May 2022

May 02, 2022

Welcome to May!  I have spent a lot of time reviewing my internal numbers, the available market research, historical trends, and overall investor sentiment.  Obviously, we are not where we want to be.  We just had GDP numbers come in and they were negative.  Two negative GDP quarters equals a recession.  It is interesting, in all the previous recessions (and by definition), only after the numbers have been posted do we label it as such.  "Two bad quarters, we are in a recession now!"  When everyone else was saying, "things are bad..." well before the declaration.  It is almost a bean counting function to label a recession a recession as opposed to making it something worthwhile in the economic sense.  

So, where do we stand?  Are we in a recession now and not know it?  How do you feel?  Are things bad?  If we are in a recession, what do the markets think?  Are lower GDP numbers already priced into the share prices?  I'm sure I've mentioned this before in a previous post, but the market is like the Heisenberg Uncertainty Principle, the more we know about one aspect of the market, the less we know about where it is going.  Knowing about the state of the market influences investor sentiment, and that can cause unpredictable outcomes.  

So, let's recap - world-wide pandemic, quantitative easing to the moon (to paraphrase Elon Musk) starting inflation, supply chain disruptions, change of parties in national elections, continued lockdowns, fossil fuel restrictions drive energy prices higher, Russia invades Ukraine, more upward pressure on fossil fuels which in turn increases the prices of just about everything.  Nowhere in that list of issues did I mention we returned to normal.  We have been living in the unusual for over two years now, and I think the market knows it.  Our economy is bouncing along the guardrails trying to find its footing, but the markets, as free and fair as they can be, have been pricing all of this uncertainty in over the last few weeks. 

I think many of you were wondering, why I didn't just move to the G Fund last month.  First, I don't place my investments in the G Fund-it is a guaranteed negative return vs inflation.  Second, there is no way to time the market.  Think of this month as a buying spree.  I just bought my TSP contribution at a major discount.  My core investment is down, yes, but economic downturns do not last very long, and unless I was going to use large portions of my TSP in the next six months, my investment will be just fine.  Sure, I could have moved it to the G Fund and preserved it, but when should I move it back into the stock market?  Timing is not possible for the TSP.

Do I think we are in a recession, yes.  Do I think the market will continue to have negative days and weeks for the next few months, probably.  I also think there will be some very strong days and an ultimate recovery, but I cannot time it.  I am going to keep maximizing my TSP contributions to buy as much as I can while the market is cheap.

I'm at 100% C Fund.  Keep investing!