Stock Funds Falling in Volatile Stock Market

The stock market has been volatile in April and TSP stock funds are down in recent weeks.

What is happening to the stock funds in your Thrift Savings Plan?

The small stock fund (the S fund) is down more than 4% and the C fund is down 3.04%. The I fund is also down for the same period losing 3.4% in the past several weeks.
Not that it will make you feel any better but the answer may be simple: Alan Greenspan.

The Chairman of the Federal Reserve is concerned about inflation and the Federal Reserve has been raising interest rates. As a result, the economy is slowing down as less money is available for spending or investment. Perhaps more importantly, investors are skittish of the future of the market and what the Federal Reserve may do the remainder of this year with regard to interest rates.

The Wall Street Journal reports in today’s edition that the Dow Jones Industrial Average recorded three moves of more than 100 points in January and February. But in April there have already been five such moves: four declines of more than 100 points in a 6-day period and one huge move up of 206 points in one day.

Part of the problem is that inflation was higher in March than expected with consumer price gains of 3% over last year. The economy has also slowed to a growth rate of 3.5%. That is not bad in an economy as large as America’s but is slower than the 4% gain of last year.

No one can reliably predict what this means for the stock market for the rest of the year. It may be that the Federal Reserve will continue to raise interest rates and the impact on stocks will continue to be negative and stock prices will continue to fall. It is also possible that inflation will slow, the interest rate hikes that have been made will be absorbed and stocks will turn around again later this year.

In short, your TSP stock funds may be in for a rocky ride for the remainder of the year. You can see from the charts in the TSP corner that small company stocks are likely to move up or down more than larger companies. And, in a volatile stock market, the swings in the S fund are likely to be more dramatic than the other funds.

Many financial advisers would advise investors not to panic but to make sure you have diversified your investments between the available funds in the Thrift Savings Plan and to ride out the uncertainty. If you have ended up with too much of your TSP investments in one fund, so it may be a good time to ensure you have not ended up with more money in one fund than you think you should have. And, on a side note, open season for the TSP started recently and more changes are on their way for TSP investors.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47