Friday's U.S job report revealed that for the month of September 2022, it has gained 263,000 jobs. While this is a drop from 315,000 in August 2022, the stubborn resiliency of positive job growth spells trouble for the global economies as Jerome Powell is targeting for more people to lose their jobs in order to combat wage induced inflationary pressure. Hence this seems to guarantee another 0.75 percentage jumbo size adjustment by the Feds for Nov'22 borrowing rates. The US S&P 500 immediately dropped 2.8% to 3,639.66 points overnight on Friday yesterday. For SGX, I would expect upcoming Monday to be another blood bath in the market upon commencement of trading and for it to relinquish the gains from the mini-rally over the last week.
1. US Federal Reserve eager to see evidence that interest-rate increases are cooling off a frenzied labor market, but not enough to tip the economy into a recession.
Seriously, I am not sure how the US Federal Reserve plan to keep increasing the borrowing rates until it reaches a "just right point" that prevents recession. Easier said than done to achieve this golden equilibrium point. While I think that Jerome Powell is perfectly well-meaning, and he means what he says, I am still of the view that US is headed for a severe recessionary landing soon because the US Federal Reserve has already screwed up the entire US economy by pushing it over its tipping point with the recent 0.75% hike-just that the statistics do not reflect it yet.
2. Investment using Central Provident Funds ("CPF")
I am referring to the ordinary account funds for CPF here and not talking about the CPF special account. For me, I will not touch my CPF special account as it forms my base protection for risk free retirement planning in the event that a black swan event leads to a catastrophically loss of all my cash and CPF ordinary account investments so that I can still have enough to buy bread and butter during retirement age. I have already reached the Full Retirement Sum in my CPF special account a few years back. The current CPF contribution from monthly salary as well as the effect of 4% interest income rate compounding continues to bring me closer to reaching the eventual goal of attaining the Enhanced Retirement Sum.
On the usage of CPF ordinary account, I had S$25K invested into Mapletree Industrial Trust from my CPF ordinary account since the COVID pandemic days. However, MIT's performance has not been doing well with the relentless interest rate hikes as alluded to point 1.
To exploit the current bear market and also to ensure adequate diversification of my CPF investments, I have decided to invest into five hundred top US companies in the form of an index fund. The S&P500 has a long track history of producing an average of 10% return per annum if one holds on to it over the long term. I have thus invested S$30K this year into the S&P500 in different tranches when it crashed over 20%. I have no intention to add on additional CPF funds to what I had already invested into the S&P 500 unless it slides further to test the next resistance level of below 3,500 points. I will then continue to plough in S$5K for every 100 points decline until I reached my maximum investable CPF fund outlay of S$55K.
Parting thoughts
Upcoming week will be a very interesting one as we see how the stock market play see-saw. Going forward, I am actually examining on a switch of some of my individual stocks/REITs to index funds for my cash & margin investment portfolios as I find that it is virtually impossible to keep up to date with the latest news/development due to the nature of my busy full-time work schedule.
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