financial planner Stephen Zelcer

TSP Planning Report June 2022

TSP report graphic from Stephen Zelcer

June 2022 TSP Planning Report:

Facts:

  • The G Fund rate for June 2022 remained at 3%.
  • The Fed Funds interest rate increased to 1.65% from last month’s 0.9%, and they anticipate more rate increases over the remainder of this year.
  • This month’s unemployment rate remained unchanged, at 3.6%.
  • PMI (Purchasing Managers Index) continued to expand (any reading above a score of 50 means expansion). This month’s reading came in at 56.1, compared to last month’s 55.4.
  • The S&P 500 (C Fund) decreased -1.65% in the month of May. The S&P 500 was briefly down 20% (official “bear market” territory) for the year, but is now down -18.62% YTD.
  • The 2nd estimate of Q1 GDP shows a negative -1.5% GDP, slightly lower than the 1st Q1 estimate of -1.4%. Aside from the pandemic, this is the first negative GDP since 2009.

Assessment:
For the past couple months, I’ve been pointing out that things are looking ugly – and it’s not really because of Russia or Covid. It seems to be Gov’t policy. The Oil & Gas industry has identified 10 steps that Biden can do to stop interfering with energy production.

In this environment even Bonds are not safe – The F fund is down 9% YTD. And the F fund will continue to fall as the Fed raises rates. This month, they raised rates by 0.5%. They have scheduled two more rate increases this year – in July & September – which will further drive down the F fund.

Bottom Line:

The market has already dropped significantly, and I don’t know when investors will start looking past the immediate gloom & doom towards a brighter future. This past week, the S&P 500 rebounded over 5% in one week. A rebound, when it comes, usually comes quickly. As such, it’s hard to advise to pull out of the market.
If you are seeking 4% yields, you may be able to accomplish this in the near future without any stock exposure, because the G fund yield is rising quickly. This, in turn, decreases the need for stocks in my lower-yielding portfolios.
However, for higher yields you will still need stock exposure. Keep investing, and go on with your business. In fact, you may want to introduce some more money into the C & S funds to capture the bounce-back. Your new TSP contributions should go 70% C fund, 30% S fund to catch a bounce-back. If your G fund is overfunded (if you don’t know what overfunded is, contact me asap), consider doing an inter-fund transfer from G into C & S to participate in the bounce-back.

See this month’s recommended portfolios. DON’T JUST LOOK AT RATE OF RETURN. Always view the target return of each portfolio in context of its ranges of fluctuation.

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.

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

Email me here – stephen@stephenzelcer.com

Click here to download my portfolios.

TSP report portfolio from Stephen Zelcer
TSP report portfolio from Stephen Zelcer

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