Limited Options

Welcome to May!  2024 has been an interesting year thus far. In each month we have had very interesting events to talk about.  Some good, some bad, and some ugly.  As I write this, the police are storming Columbia University and other protests are happening all over the country.  We also have continued war in the Ukraine and disruption to the major choke points of the Red Sea and the Strait of Hormuz.  On the financial front, we have rising fuel prices, very sticky inflation, high interest rates, and a housing market that looks to be in trouble.  GDP and employment numbers don’t seem to be telling the whole truth either.

With all the above going on, it either feels like 1972 or 1939.  Either we are entering a period of Stagflation reminiscent of the oil embargo and stagflation period of the 1970s, or much worse, we are coming out of a financial disaster and hurtling towards a great war.  Neither of these two feelings is good.

I follow multiple markets, individual stocks, and different investing vehicles to gauge my current investments.  While I would welcome the opportunity to diversify my TSP at this time, I cannot with the limited funds and current environment.  Based on the economic factors listed above, the G Fund and the F Fund are not practical investments.  Most of you know my feelings about the G Fund, but the F Fund is supposed to provide shelter in a storm, and it no longer provides that protection.  Moving onto the C, S, and I Funds, with the global issues facing the world, the I Fund is performing miserably as well.  Therefore, I am left with just the C and the S Funds.

I wrote a few months ago, it was tough to be a bear.  I’m finding I still feel this way.  I am not confident in the current economy and the direction of inflation, and neither is the Federal Reserve.  As long as inflation remains high, interest rates will remain high, and with the additional upward inflationary pressure of increasing fuel prices, I don’t think we will see an interest rate reduction soon.  I do believe we are seeing the start of stagflation.  Therefore, in the near term, I don’t think we are going to see a dramatic shift in the markets, but when someone or something finally causes a change in the economy, the market shift will be dramatic.  In the meantime, although the C and the S Fund look identical in expected returns, the S Fund still has more risk.  Therefore, I’m still 100% C Fund, but I remain very cautious.  Keep investing!