TSP Planning Report - June 2021
June 2021 TSP Planning Report:
Facts:
- This month’s unemployment rate dropped to 5.8% from last month’s 6.1%.
- PMI (Purchasing Managers Index) continued to expand (any reading above a score of 50 means expansion). This month’s reading came in at 61.2, compared to last month’s 60.7.
- The S&P 500 (C Fund) increased 0.69% in May compared to 5.33% in April.
- Q1 GDP shows growth of 6.4% according to the 3rd estimate (same as 2nd 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:
Overall trend is still very good.
Inflation:
The price of almost everything is inflated. The Fed originally forecasted 2.1% inflation. They recently revised that forecast up to 3.4%. The year-over-year increase is the highest inflationary increase since 2008.
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 12.31%
1980 25.77%
1981 -9.73%
1982 14.76%
1983 17.27%
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
