Federal Retirement Thrift Investment Board Members Is Delaying the Implementation of the (I) Fund Benchmark Change

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Due to a meaningfully different economic environment related in large part to the impact of the global COVID-19 pandemic, as well as the nomination of three new Federal Retirement Thrift Investment Board Members, pending further study, the Federal Retirement Thrift Investment Board is delaying the implementation of the I Fund benchmark change to the MSCI ACWI ex-U.S. Investible Market index from the MSCI EAFE index.

In 2017 a decision was made to change the (I) Fund index from the MSCI Europe, Australasia and Far East Index to the more comprehensive MSCI All Country World Ex-US Investable Market Index, which includes investments in markets around the world, most notably Canada and China.

In a letter to Labor Secretary Eugene Scalia, from Natl. Economic Council Director, Larry Kudlow and Natl.  Security Adviser, Robert O’Brien.  It stated that the (I) Fund change would “expose the retirement funds to significant and unnecessary economic risk,” citing Chinese human rights abuses and the COVID-19 Pandemic.

The letter further states “The Chinese Government’s intentional thwarting of US investor protections should raise serious concerns about the reliability of financial information from Chinese companies and demonstrate significant concerns to investors, especially retail investors such as TSP beneficiaries of investing in the companies listed on the Chinese exchanges that would be represented in the new index”.

 “The Federal Retirement Thrift Investment Board is set to implement these plans during a time of mounting uncertainty concerning China’s relations with the rest of the world, including the possibility that future sanctions will result from the culpable actions of the Chinese government with respect to the global spread of the COVID-19 pandemic,” they wrote.

Scalia wrote. “This now is the only acceptable course, given the concerns expressed by the president’s advisers and the chairs of the SEC and [accounting oversight board], as well, of course, as the president’s own directive to the board”.

Social Security Outlook Makes TSP All the More Important

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Social Security Outlook Makes TSP All the More Important. Can we count on Social Security in the future?

This question is related to the Thrift savings Plan because, if we can’t count on Social Security, we will need more income coming from sources such as the TSP and IRAs.

For the last two years, the report of the Social Security Trustees has said that Social Security would become insolvent by the year 2034. This does not, however mean that Social Security will not be able to pay benefits to those who have earned them once we hit 2034. The Trustees have said that, even if nothing changes for the worse, they will be able to pay 80% of promised benefits. 80% is way, way better than 0%.

In Congress, our elected representatives are asking themselves if it is 2033 yet. It is likely that many Senators and Representatives will have retired by that future date, so they don’t have the level of concern that most Social Security recipients (or future recipients) have. As long as politicians continue to think of the next election, instead of the next generation, we will continue to lurch from crisis to crisis.

There have been suggestions from various interested groups about how to “save” Social Security; and the suggestions vary widely based upon the constituency of the group that is making the suggestion.

Here are some of the suggestions:

• Gradually increasing the full retirement age (FRA). The most common age suggested is 70. Some suggestions would keep the age of 62 for reduced benefits, but the benefits will be reduced more for someone whose FRA was 70 than for one whose FRA was 67. Other suggestions would increase the age for early benefits to 64 or 65. Follow link to read full article: https://bit.ly/2Wn4aGJ

Monthly Market Insights | April 2020

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The spread of COVID-19 sent stocks tumbling, as the health and economic costs of the pandemic continue to mount.

U.S. MARKETS
The spread of COVID-19 sent stocks tumbling, as the health and economic costs of the pandemic continued to mount. The Dow Jones Industrial Average dropped 13.74 percent, while the Standard & Poor’s 500 Index fell 12.51 percent. The NASDAQ Composite lost 10.12 percent.1 When you reach the end of your rope, tie a knot in it and hang on. Franklin D. Roosevelt, 32nd President of the United States. Stocks moved sharply lower early in the month, as investors grappled with a string of troubling coronavirus headlines. Meanwhile, the markets kept an eye on the evolving coronavirus pandemic, while digesting both the Super Tuesday results and a drop in oil prices.

SWIFT ACTIONOn March 15, the Federal Reserve cut interest rates to zero and announced several actions designed to support households and businesses. However, markets were unfazed by the Fed’s aggressive move, electing to instead focus on the contraction of economic growth that many are expecting. As prices fell, the hospitality, real estate, and travel industries felt the immediate impact of the newly instituted social distancing rules. At the same time, financial stocks suffered losses on lower interest rates, while energy prices sunk to new lows in part due to lower oil prices.

THE CARES ACT.
As the month came to a close, the passage of the $2 trillion CARES Act led to a historic jump in stocks and provided some much-needed support to the market. Stocks registered their best weekly performance since 1933, with the S&P 500 surging over 10 percent.2 However, stocks were mixed in the final days of trading, leaving the markets with losses for the month.

SECTOR SCORECARD
All industry sectors ended lower in March, with declines in Communication Services (-12.69 percent), Consumer Discretionary (-13.58 percent), Consumer Staples (-4.12 percent), Energy (-36.78 percent), Financials (-19.48 percent), Health Care (-3.93 percent), Industrials (-18.24 percent), Materials (-13.37 percent), Real Estate (-12.97 percent), Technology (-7.32 percent), and Utilities (-7.14 percent).3

RATTLED BY THE MARKET DROP? YOU’RE NOT ALONE

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We have witnessed some extraordinary moves in the financial markets during the past few trading sessions.

In recent days, the Standard & Poor’s 500 index has fallen by over 7 percent more than once. Ongoing concerns over the possible economic slowdown stemming from the coronavirus are prompting traders to reprice financial assets.1 For many, things “got real” when the National Basketball Association suspended its season, and actor Tom Hanks and Rita Wilson both tested positive for COVID-19.

In times like these, I hear from some clients that they can find it difficult to stay committed to an investment program when fears are high.

But for me, a quick look at recent history helps me keep tumultuous seasons in perspective.

Remember when the trade dispute with China ramped up back in February 2018? In just six trading days, stock prices had undergone a rollercoaster ride on their way to a 10-percent market correction. On February 8, 2018, CNBC reported that the Dow Industrials traveled 22,000-plus points over the course of February’s first full week of trading, due to trade-related fears.2

How about the 4th quarter of 2018? On October 10 of that year, the Dow saw an 800-point drop, largely due to rising interest rates and global economic concerns. And who can forget the holiday market trading two months later? It was a breathtaking event as the Dow lost over 600 points on Christmas Eve, then soared 1,000 points the day after Christmas.3,4

In the past few weeks, I’ll admit that I’ve done a few “double takes” at my computer screen, as we’ve watched major swings in stock prices and movements in the bond and crude oil markets.

But just like always, I am here to help you and your family answer any questions that might surface for you. Whatever decisions you’re considering, I’d be honored to support you through them. Reach out to me anytime.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

1. CNBC.com, March 12, 2020
2. CNBC.com, February 8, 2018
3. CNBC.com, October 10, 2018
4. CNBC.com, December 25, 2018

Thrift Savings Plan – Allocating Your TSP in Uncertain Times

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During this webinar we will go into more depth on creating a portfolio based on risk return statistics that are appropriate for your individual needs. Tools will be provided to determine if your current TSP allocation is within your comfort zone.

Tues., March 24, 2020 from 1:00-2:00pm EST 

To access the Live Webinar, click here.

If you have questions related to the subject matter that you would like Carol to address after the meeting, email karen@fedsavvy.com. 

If you experience problems registering, please email natalie@fedsavvy.com or call (855)531-7252

For those of you who can’t participate on the computer and would like to call in, let us know and we will send you the slides so you can follow along! Or contact Natalie Meglino at natalie@fedsavvy.com and request to be registered.

Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC.  Advisory Services offered through J.W. Cole Advisors (JWCA). FedSavvy Educational Solutions and JWC/JWCA are unaffiliated entities. Securities are not FDIC insured or guaranteed and may lose value.  Investments are not guaranteed and you can lose money.   This presentation is for educational purposes only and is not an offer to buy or sell an investment. Neither FedSavvy Educational Solutions nor JWC/JWCA are tax or legal advisors and this information should not be considered tax or legal advice.  Consult with a tax and/or legal advisor for such issues.