TSP Performance Drops for 2nd Straight Month
The S&P 500 index is down 8.2% over the past two months. This is the worst stretch for this index since March 2020, and it has impacted TSP fund performance in 2022.
For TSP investors, this means the C Fund is also down for the second straight month as the C Fund is based on the S&P 500 index.
The C Fund is the most widely held stock fund in the TSP with 32.3% of participant allocation in this Fund. The G Fund has 27.7% of participant allocations. The G Fund is usually the safest place when the market falls and January and February were no exception to this general result.
G Fund and F Fund Performance – February 2022
For February, the G Fund had a return of 0.14% and for the year-to-date, it is up 0.28%. The returns are not very high but, compared to the losses in some of the other funds, any positive performance is a favorable result.
For February, the C Fund was down 2.99%. It was down 5.18% in January. So, for the year-to-date, the C Fund is down 8.01%, almost the same decline as the S&P 500 index.
The good news, if that is the appropriate term, is that the C Fund is still up 16.37% over the past 12 months. For comparison though, at the end of January, the C Fund was up 23.27% over the previous 12 months.
TSP L Fund Returns: All Have Positive 12-Month Performance
In February, all of the L Funds had a negative return. The L Income Fund fared better than any other L Fund with a loss of only 0.51%. The more aggressive L Fund (L 2065) lost 2.38% in February.
To put the past two months into a longer perspective, returns for the past 12 months look much better. The L 2065 fund has a 12-month return of 8.03%. Moreover, as displayed in the chart below every one of the L Funds has had a positive return over the past 12 months
War, Inflation and TSP Returns
Early in February, stock investors were focused on the rapidly rising inflation rate and the interest rate hikes that were sure to come from action by the Federal Reserve in the near future. While rapidly increasing inflation is not good news, the Russian invasion of Ukraine piled more bad news onto the market and the decline in stock prices continued.
TSP Performance for February 2022, Past 12 Months and Year-to-Date
Here are the TSP returns for all of the funds in the Thrift Savings Plan for February 2022 and for the past 12 months.
| | G Fund | F Fund | C Fund | S Fund | I Fund |
| Month | 0.14% | -1.08% | -2.99% | 0.03% | -2.61% |
| 12 Month | 1.51% | -2.47% | 16.37% | -6.52% | 3.06% |
| YTD | 0.28% | -3.15% | -8.01% | -10.05% | -6.47% |
| | L Income | L 2025 | L 2030 | L 2035 | L 2040 |
| Month | -0.51% | -1.01% | -1.45% | -1.61% | -1.76% |
| 12-Month | 2.99% | 4.90% | 5.60% | 5.91% | 6.24% |
| YTD | -1.79% | -3.36% | -4.73% | -5.23% | -5.70% |
| | L 2045 | L 2050 | L 2055 | L 2060 | L 2065 |
| Month | -1.89% | -2.01 % | -2.38% | -2.38% | -2.38% |
| 12-Month | 6.45% | 6.72% | 8.04% | 8.03% | 8.03% |
| YTD | -6.12% | -6.52% | -7.67% | -7.67% | -7.67% |
Inflation Likely to Continue
While inflation has been raising concerns in financial markets, the war in Ukraine is likely to exacerbate the problem. At the moment, reports indicate the war is likely to intensify as Russia is pouring more manpower and military equipment into the country. Russia is the single biggest gas exporter and a major supplier of crude oil, and the war and its impact on the Russian economy and others will likely increase inflation.
The Federal Reserve is almost certain to begin raising interest rates this month. That will eventually have a dampening impact on inflation.
No doubt, more volatility is in store for stock investments. The market has had a strong run and eventually all market trends turn around. In this case, war and inflation are having a negative impact.
How the war in Ukraine will end and its impact on the economy and the political atmosphere remains to be seen.
Stocks will eventually turn around again. When that will happen is unknown, but the end of the year returns may look much better. The American economy is still strong and inflation may start to get under control.
Stock investors are likely to be challenged in coming weeks. There are going to be bumps and stocks will be volatile. Based on historical experience, some investors will bail out of stocks and lose money. Others will remain diversified, stick with their long-term investing plan, and are likely to come out ahead in the long run. Others will try to time the market by selling when the market is up and buying when it is down.
That is hard to do as an investor will have to know when the market is really at a low point and will also have to know when it is about to fall again. We wish those who try this approach the best of luck, but as it often turns out, these investors can lose more money than those that do not react to short-term market moves.
We wish all TSP investors the best in making their investment decisions in a turbulent market. FedSmith will keep federal employees and retirees informed of the latest results in the TSP.
