TSP Planning Report October 2020
- Unemployment continued to drop. This month’s unemployment rate came in at 7.9%, compared to last month’s 8.4%.
- PMI (Purchasing Managers Index) continued to expand. This month’s reading came in at 55.4, compared to last month’s 56.
- The S&P 500 (C Fund) dropped 3.8% during the month of September. The YTD return is 5.5%
- The Fed Funds interest rate remains between 0% – 0.25%, and the Fed suggested that such rates will hold thru 2023.
- The 3rd Q2 GDP estimate shows GDP dropping – 31.4%, as opposed to the original estimate of -32.9%.
Another point I am concerned with and monitoring is housing. A couple of real estate stocks have already started declining. The reasoning is this:
The amount of defaults, evictions, and foreclosures is being stalled by the government. The government stalling may expire in the near future. That’s not a problem, unless people are still being prevented from working. If that happens, many unemployed people will be evicted with no place to go (unable to rent because they are still being prevented from working), and/or landlords may not be able to find tenants, and thus unable to collect rents, causing them to default on their loans. If both of these happen, we will have a weird situation of plenty of empty properties but no one employed to rent them. This will cause many properties to be put on the market, an over-supply, which in turn will cause housing prices to go down. This may also cause a credit crunch, as lenders will ultimately feel the burn of defaults, leading to tightening of lending and increased costs of borrowing.
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