TSP Funds Down in June

How are your TSP funds doing so far in 2011? Your funds are doing well for the year but the results for May and June are mostly negative.

The stock funds for the Thrift Savings Plan were down for a second month in a row after calculating TSP returns for June.

The biggest loser for the month: The S fund which was down 2.35% after losing 1.27% in May. The C fund was down 1.67% after losing 1.13% in May. In fact, the only TSP fund that was not down in June was the G fund which returned 0.21%.

On a brighter note, the S fund is still up 7.17% for the year and the C fund is still up 6.01% for the year. 

For the lifecycle funds, all were down for the month including the L income fund which dropped 0.18%. The L 2050 fund was down 1.48% which was the biggest loss for the month among the L funds.

Interfund transfers

Transfers between the Thrift Savings Plan funds fell below 100,000 for the first time since September 2010.

Investors withdrew $290,000 from the G fund and another $214,000 from the C fund and $55,000 from the S fund. The money often went into the F fund ($310,000), the I fund ($42,000) and the L funds ($207,000).

TSP participants are now allocating 18% of their contributions to the lifecycle funds which is a new high for these funds.

Recession and Recovery

Two years after the official end of the recession, the American economic recovery has been the slowest recovery since the government began tracking this data after World War II. Unemployment is still high high, home prices are depressed and consumer expectations for their for financial well-being are near record low levels. Many economists think that the slow rebound may continue for a number of years.

Companies are expected to show strong profits despite the slow recovery. According to the Wall Street Journal, “Combined earnings of companies in the Standard & Poor’s 500-stock index are projected to rise 13.6% from a year ago for the second quarter….” There are two reasons for the dichotomy: Cost cutting has helped pare expenses and improve expenses and an increasing amount of company sales are now derived from foreign sources. The slow U.S. recovery may have an impact on company profits later in the year.

For a variety of reasons, one new trend in the past several years is that more money is leaving the United States that is being invested here from other countries. “Americans are taking their investment dollars abroad at a faster pace than foreigners are bringing capital to these shores. In 2010, for example, U.S. investment abroad was $351 billion—$115 billion higher than foreign investment here. Economic recoveries are periods when investment capital usually surges into a country, but since this weakling rebound began in the middle of 2009 the U.S. has lost more than $200 billion in investment capital. That is the equivalent of about two million jobs….” That trend also has an impact on our rate of recovery.

The current inflation rate is calculated by the federal government to be 3.57%. A more accurate rate of inflation may be closer to the 7.5% calculated by a site which tracks economic data and eliminates some of the “tweaking” that has been done in recent years and results in minimizing the economic data that often minimizes unfavorable economic news. The same site shows the real American unemployment rate to be closer to 22% rather than the 9.1% reported by the government. Take your pick as to which one you choose to believe to be the most accurate and the impact that these statistics may have on your investment for your future retirement income.

Some analysts predict stocks will move higher before the end of 2011, based in part on historical data which shows stocks tend to well in the third year of a presidential term as the government attempts to keep the economy moving along as we get closer to an election. No one knows what will happen in Congress on negotiations to cut spending, raise the debt ceiling or raise taxes. The results of this political decision could also impact our economy and future stock prices.

No doubt, investors in the Thrift Savings Plan hope 2011 will not be an exception to this general trend. And, on a positive note, in keeping with this trend of the third year of a presidential term, your TSP investments are all up in 2011 which has improved the financial status of those readers who are invested in the TSP.


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