financial planner Stephen Zelcer
tsp report for federal employees 2021

TSP Planning Report - April 2021

April 2021 TSP Planning Report:

Facts:

  • This month’s unemployment rate lowered to 6.0% from last month’s 6.2%.
  • PMI (Purchasing Managers Index) continued to expand (any reading above a score of 50 means expansion). This month’s reading came in at 64.7, compared to last month’s 60.8.
  • The S&P 500 (C Fund) increased 4.38% in March compared to 2.76% in February.
  • Q1 GDP shows growth of 6.4% according to the first estimate.
  • The Fed Funds interest rate remained at 0.25%, (although the Fed suggested that such rates may only hold thru April 2021, while previously they indicated it would hold thru 2023).

Assessment:
The Gov’t spending is very concerning.  I’ve been reading up on this, and surprisingly everyone is in agreement that pumping $6T into the economy will cause serious inflation issues.  To counter-balance inflation, interest rates will need to rise faster.  That’s not the end of the world, as I mentioned in last report, but that is directly pushing the F fund lower, and the G fund higher.  As such, I have adjusted the G & F fund proportions in this month’s report.  

Businesses still manage even in rising interest rate environment. Remember, business was growing even when interest rates were above 4% just over a year ago.  PMI (purchasing managers index) is expanding rapidly.  PMI measures the purchasing of materials for producing goods – whether lumber for housing or furniture, etc., textiles for furniture or clothing, etc., plastics for products and disposables, etc., metals for cars, computers, etc.  When PMI is high, it means companies are forecasting an increased demand for products.  As such, they order more materials. When PMI is low, it means companies are forecasting an decreased demand for products.  As such, they order less materials. 

Essentially, PMI is an indicator to future business, and this month’s PMI is even higher than last month’s record high.

Bottom Line:
Businesses are doing what they do best – create jobs and make money – even in the face of rising interest rates.  The market may have a temporary dip, but keep buying as it goes down.  Eventually, it will stabilize and come back up.   

Anyone who has more than 5 years before drawing income from their TSP should consider taking a more aggressive posture going forward and use my aggressive portfolio’s below.  If you are within 5 years of retirement, you should email me to get a more customized recommendation.  

DON’T JUST LOOK AT RATE OF RETURN. Always view the target return of each portfolio in context of its ranges of fluctuation.

If you have any questions, feel free to contact me.

Email me here – stephen@stephenzelcer..com

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