TSP Planning Report March 2024

Facts:

  • The G Fund rate for February 2024 increased from 4.125% to 4.375%. 
  • The Fed Funds interest rate remained at 5.3%. 
  • This month’s unemployment rate increased to 3.9% from 3.7%. 
  • The 2nd Estimate for Q4 GDP came in at 3.2%.  Last quarter’s GDP was 4.9%. 
  • PMI (Purchasing Managers Index) expanded to 52.5, compared to last month’s 50.7 reading (any reading below 50 represents contraction).
  • The S&P 500 (C Fund) increased 5.34% in February 2024.  Thus far in 2024, S&P 500 is up 10.63% YTD.

Assessment:

Possible lowering of interest rates:
I’m no prophet, but I mentioned that we are in an election year, and lowering interest rates is a tactic that politicians can use to buy votes.  This month’s inflationary reading was HIGHER than expected, which should have caused the Fed to RAISE interest rates, but instead they kept rates steady and even forecasted 3 rate cuts this year.  
The lowering of interest rates bodes well for the F funds, as such I have introduced the F fund back into my recommended portfolios. 

Rising Credit Card Debt & Borrowing from 401ks:

According to a Vanguard stat, 3.6% of 401k participants took a Financial Hardship withdrawal (not a loan) in 2023.  This is compared to 2.8 in 2022, and compared to the pre-pandemic average rate of 2%.
This comes as no surprise considering the increased cost of living keeps rising. As mentioned above, inflation readings came in HIGHER than expected.  
Also, as Fox News reports, “in the three-month period from October to December, total credit card debt rose… 4.6% from the previous quarter… It marks the highest level on record in Fed data dating back to 2003 and the 10th consecutive annual increase.”

This rise in debt may also be giving the Fed reason to lower interest rates.  
Lowering interest rate would add fuel to the already-sizzling-hot stock market.  The C fund is already up over 10% YTD.  

Bottom Line:

The prospect of lowering interest rates excites the economy and the stock market, and the F fund.    
We still have looming real estate defaults, the problem that the government hiring represents almost 2/3 of all new jobs, global threats to trade, global threats to war, and domestic political instability.  It’s hard to bake that into the current allocation – if I did, we would need to take shelter in high-yielding money markets.   

In general, I am confident in the power of companies to make profits, and the economy will thrive and the market will continue to rise so long as Governments don’t interfere.

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.

Email me here – stephen@stephenzelcer.com

Click here to download my portfolios

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