June 2023

May 31, 2023

Welcome to June! While the US market saw some volatility towards the end of last month due to prolonged debt ceiling discussions, the S&P 500 and Small Caps 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.  This impacted my USAA returns.

As mutual funds are managed more than index funds, I felt the S&P 500 based mutual funds would better weather the issues surrounding the debt ceiling and the US economy.  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, but I still chose these managed funds over investing in the international mutual funds.  As a result, for Fidelity and Vanguard, I had very positive returns and USAA did not.

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 USAA USIFX was dropping, I was still contributing 100% of those contributions throughout the month to the lower USIFX 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.  

I am now 100% in all of the large cap mutual funds for June.  Keep investing!