Within the international equity asset class, the median manager underperformed the MSCI EAFE Index by 140 basis points during the quarter, Mercer said. The median emerging markets manager lost 29% for the quarter and underperformed the MSCI Emerging Markets Free Index by 140 basis points.

International equity markets, as measured by the MSCI EAFE Index, lost 20% during the fourth quarter, while the fixed income asset class turned in a positive quarter, with the Barclays Capital Aggregate Bond Index posting a 4.6% gain. Money market instruments rose 0.3%, as measured by the three-month T-bill rate.

The balanced asset class, using a benchmark of 60% S&P 500/40% Barclays Capital Aggregate Bond Indices, posted a loss of 11.9%. The median core fixed income fund underperformed the Barclays Capital Aggregate Bond Index in the fourth quarter by 370 basis points.

According to Mercer, capital market returns turned negative over the long term as significant losses during 2008 affected results. Over a 10-year time frame, the S&P 500 Index lost 1.4%, while the Russell 2000 Index gained 3%. International equity markets produced a gain of only 0.8% over a 10-year time frame, outperforming their U.S. counterparts.

Data & Research February 5, 2009

Would-Be Retirees Plan to Work Longer

Delaying retirement is one of several life adjustments pre-retirees are making to weather the current economic climate.
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CPA financial planners surveyed by the American Institute of Certified Public Accountants reported that nearly 35% of their clients who are approaching retirement age are postponing leaving the workforce because of recent economic conditions—a 3% increase from the 32% cited last year. According to a press release on the survey, a majority of those who are postponing retirement (67%) plan to delay retirement no more than five years.

Only 9.6% are postponing retirement for six years or more, the survey found.

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Other adjustments in spending CPAs’ clients are making include:

  • postponing vacations (60%)
  • postponing car purchases and/or the buying or selling of a home (52%)
  • cancelled home renovations (42%).


Only 11% of CPAs have clients who have no plans to change their current spending, the press release said.

The survey was conducted in December via a questionnaire e-mailed to members of the AICPA Financial Planning Membership Section.

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