financial planner Stephen Zelcer

May 2021 TSP Planning Report:



  • This month’s unemployment rate increased to 6.1% from last month’s 6.0%.
  • PMI (Purchasing Managers Index) continued to expand (any reading above a score of 50 means expansion). This month’s reading came in at 60.7, compared to last month’s 64.7.
  • The S&P 500 (C Fund) increased 5.33% in April compared to 4.38% in February.
  • Q1 GDP shows growth of 6.4% according to the 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).
Overall trend is very good.
Government Spending:
I’ve been reading up on Gov’t spending, and surprisingly everyone is in agreement that pumping $6T into the economy will cause serious inflation issues.  To counter-balance inflation, interest rates will need to rise faster.  That’s not the end of the world, as I mentioned in last report, but that is directly pushing the F fund lower, and the G fund higher.  As such, I have adjusted the G & F fund proportions in this month’s report.
Businesses still manage even in rising interest rate environment. Remember, business was growing even when interest rates were above 4% just over a year ago.  PMI (purchasing managers index) is expanding rapidly.  PMI measures the purchasing of materials for producing goods – whether lumber for housing or furniture, etc., textiles for furniture or clothing, etc., plastics for products and disposables, etc., metals for cars, computers, etc.  When PMI is high, it means companies are forecasting an increased demand for products.  As such, they order more materials. When PMI is low, it means companies are forecasting an decreased demand for products.  As such, they order less materials.
Essentially, PMI is an indicator to future business, and this month’s PMI, while not as high as last month’s, is still showing strong demand.
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.
As I mentioned in last report, inflation will be countered by rising interest rates.  This may cause a temporary dip, but keep buying as it goes down.  Eventually, it will stabilize and come back up.
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.

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