Disruptors in the Next Six Months
Welcome to July! We had another solid month with the C Fund. It is definitely the fund that keeps on giving. The S and I Fund continue to be laggards this year. Even though they are positive for the year and are on track for 5% and almost 12%, respectively, they are showing dismal returns compared to the C Fund, which, at its current pace, would be over 30% for the year! I do not believe we will see 30% out of the C Fund though. I hope I'm wrong, but there are just too many disruptors facing us over the next six months.
- First, Ukraine is about to start getting really advanced weapons with the F-16. ATACMs have already been introduced and they are starting to cause effects that will disrupt the stalemate the markets have gotten used to.
- Second, the presidential election has been thrown into complete disarray with President Biden's poor debate performance. This is introducing the unknown of a possible mystery candidate for the Democrat party. The October surprise seems to have come early.
- Third, interest rate cuts are not expected to occur as quickly as possible. Inflation has come down considerably since its highs, but in order to keep inflation at the new target of 3%, the Federal Reserve needs to be careful not to lower interest rates too soon or too quickly. Additionally, the more we can outsource our inflation overseas, the better our national debt becomes.
I am also not positive on our long-term economic prospects right now. There are many different canary in the coalmines, and if you look around, you might be seeing some in your area. On the national level, pool supply stocks are faltering, a possible indication that consumers are tightening their spending. At local levels, housing prices are slumping (this is not always a good indicator though as different regions can collapse for different reasons). Bottom line, be on the look out for other indicators. Durable goods, car prices, etc., are all good indicators, but ever since COVID and high inflation, these metrics are subject to other disruptions that may not signal a down turn.
For now, I'm remaining positive on the stock market for July and will remain 100% in the C Fund. Keep investing!
