Debt Ceiling Causes Treasury to again ‘Disinvest’ G Fund

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The Treasury Department has said that starting this week it will “disinvest” the TSP’s government securities G fund as part of financial maneuvers to avoid hitting the debt ceiling.

In disinvestment, the Treasury in effect takes the G fund off the government’s books as debt owed, freeing up an equivalent amount of money. In a letter to Congress, Treasury Secretary Janet Yellen said she was using that authority, as well as maneuvers involving the civil service retirement fund and others, to “temporarily provide additional capacity for Treasury to continue financing the operations of the federal government.” Click HERE to read full article.

Treasury Department to Freeze Reinvestments in Thrift Plan as Debt Default Looms

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The Treasury Department will have to resort to “extraordinary measures” to prevent the U.S. government from defaulting on its obligations if lawmakers in Washington do not soon raise the statutory debt limit, Treasury Secretary Janet L. Yellen said Friday in a letter to congressional leaders.

The extraordinary measures include suspending reinvestment in the $748.1 billion Thrift Savings Plan’s G Fund, or Government Securities Investment Fund.

By law, the G Fund must be invested in non-marketable U.S. Treasury securities specially issued to the TSP, the retirement plan for 6.7 million federal employees and members of the uniformed services. Click HERE to read more.

Weekly Market Insights – January 17, 2023

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Stocks rallied last week thanks to fresh confirmation of inflation’s cooling trend and growing optimism that an inflation slowdown may provide the Fed with space to ease up on future rate hikes.

The Dow Jones Industrial Average gained 2.00%, while the Standard & Poor’s 500 advanced 2.67%. The Nasdaq Composite index surged 4.82% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, jumped 3.32%.1,2,3

IMPROVING SENTIMENT
Investor sentiment came into the new year weighed down by recession fears and concerns that Fed rate hikes may “go higher for longer.” Last week a different narrative emerged. Sustained declines in inflation, a rate hike cycle nearing an end, and a resilient economy that may avoid recession resulted in a broad-based rally.

Moderating inflation was evident in the Consumer Price Index (CPI) report released on Thursday, which, in combination with a strong labor report the previous Friday, gave investors confidence that the environment for stocks had improved. Stocks extended their gains to end the week as a few money center banks kicked off a new earnings season with upbeat reports.
INFLATION’S COOLING TREND
December’s CPI report showed a 0.1% decline in prices from November and a 6.5% increase from a year ago. It was the sixth-consecutive month of decelerating year-over-year increases. Core prices (excludes food and energy) slowed to 5.7%, a decline from the previous month’s 6.0% year-over-year rise. For the last three months, core prices have risen at an annualized rate of 3.1%–the slowest pace in over a year.4
Falling gasoline prices (-9.4%) accounted for most of the monthly decline in the CPI. Used car prices (-2.5%) were another bright spot.5

THIS WEEK: KEY ECONOMIC DATA
Wednesday: Producer Price Index (PPI). Retail Sales. Industrial Production.
Thursday: Housing Starts. Jobless Claims.
Friday: Existing Home Sales.
Source: Econoday, January 13, 2023

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THIS WEEK: COMPANIES REPORTING EARNINGS
Tuesday: The Goldman Sachs Group, Inc. (GS), Morgan Stanley (MS), The Charles Schwab Corporation (SCHW).
Wednesday: United Airlines Holdings, Inc. (UAL), The PNC Financial Services Group, Inc. (PNC), Prologis, Inc. (PLD).
Thursday: Netflix, Inc. (NFLX), The Procter & Gamble Company (PG).
Friday: Schlumberger Limited (SLB), PPG Industries, Inc. (PPG).
Source: Zacks, January 13, 2023

Footnotes And Sources
1. The Wall Street Journal, January 13, 2023
2. The Wall Street Journal, January 13, 2023
3. The Wall Street Journal, January 13, 2023
4. The Wall Street Journal, January 12, 2023

Do I Need a Traditional or Roth Thrift Savings Plan (TSP)?

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If you’re a government worker with a Thrift Savings Plan (TSP) from your employer, congratulations! With low management fees to matching contributions, you have one of the best investing tools available. You can prepare well for a comfortable retirement by contributing to your account. However, you have a choice: deposit to a traditional or Roth TSP. Your selection will determine when you pay income tax on contributions and earnings. Here’s a breakdown of the key differences but you can also work with a financial advisor to help you choose the right investments for your situation.

What Is a Thrift Savings Plan (TSP)?
A Thrift Savings Plan (TSP) is an investment account that government employees, including military members, receive as a benefit. TSPs have minimal administrative costs and allow participants to contribute pre- or post-tax dollars. Click HERE to read more.

SECURE Act 2.0” May Impact Your TSP

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The “SECURE Act 2.0” would change the age for required minimum distributions (RMD) from the TSP and require catch-up contributions to be Roth contributions.

Most readers and investors in the Thrift Savings Plan (TSP) have probably never heard of the Securing a Strong Retirement Act of 2021 (H.R. 2954), dubbed the “SECURE Act 2.0.” But, if it passes into law, it contains significant changes for TSP investors and the age for starting a required minimum distribution (RMD).

Predicting whether a complex bill like HR 2954 will become law is difficult at best. In this case, the bill does have 98 Cosponsors—51 Democrats and 47 Republicans. Moreover, the bill is likely to be considered in the House next week. In short, there is a reasonable chance that this bill will become a new law.

Summary of the SECURE Act 2.0

This bill makes changes to employer-sponsored retirement plans, including the TSP. These changes include increasing the age at which participants are required to begin making a required minimum distribution (RMD). Click HERE to read more.