With the exception of the F fund, TSP investors all made money last month. And, with the exception of the F fund, all investors have made money over the past twelve months as well–and in some cases investors have made a great deal of money.
The largest TSP fund gains for the month were in the S fund with a return of 1.50%. The S fund has returned 28.70% for the past twelve months.
The common stock fund (the C fund) which tracks the S & P 500 index, had a positive return of 1.37% and it is up 18.20% for the past twelve months.
International stocks (the I fund) were also up with a return of 0.30% for the month. The I fund also comes out on top of all TSP funds with a leading twelve month return of 31.70%.
The super safe G fund proved once again it is safe and secure with a return of 0.39% for the month and a positive return of 4.10% for the past year.
As noted above, the only losing fund this month was the F fund which was down 0.50% in May and it is down 0.60% for the past twelve months.
The reason for the drop in the F fund is that the value of the underlying bonds are affected by rising interest rates. As rates rise, the value of the bonds goes down. (See our article on the F fund for more information on how the F fund can lose money for investors. )
Here is an interesting dilemma for TSP investors who may be wondering what will happen next.
Will your investments in the stock funds continue to rise through the summer? Historically, the stock market does not do well between May and September. It may be because people are on vacation or for some other reason. But, according to an article on “This Summer Could Be A Hot One for Stocks appearing in the Wall Street Journal, there is normally a distinct trend that leads to this conclusion. Since 1950, the underlying index for the TSP’s C fund has risen an average of 7.4% from November through April while rising only 1.4% from May through October.
This year may be different, in part because it is a presidential election year. In presidential election years, the stock market tends to go up from June through December. This may be due to voters getting a clearer idea of how the election campaign is going. To further compound the analysis, if it appears the incumbent president will win, the stock market does well throughout the election cycle. If it appears the challenger will win, stocks usually fall after August.
As of this writing, the upcoming presidential election is too close to call according to most polls. But, based on this analysis, if you think George W. Bush will be the winner in November, you would want to put more money into stock funds. If you think John Kerry will win, you may want to put more of your investment funds into the G fund.
Enjoy your summer vacation and good luck with your retirement investments!