Less Than Stellar Economic Data Can Affect TSP

Earlier this month, a lot of data in regards to the economy was released which revealed lack-luster data about private-sector jobs, the worst manufacturing report in the last ten years, and a service sector report that was quite weak. These reports point toward a decelerating economy on a general scale, along with a growing risk of a recession on the horizon.

Payroll data from the government was also released, which eased some fears for the moment from some negative predictions made by financial analysts. The payroll data wasn’t stellar but was in pace with forecasted calculations.

The ISM (The Institute For Supply Management) provided its monthly manager’s index report on monthly purchases with a low report of 47.8, which shows a decline in manufacturing. Last year, the highest score was at 60. 47.8 is the lowest since the 2008 recession.

The Institute’s non-manufacturing report also was below the expected points of 55, coming in at 52.6. Even though this is still growth, this report still shows a drop in acceleration as the score was 60 last year around the same time period as this year.

The jobs report for September revealed that the unemployment rate was at a new low in 20 years at 3.5% and that 136,000 job positions were formed. Data shows that manufacturing and retail are failing to create new jobs, while business, service sectors, and the medical industry are still generating new jobs.

Though this report is not bad enough to ring the alarm on recession concerns, the report is lacking enough that many will not be surprised if the Federal Reserve cuts the interest rate even further at the end of this month. With rate cuts, equity prices usually spike if recession fears are not high.

The Federal Reserve may also have good reason to cut the interest rates as wage growth remains steady at around 2.9%, which pacifies inflation fears.

Businesses that are a part of the S fund are facing the likelihood of being less profitable than larger businesses in the C fund. And because they usually do not accelerate their earnings with stock buybacks per each share, this makes these companies more prone to being affected by economic deceleration.

If you are a TSP participant, be sure to keep an eye on these reports in the future as they can affect your investments.