Global Events and a Strong USA - July Allocation

Welcome to July and Happy Independence Day!

We serve in and live in a unique, exceptional, and wonderful nation. Our free markets and access to information are unparalleled, and I am pleased you have chosen to listen to my small voice among a sea of many.

I am working on many updates to the site, namely interactive charts for each of the funds to allow you to compare them to TSP Coach and a C/S Fund percentage tool to allow you to experiment with different percentages in each of these funds. Spoiler alert: TSP Coach still beats this strategy in the long term. I will make an announcement when I have released the tool.

We had a very strong month of June despite international disruptions and signs the economy might be in trouble again in the next six months. Riots in France, the continued Russo-Ukrainian war, the “attempted coup?”, and US-China relations all pose various challenges to both the US and international markets.

First, the riots in France should not have a significant impact on the global economy or stock markets, except for those companies tied to France in a major way. France’s share of the global GDP is ~2.7%, and their unrest does not look to be contagious to other European countries. While the unrest is being seen across much of the country, it looks like it is contained to regional centers within cities. France obviously has issues it must address, but in the short to medium term, the unrest will impact tourism the most.

I made a post a few months ago stating that numbness was a strategy. Unfortunately for Ukraine, it looks like the war will continue to last through this summer and into the winter. However, for the global economy, the West’s diversification away from Russian petrochemical products means the impact of winter will not be as dramatic for the global economy, resulting in fewer surprises on balance sheets and GDP predictions—economists and financial analysts hate surprises. They can now base their stock pricing models on over a year’s worth of data to output models reflecting the new energy prices.

As for the “attempted coup?”, I do not think it will significantly change any of the calculus in economies and stock markets. Remember when I said we are blessed to live in a country with access to information? I will quote Sir Winston Churchill on the opposite case: “Russia is a riddle, wrapped in a mystery, inside an enigma.” Anything they do cannot be used for investment decisions, so in the short term we must discard outputs from them. In the long term, we need to understand the trends, and like I stated above, the trend looks like at least another 12 months of war.

On the China front, although President Biden had a major misstep in calling President Xi a dictator, the fact that both our countries are willing to talk and have negotiations is a positive sign that the escalating tensions of 2024 may not occur.

I hope people reading this did not use the adage of “sell in May and go away” as the last two months across the C, S, and I Funds were incredibly strong. Missing out on one strong month over a series of years can cripple your portfolio. I take the long-term view, and if I take myself out of the market, it better be for very good reasons.

While we had a very strong month in the S Fund, my models and analysis still point me to the C and I Fund. Have a great Independence Day and keep investing!