TSP Planning Report - July 2021
Facts:
- This month’s unemployment rate increased from 5.8% to 5.9%.
- PMI (Purchasing Managers Index) continued to expand (any reading above a score of 50 means expansion). This month’s reading came in at 60.6, compared to last month’s 61.2.
- The S&P 500 (C Fund) increased 2.33% in June, compared to 0.69% in May.
- Q1 GDP shows growth of 6.4% according to the 3rd estimate (same as last month).
- The Fed Funds interest rate remained unchanged, at 0.25%.
Assessment:
Gov’t Shutdowns:
Rumors are spreading about another shutdown in the USA. Gov’t intervention, as I’ve said in previous reports, is the biggest obstacle to businesses flourishing. If the Federal Gov’t shuts down the country again, the market will have a negative reaction. The assumption is the negative reaction will be short-lived, unless the Gov’t shutdown goes on forever.
Inflation:
The Gov’t has already caused massive inflation. The price of many goods up over 10%. Real Estate up over 30% in some places. The price of almost everything is inflated. The Fed originally forecasted 2.1% inflation. In June, the Labor Department reported a 5.4% increase in consumer prices over the past year – the biggest increase in 13 years, since 2008. This forces the Fed to revise their forecast up to 3.4%, thru 2022.
In case this worries you, let me remind you about stock market performance in the early 1980’s when inflation was rampant and interest rates reached 14%.
1979 12.
1980 25.
1981 -9.
1982 14.
1983 17.
As you can see, people still invested in super-high inflationary environments. Yes, there was a dip in 1981, but it was more than compensated for by the prior and following years.
Real Estate:
The federal eviction moratorium has expired, and evictions are well underway. Some states have implemented their own extension of the moratorium. While the backlog of evictions is no surprise, stats indicate that over 90% of renters are current on their rent. See here. This would suggest that there may not be a glut of housing inventory hitting the market at once.
On a similar note, mortgage delinquencies are seemingly stable, if not even decreasing. See here.
This is positive news for the housing market.
Bottom Line:
The overall economic trend is very good. I wish that government would step aside and let business do what they do best – create jobs and make money. But, aside from pumping $6T into the economy and driving up inflation, the other aspects of economic activity look sound.
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
