Facts:
- Unemployment increased 0.2%, up to 3.9%.
- 3rd Quarter GDP came in at 3.4%, according to the 3rd estimate.
- PMI, posted another month of expansion, with the index reading 54.1%.
- The S&P 500 (C Fund) got hammered and lost 9.03% (in just 1 month!)
Assessment:
- Unemployment did increase, but this is the first increase in 4 months, and it is only a minor 0.2%.
- 3.4% quarterly GDP is still (relatively speaking) amazing.
- PMI had a notable slowing, but still continues it’s impressive streak, performing well above-average (50% is considered average) for the past 25 months.
- The S&P 500 ended 2018 down a total of 4.41%. Overall, this is not terrible for the S&P 500, but a 9.03% one-month drop is very alarming.
Bottom Line:
I honestly don’t know what to say except that the fundamentals are still solid. My attitude towards rising interest rates has not changed from last month. See last month’s report. Also,
The fundamental economic indicators have not enough for me to panic. That said, I cannot ignore the investor sentiment. This environment is what I’d call a mid-economic-cycle environment. You’ll need more stock to pursue middle-of-the-road returns. But not just any stock. The smaller companies are going to feel some challenges. The larger ones can weather the storm. International exposure in the TSP (I fund) does not justify it’s levels of risk, and F fund will go negative if interest rates rise.
Check out the 3 page report below. DON’T JUST LOOK AT RATE OF RETURN. Always view the target return of each portfolio in context of its ranges of fluctuation.
I know this volatility is scary for pre-retirees. You will need to make sure you have the TIME in your portfolio to ride out the volatility. If you need to derive income over 2019, you need to carve out that money from your portfolio and put it into the G fund. I explain how to do so HERE. The remainder should be invested in the C fund. Certainly all new TSP contributions should buy into the discounted S&P 500.
Feel free to get in touch if you would like to work with me or simply have a discussion on financial planning – stephen@stephenzelcer.com
Click here to download this month’s portfolios. See below…
Jan-2019-report
