financial planner Stephen Zelcer

TSP Planning Report June 2023

  • The G Fund rate for June 2023 increased to 3.875%.  
  • The Fed Funds interest rate decreased to 5.07%. It was 5.25% just a month ago.   
  • This month’s unemployment rate increased from 3.4% to 3.7%.  
  • PMI (Purchasing Managers Index) expanded for the 3rd straight month, reading 53.0 this month (any reading above 50 represents expansion. 
  • The S&P 500 (C Fund) increased 0.43% in May. YTD, S&P 500 is up 14.49%
PMI expanding or contracting –
Last month I pointed out something:  PMI (Purchasing managers Index), which is considered a leading economic indicator – meaning, it doesn’t just tell you what has happened in the past, but also helps forecasts what will happen in the future –  expanded, showing an uptick in growth in the “composite” US economy.  Meaning, the economy in general is showing signs of expansion.  
However, if you read the details within the PMI report you will notice that the expansion was primarily in service-related businesses (accounting, hospitality, etc), however the manufacturing PMI showed a drop.  This means people are spending less on products and more on services.  
This month, that trend continued however, manufacturing PMI showed an even steeper contraction.  Last month was 48.4.  This month was 46.3.  
It’s not clear why this is, but certainly even service-based businesses rely on products, and if there’s a slow down of product, that could reflect a slow down of services. 
This sentiment was actually shared by Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.  He noted “with manufacturing slipping back into decline after three months of growth… an increasingly severe downturn in new orders mean factories are running out of work.”
He warned that “we are likely to see further downward pressure on both output and prices for goods in the coming months, thanks to the demand environment which has been hit by higher interest rates, the increased cost of living, economic uncertainty and a post-pandemic shift in spend from goods to services.” 
Bottom Line:
We are not in the clear.  I was hoping that this month would be a 3rd straight month of positive economic indicators, and I would be able to move heavier into stocks and adjust my TSP allocations. However, we’re not yet there, and I am sticking with my current recommended portfolios. 
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 portfolios 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.

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Click here to download my portfolios.

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