TSP Performance in 2022 Through August
In the first eight months of this year, Thrift Savings Plan (TSP) investors are not having a good year for most of their investments. So far in 2022, regarding the performance of the TSP core funds, here is the bad news:
- C Fund: -16.15%,
- S Fund: -22.14%
- I Fund: -19.71%
- Fund: -10.45%
- G Fund: 1.66%
The best news is that TSP investors have access to the G Fund which is the only TSP Fund with a positive return so far this year.
Some TSP investors were feeling more positive at the end of July. The leading FedSmith headline at this time last month read: July is Best Month for TSP Performance Since Trump Administration: One Fund Up 10.32%.
While we do not know how the year as a whole will turn out, so far in 2022 July was the best month for TSP returns.
LifeCycle Funds Lose Less than TSP Core Stock Funds
Some of the L Funds have seen better TSP returns so far this year than the core stock funds. That is not a surprise. The funds with the shorter projected times before potential retirement have a larger amount of investments in the G Fund and less in the more aggressive stock funds.
As a result, if a current federal employee plans to retire in 2025 or 2030, the appropriate Lifecycle Funds are down less than the more aggressive funds. The L 2025 fund is down 6.31% and the L 2030 Fund is down 2.84%. On the other hand, the most aggressive L Funds are down more than 16% as can be seen in the chart below.
TSP Performance for August 2022, Year-to-Date, and 12-Months
| FUND | Month-to-Date | Year-to-Date | 12-Month Return |
|---|---|---|---|
| G Fund | 0.25% | 1.66% | 2.17% |
| F Fund | -2.80% | -10.45% | -11.27% |
| C Fund | -4.08% | -16.15% | -11.23% |
| S Fund | -2.08% | -22.14% | -24.72% |
| I Fund | -5.79% | -19.71% | -19.88% |
| L Income | -1.04% | -3.75% | -2.84% |
| L 2025 | -1.83% | -7.52% | -6.31% |
| L 2030 | -2.74% | -11.04% | -9.57% |
| L 2035 | -3.03% | -12.27% | -10.75% |
| L 2040 | -3.30% | -13.44% | -11.86% |
| L 2045 | -3.55% | -14.48% | -12.88% |
| L 2050 | -3.77% | -15.44% | -13.80% |
| L 2055 | -4.36% | -18.00% | -16.10% |
| L 2060 | -4.36% | -18.01% | -16.11% |
| L 2065 | -4.36% | -18.02% | -16.12% |
Why Are Stock Prices Going Down?
Inflation is a major factor in falling stock prices. According to the latest inflation figures, inflation is up 8.5% over the last 12 months. To put this in perspective, this is about the highest inflation rate in 40 years. Some people took a positive approach and felt better about inflation as the yearly increase went down from 9.1% in June to 8.5% in July.
While politicians running for office may have issued positive press releases touting a monthly decrease in the rapid rise in inflation, most Americans were aware that over the past 12 months, the cost of food went up 10.9% (the largest increase since 1979), food at home was up 13.1%, electricity was up 15.2% and gas was up 44% (despite a drop in July).
Rapid inflation hurts everyone. And, to try and get the rate of inflation under control, the Federal Reserve noted in the last week that interest rates were going to go up until inflation was brought under control. Higher interest rates also increase the possibility of a recession and raising rates to lower inflation without causing a recession is difficult to accomplish.
As a result of continuing inflation, the stock market is still going down.
Is Economic Prosperity Just Around the Corner?
With a national election coming up in November, many elected officials—hoping to retain the perks that accompany winning an elected office—will try to convince voters the economic outlook is bright and Congress and the Biden administration have the situation under control. But, with inflation causing a rapid rise in prices, and the purchasing power of family incomes going down even if wages are going up, a promise of better economic times ahead can be a hard sell.
Of course, forgiving hundreds of billions of dollars in student loans is likely to please many voters who are way behind on paying off student loans, a promise of lower utility rates (but some higher taxes) from the “Inflation Reduction Act”, and lower gas prices over the past few weeks may also be on the minds of many voters as they enter the voting booth or send in their ballots by mail.
No doubt, all of us will be seeing the political ads dominating the airwaves in the coming weeks to convince voters new legislation and more government money is paving the way for prosperity again. Other politicians will try to convince voters those now in office have failed and a vote for the other party will lead to better economic times.
4.6% 2023 Federal Pay Raise Highest in 20 Years But Inflation Highest in About 40 Years
Federal employees have just received news that they are going to get the highest pay raise in 20 years. That sounds good and makes a good headline. Currently, a raise of 4.6% with inflation going up at a yearly rate of 8.5%, and TSP returns in the C Fund down -16.15% so far in 2022, the highest raise in 20 years does not add up to economic prosperity in the immediate future.
No one knows what the stock market will do in the coming months. We wish all FedSmith readers the best in coping with the current market downturn and making good investment decisions for the future!
