- The G Fund rate for September 2022 increased to 3.375% It was 2.75% last month.
- The Fed Funds interest rate increased to 3.25. It was 2.5% in August. In June in was 1.65%, and 0.9% in May. The Fed anticipates 1 more rate increase this year, in November.
- This month’s unemployment rate increased slightly to 3.7%, from 3.5%.
- PMI (Purchasing Managers Index) continued to expand (any reading above a score of 50 means expansion). This month’s reading came in at 52.8, compared to August’s 52, July’s 53, and June’s 56.1.
- The S&P 500 (C Fund) decreased 4.7% in August. YTD it is down 24.10%
- The 3rd estimate of Q2 GDP confirms a negative -.6% GDP. This is back-to-back quarters of negative GDP which means the American economy has entered a “recession.”
Nothing has improved since last month’s report. If anything, things have gotten worse.
To restate what we discussed in last month’s report:
Major employers have announced massive layoffs. This includes Walmart, Amazon, Apple, Tesla, Netflix, Redfin, JP Morgan, Carvana, Coinbase, Wix, Groupon, Oracle – just to name a few big names. See HERE.
On a global level, the U.N. recently announced the world is heading toward “global destabilization, starvation and mass migration on an unprecedented scale.” See HERE
Aside from the war in Ukraine, there have been governments and economies showing troubling signs. For example:
Protests of government over-reach have sprung up in Sri Lanka and the Netherlands.
And, new to this month’s news –
- Interest rates have gone up again – sending mortgages above 7%. This means, people who need access to cash will have to pay a hefty to price to get it. That will slow spending and economic growth (however, most feel that it’s a necessary evil to combat inflation).
- The British pound is steeply losing value, dropping 22% of its value in 6 months. This means the UK will experience serious loss of buying power when trying to buy international (and national) goods and services, putting even more pressure on the UK economy.
It’s ugly out there, and it seems things are going to get worse before they get better. I do not feel good about the market for the next few months. However, it’s always hard to say when the fall and rise will happen.
You need to ask yourself – how soon do you need your investment money?
The market has dropped significantly. A rebound, when it comes, usually comes quickly. For example, during the month of July, the S&P 500 rebounded over 9%. As such, it’s hard to advise to pull out of the market. My general advice is to give it time. Time is the ultimate risk mitigator.
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, currently at 3.375%. 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 – email@example.com
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