No Default, but I Still Felt the Impact - June Allocation

June 01, 2023

Welcome to June! While the US market saw some volatility towards the end of last month due to prolonged debt ceiling discussions, the C and S Funds quickly recovered after a tentative agreement was reached before the Memorial Day weekend. Unfortunately, international stocks were hit harder as they are not as resilient to outflows of capital and remained down for the rest of the month. 

I believed at the end of last month that the debt ceiling talks were further along than they were, and my system showed weaker signals in the US economy than in the international economy.  As a result, the fund was down 4.01% compared to the relatively flat performances of the C and S Funds, which saw gains of 0.43% and 0.44%, respectively. 

While I hate losing money in a month when other funds are flat or positive, I maintain a long-term view that the fund can recover the following day, and this return us just a snapshot in time.  I also take comfort in knowing, that while the I Fund was dropping, I was still contributing 100% of my contributions throughout the month to the lower I Fund share price. 

June's potential performance looks uncertain for all funds and the world economy, but I am cautiously optimistic about the US economy, which has inflation a bit more under control. Additionally, with the debt ceiling bill having just passed the House of Representatives, the uncertainty of US default is now next to nil.  It is worth noting the reduced federal spending as part of the debt ceiling agreement will have an impact on the economy as government spending is additive to the GDP, and cuts to government spending will reduce GDP in the long run.  

To diversify and potentially take advantage of any upswings in the I Fund, I will be keeping 13% of my allocation and new contributions in the I Fund, while the rest will be allocated to the C Fund.  Keep investing!