04/17/2018
Welcome back for the April/May update.
First up, I want to again thank the folks who donated to support the site since my last update. I have big plans to create a podcast in the near future so readers can listen to new posts on the go, as well as to expand the website later in 2018. Those plans may be a little unrealistic as my friends tell me that things are going to be a bit busy at home with the arrival of the baby. At any rate, the podcast will add a few extra expenses to the site and those donations will definitely help cover those.
Bottom line up front: I will be sticking with an allocation of 50% TSP C Fund and 50% TSP I Fund in both my existing balances and new contributions this month.
Thrift Savings Plan Fund Returns
For all the volatility (and there has been a lot of volatility), the TSP stock funds are all nearly flat for the year overall. Year-to-date returns (through 04/17/2018):
- TSP C Fund: 1.77%
- TSP S Fund: 2.77%
- TSP I Fund: 1.0%
- TSP F Fund: -1.54%
- TSP G Fund: 0.79%
The Mailbag
Since my last update, I have received a slew of questions from folks who expect I might be very concerned about talk of trade wars and/or the volatility we have been seeing in the market. Of course those of you who have followed me during volatile times in the past know just how hopelessly boring I am and how little attention I pay to things like that.


So where to from here?
All indications are that the US will avoid recession in the next year. The economy isn’t extraordinarily strong, but this slow, steady growth is easier to manage than an overheated, inflationary economy. Short to mid-term, my guess (and it really is a guess) is that the stock market will continue its recent run – earnings for the first quarter are projected to be 17.3% higher than the first quarter of 2017 (and that would be the strongest year-over-year improvement since 2011). Tempering that, first quarter economic growth estimates have been cut in half from about 5% to 2.4%, and stock market valuations are still well above historic averages.
March’s Economic Numbers:
In this section I discuss the key indicator data I use in determining where I think we are in the economic cycle and what that data means to me in deciding how to allocate my Thrift Savings Plan balance. (These indicators are explained in some detail in How to Determine the Current Phase of the Business Cycle.)
Employment numbers:
Total nonfarm payroll employment edged up by 103,000 in March, and the unemployment rate was unchanged at 4.1 percent. Employment increased in manufacturing, health care and mining.
Taking a look at the unemployment rate over the course of the year, you can clearly see that we are at the natural rate of unemployment and further significant improvements in the rate are unlikely. So we focus much more on wage growth at this stage in the business cycle.
In March, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.82. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent. Average hourly earnings for private-sector production and nonsupervisory employees increased by 4 cents to $22.42 in March.
I obtain this data from the Bureau of Labor Statistics.
Purchasing Managers’ Index (PMI):
As usual, I pulled up the most recent report from the Institute for Supply Management. Any number above 50 indicates growth in manufacturing and anything over 43.2 indicates an expansion of the overall economy. The March PMI reading of 59.3 is a very strong number:
Manufacturing expanded in March as the PMI registered 59.3 percent, a decrease of 1.5 percentage points from the February reading of 60.8 percent.
A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the March PMI indicates growth for the 107th consecutive month in the overall economy and the 19th straight month of growth in the manufacturing sector. The past relationship between the PMI and the overall economy indicates that the PMI for March (59.3 percent) corresponds to a 4.9 percent increase in real gross domestic product (GDP) on an annualized basis.
The last twelve months:
Yield spreads: The yield curve has made a definite move to the upside and gotten steeper in the process. I get this information from the Cleveland Fed, who had this to say:
As we move into spring, short rates have continued to rise, but long rates have not followed along, twisting the yield curve flatter. Using past values of the spread and GDP growth suggests that real GDP will grow at about a 1.5 percent rate over the next year, equal to the February number, and just up from the January prediction of 1.4 percent.
The flatter yield curve had more effect on the estimated probability of recession, which increased a bit. Using the yield curve to predict whether or not the economy will be in recession in the future, we estimate the expected chance of the economy being in a recession next March at 13.4 percent, up from February’s 11.1 percent, as well as January’s 12.9 percent. So the yield curve is optimistic about the recovery continuing, even if it is somewhat pessimistic with regard to the pace of growth over the next year.
Money supply growth rate: Money Supply M2 (which includes savings deposits, money market mutual funds and other time deposits which can be quickly converted into cash or checking deposits) growth improved markedly in March:
Money Supply M2 in the United States increased to 13918.10 USD Billion in March from 13858.30 USD Billion in February of 2018.
Conclusion
All of the above data leads me to believe that we remain in the Mid/Growth/Performing stage of the business cycle (although I do think we are moving later in that stage) and so I am going to continue to allocate my balances and contributions 50% to the C Fund and 50% to the I Fund.
Things I Like
I have lately been trying to make myself more secure online, particularly when I am traveling. A big part of that is using a VPN (virtual private network) on my phone, iPad and laptop whenever I am on any WiFi network besides my home network, and even when I am on cellular systems while traveling overseas.
This allows me to connect to dodgy public/hotel WiFi networks without concern as it automatically encrypts everything I do, the provider can’t even tell what websites and apps I am using, and I can make myself appear to in another country with the click of a button (handy for streaming Netflix or WatchESPN in parts of the world where my account is blocked).
I selected NordVPN based on reviews, speed, price (about 10 cents a day with the two-year plan), and ability to use a single account on six different devices simultaneously (so I can protect all the family’s devices with one account).
I tend to do fairly exhaustive research on things before I buy or sign up, and it seems a shame to not share the results of that research with anyone, so I have created a Things I Like page which you can always find through the Resources tab in the menu. It has absolutely nothing to do with the Thrift Savings Plan, but this is my only website, so there it is.
What I’m Reading
In case you somehow missed it, James Comey’s A Higher Loyalty: Truth, Lies, and Leadership is finally out. This is also completely unrelated to the TSP or investing and isn’t really a recommendation (I just downloaded it today and haven’t even started yet), but it’s the book I will be reading this week.
The Next Update
Quick note: not surprisingly, life is busy with the baby coming, so the next update might be a bit delayed and will almost certainly be a short one. Rest assured that if I see a cause for concern in the May economic numbers, I will get something up and send a notification out to the email list.
I send out a notification of these updates (or allocation changes during the month) to the email list which you can subscribe to here: Subscribe. If you want to see what I am reading throughout the month, I also have a twitter account to which I usually post items of interest which I stumble across for investors, Feds and the military a few times a week at: @TSPallocation
What’s in it for me?
I don’t ask anything except that you share the site with your colleagues so we can continue to expand the community of feds and service members helping each other in a free, transparent, no-pressure environment (although if you want to, you can donate to support the site here). You can help by telling the person sitting next to you, linking to this site from your own webpage or blog, liking it on Facebook, sharing on Twitter and in other investing forums, or actively participating on our Message Board. So if you found this post useful, please share it with your friends and colleagues using the email and social sharing buttons below right now. Thanks!
Paul: How are you going to accommodate us deaf folks who are finding this website very useful if you do podcast?
The website will always come first – the podcast (if I can make it work) will just be an audio version of the exact same content (sans images). Tonight I can’t even fix the spacing between paragraphs so I’m not sure the podcast will be as simple as I imagine.
Thanks so much for all you are doing!!
Hi Paul – hope fatherhood is going well, any chance of reviving your website?
Thanks so much for doing these! Big congrats on your new baby to come!
I appreciate your articles and updates. How can/should we adjust our allocations if we have less than 10 years to retirement- say 7 years. I know it’s an individual decision and that you should be diversified with some safer options as you near retirement etc. You mention that you have 10-20 years so are less concerned about motion but just curious how you would advise those of us that are closer.
I have followed you for years. I adhere to your advise. I would like some help with where to be in retirement. I have a higher than average risk factor. Thanks.
Hey TSPaul. Do you think me and you can be partners some time? Like team up?
Paul, you are doing a great service for a lot more people than you think. I can probably speak for everyone when I say thank you.
Thanks, Paul — you are a voice of reason and sanity — and congratulations in advance on your impending family addition!
I really wish you’d keep it straight instead of weaving in your politics. If I wanted to read a Comey tabloid, I’d go to Walmart.
I just said I was reading it, and specifically said that this wasn’t a recommendation. The Comey book is sort of what a lot of people are talking about this week, no matter their politics. No political slant intended, sorry if it came across that way.
I personally don’t care what your political affiliation is. If I get great financial advice from a democrat, or a republican, I’ll take it! I look forward to your post every month, good sir! Congrats on the chitlin’, being a dad is the best! And as a result of your post, I feel very confident that I have financially set myself apart from most, and can continue to provide for my family the way I desire for years to come. As the previous comment said, you are appreciated more than you know…
Not that anyone asked, but I am not, and have never been, affiliated with any political party. I have always been an independent.
Robert, Paul stated it was not a recommendation. He is just reading it. I didn’t take it as “taking sides,” and even if he did, so what.
Not a big deal. Politics make up a very very small part of a person. My daughter is a liberal college student but a great well rounded person. Besides, he’s just telling about a book that he has yet to read…cut him some slack. He’s helping us all.
Robert: The act of taking in information (ie, reading a book) is only seen as a political statement by those whose politics are based on staying as ignorant as possible. Even Republicans do opposition research (smart ones, that is). If facts and data aren’t your thing, maybe this website isn’t for you.
Robert: I read the same article and did not see anything politically about it. In the end this is Paul’s own website and is effectively entitled to do as he wish. It is not like he was charging an upfront access fee or hired by the government to provide us all this insight into TSP management gained from his research. It is HARD work.
Thanks Paul for the advice! Enjoy the baby! Congrats
Congrats on the upcoming baby! There is nothing more wonderful than having a baby in the house, and your entire life is about to change for the better. And thanks for all your TSP advice. I’m slow absorbing all that I can.
Thanks for the new update. Congrats on the new addition to your family!
A podcast would benefit me greatly. In this day, my media consumption revolves around talk radio and podcasts. I have two kids in diapers so I hardly have anytime to read anything. Thanks for your insight.
Paul,
I was looking back to see what changed between December’s post (100% C) and this post (50% C, 50% I), and I couldn’t see where you changed your recommendation. The link on the sidebar to the Feb/Mar post comes right back to this one. Could you elaborate (again) or provide a link to your reasonings on the change to include the I fund?
You’ve always seemed to be a bit down on the I fund (calling it an outdated measure of the global markets). I’m just wondering what may have changed in that assessment, or what in today’s market makes the I fund viable.
Thanks for all you do, and congratulations on your baby-to-be!
I made the change and discussed my rationale in the January “Look Forward at TSP Investing in 2018” post – http://www.tspallocation.com/tsp-investing-2018/
As far as the I Fund goes, I just don’t like it as the only international option for TSP investors because it doesn’t include rapidly growing markets like China. It does a fine job following the developed international markets index, so when those economies are growing it will do well.
What is your opinion of the 40-week moving average or in some cases referred to as the 200 day moving average?
I tried the Faber method for almost three years and the whipsaw took all the gains I would have made. Works well in a down market but didn’t pay off in the end so that is why I came here. This method matches my investment philosophy much better. However, it is probably still better than buy and hold.
TS Paul can you reply to Carol below, I am in the same boat but actually closer. I am eligible in 1.5 years.
Thank you. Joe
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Carol says:
April 18, 2018 at 12:07 pm
I appreciate your articles and updates. How can/should we adjust our allocations if we have less than 10 years to retirement- say 7 years. I know it’s an individual decision and that you should be diversified with some safer options as you near retirement etc. You mention that you have 10-20 years so are less concerned about motion but just curious how you would advise those of us that are closer.
Reply
Hello, I’m new to your site and I am so glad to have found it. The information you give is so helpful to me because this all seem not a foreign language. I was actually googling advice on TSP allocation because doing what my coworker does has not been lucrative for me so I am starting to do my own research and invest in the market outright but every little bit helps because I am presently buying back military time so I probably have another 8 -0 years to work and my TSP will not support me. Thanks
Will there be an update soon?
Yes, in the next week or so. I am still digging out from the birth of my son, but will be back on the computer soon.
I fund dragging me down, eating all my profit from C. 🙁
I know just how you feel. Hopefully Italy is almost behind us. New update soon.
I’m looking for your update too.
Do you have a running 12 month summary of returns based off your recommendations? Or maybe annual summaries as well?
Right now, I think it’s very difficult to make predictions because some significant unknowns like the tariff issue. It’s tough and you’re doing a great service and just very difficult to predict what will happen. Over the longer term, I’m sure things will work out and just bumpy for a while…I think! LOL
I left the I fund back in June. With all the talk of tariffs this fund seems to be a losing fund. I am 60/40 S/C respectively and have done rather well so far this year with that mix.
I dropped from 50/50 to 75/25 for the same reason
With all the talk on Tariffs, why have you not sent something out. You are 50% I, this has to make you nervous and consider moving some funds to protect loss.
Trade wars and other short term unpredictable events don’t factor into my investing decisions at all. If the trade war tips us towards a recession, that will show up in the numbers and I will make a move. Otherwise, the market will bounce back like it never happened. Only a problem for someone who needs the money this year.
Dying to read an update, how’s it coming?
This whole baby thing is much more time consuming than I anticipated, but I hope to get one out in the next few days.
You’ve got it Paul! Just had a new child here too; it’s always challenging in unexpected ways.
Hey TS Paul, congrats on the little one and thank you again for the wealth of knowledge you’ve posted. I just found your site this week and really enjoy going through your assessments. Enjoy every moment you have with the baby, they grow up quick. I have three kids myself, and love every minute of it. Just wish I could sleep through the night again someday ha ha!
Looking forward to the next update. But I understand that fatherhood takes priority!
update soon?
I fund getting smeared
I am not sure why anyone would still be in the I fund at this point. Of all the funds it has historically done the worst. It had a good run last year, but that is long over. YTD the I fund is -3.74 while the C is +7.9 and the S is +9.85. C/S are the funds to be in right now, period.
Four months since the last update. Since June you have made several posts about an update coming in the next few days. Your credibility decreases with each unfulfilled promise. Perhaps you should quit worrying about podcasts and multiple page updates and just stick to the simple facts. It will be easier on you and more supportive to your readers. A quick overview of the economic indicators along with the current allocation is all most of us are looking for anyway.
I realize you will post as soon as you see something that requires action but in the meantime some simple credibility maintenance might be beneficial to you as well as the readers.
I hope you are enjoying your baby and you named him Mud like my mother did me (although I may have only realized later in life that she only called me mud when I did something wrong). 😃
Folks, TSPaul is very kind to provide the links used for his analyses. If you look at the current data, it doesn’t look like the numbers or trends have changed much.
Hope things are going well with the little one and that you got a good sleeper! It can take months to get a new baby on anything that vaguely resembles a schedule. The first baby can sure be a shock to your system.
I agree 1,000% and not much has changed with regard to economic indicators. My bet is “stay the course” for now at least. I did lower my percentage in equities just because I was a bit stressed out and retiring in a few years. But mostly to lower my stress level!
chirp chirp, crickets??? Just joking, I know the time a new baby consumes in the 1st year. Hope all is well and look forward to next update and your take on impact of on going trade war talk and supposed “new NAFTA”.
Is this site still active? Given it’s now September, I’m starting to worry due to the lack of communication for awhile. At what point does exiting the I fund/dumping everything back into C or S make sense?
It is still active, I have just been pulled away by the arrival of the baby and that pesky day job. I will get an update out when I can, but the reason I haven’t is that I haven’t seen a reason to change my allocation at this point.
Family 1st, OK by me. And I only expect to get what I pay for 🙂
Thanks, Paul! That’s all I needed to hear–that you haven’t seen a reason to change your allocation at this point. The silence had left my mind to wander. I appreciate everything you do!
Take your time and thanks for the effort you put into it! Reading your updates and rationale behind the allocation has inspired me to become more pro-active with not just my TSP but investments in general. It’s appreciated.