For the second month in a row, investors in the Thrift Savings Plan are coming out ahead. Every one of the TSP funds was up again in April. The biggest winner: The small company (S fund) with a return of 15% following a gain of 8.64% for March.
As you can see from the chart below, most of the stock funds are still in negative territory for 2009. The exception is the S fund which has a positive return of 2.98% so far. The bond funds are also up so far in 2009.
As you would expect, the more aggressive lifecycle funds had the best return as the market went up in the past two months. The more aggressive lifecycle funds are still down for the year while the income fund and the L2010 fund are showing a positive return so far in 2009.
Don’t be surprised to see the market heading back down in the next couple of weeks. It would not be unusual to see some investors taking profits after the recent market run-up. The widely watched Dow Jones Industrial Average has been up for seven of the last eight weeks.
Also, some of the largest market rallies have occurred in the midst of a bear market. That means that there were significant rallies in the stock market but the long-term trend of the market was still going down. It is possible that will happen this market as well. TSP investors need to keep this possibility in mind before making significant changes in how they are investing their future retirement funds.
While the 2008 stock fund returns were a disappointment and January’s TSP stock fund results reflected the worst stock market returns for that month in 113 years the last two months have been a welcome relief.
With jobless rates predicted to go up to as much as 10% or more, why would the stock market be going up now?
The reality is that the stock market usually begins to come off its bottom around six months before any meaningful upturn is discernible to consumers. So the market is acting very much in character. Stock prices in the past two months are reflecting the collective belief by investors that, as bad as things may look right now, we probably are not going to have a depression and the economy probably won’t get much worse and likely to start picking up in the near future. We can hope that trend continues but remember the advantages of diversification by investing in both stock and bond funds if the market should quickly reverse and start heading back down.