Facts:
- Unemployment remained at 3.5%.
- 3rd Quarter GDP was 2.1%, according to the 3rd estimate.
- PMI was contracted again, with the index reading to 47.2%.
- The S&P 500 (C Fund) increased 3.01% during the month of December.
Assessment:
- PMI has contracted for the 4th consecutive month. Not wonderful news.
- 2.1% quarterly GDP is just okay – nothing to get excited about, but also not terrible.
- Unemployment remains at a 50-year historic low.
- The S&P 500 performance for the past 3 months is up 8.79% and ended 2019 up 31.45%
Bottom Line:
The only concerning metric is PMI. This means there’s lower demand for textiles and manufacturing. It’s usually a forecast of future (non-food) consumption. Lower PMI means lower consumption, which means lower revenues for businesses.
Since there is no other concerning data, and even PMI data is not much changed from the previous month, I have kept the previous month’s allocations.
If you’re concerned about the conflict with Iran, don’t be. Even though historically, a sharp rise in oil prices has led the US economy into a recession, and the last three recessions were all preceded by sharp increases in oil prices, but, fortunately, the situation is not as threatening as it has been in the past. Consider the following:
- The U.S. has become the world’s largest oil producer as a result of the shale boom, outpacing the second largest producer by close to 50%. Thus, higher foreign oil prices are less of a drag on the US economy.
- Iran has lost its standing in global oil production. Currently Iran accounts for less than 3% of total world production.
The recommended portfolios below carry the least amount of risk needed to achieve the target rates of return. DON’T JUST LOOK AT RATE OF RETURN. Always view the target return of each portfolio in context of its ranges of fluctuation.
I would suggest anyone who will be deriving income from their portfolio over the remainder of this year to proceed with caution. If you are on the brink of retirement, consult with me before you position your TSP too aggressively. Email me stephen@stephenzelcer.com
Check out the 2 page report below.
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