Historically, the stock market returns for the month of January give an indication of how the markets will fare for the rest of the year. As for the Dow Jones Industrial Average, January returns have accurately predicted the year’s direction 75% of the time. In the past 30 years, it has been right 26 times.
So how did the stock market do last month?
It was the worst month in the 113 years of the existence of the Dow Jones average.
That, obviously, is not good news for investors in the federal Thrift Savings Plan funds. The I fund was the biggest loser down 11.93% for the month and also the biggest loser for the past twelve months where it is down 44.57%. The C fund was also down in January, losing 8.41% and it is down 38.62% for the past twelve months.
In fact, the only fund to have a positive return in January was the G fund with a gain of 0.19%. It is up 3.61% for the past twelve months. The F fund is the only other fund with a positive return for the past twelve months with a gain of 2.74%.
The January returns are a disappointment after the market showed signs of life in December 2008 with positive returns for all of the TSP funds. (See Thrift Savings Plan Funds All Up in December–Ending a Dismal Year of Returns)
The L funds did not fare well either. The L income fund returned the best results with a loss of 1.74% for the month. For the past 12 months, it is down 5.83%. The most aggressive lifecycle fund, the L2040, lost 7.67% and is down 33.19% for the past twelve months.
For those looking for a bright spot, there is always some room for slight optimism. The Wall Street Journal says there are "some incipient signs of optimism in financial markets." Housing sales are up in recent statistics (although prices are down significantly) and there are some price gains in commodities and in the stocks of some countries that export commodities. There is also more movement in the buying of corporate bonds.
The reality is that we are still in the midst of an economic downturn and government debt is skyrocketing. For now though, many who are going to be using their TSP funds to support their retirement are undoubtedly holding off leaving a government job that is more secure than most in the private sector and giving their TSP investment a chance to rebound before starting to withdraw their money while the market is still way down from historic highs.