TSP Performance and First Quarter Turbulence
Stocks ended the first quarter of the year going up. The past three months have been turbulent. During the first quarter, the stock market was hit by stress and failure in the banking system and rapidly changing projections for inflation and interest rates.
At the beginning of 2023, investors were upbeat. Inflation appeared to be going down. Many were predicting the Federal Reserve would quickly switch from raising interest rates to cutting them. This would be a positive turn of events for stocks, and stocks went up in January based on the anticipated good news to come. All of the Thrift Savings Plan (TSP) Funds were up in January. The S Fund was up 10.6% in the first month.
Economic reality intervened. Silicon Valley Bank and Signature Bank collapsed in March. Big Banks intervened to save other banks that were also in danger of collapsing. The annual inflation rate was reported in March to be moving along at 6% over the last year. In the last year, food at home is up 9.5%, electricity is up 12.9% and the cost of shelter is up 8.1%.
TSP Performance Up in March and Year-to-Date in 2023
Despite the ups and downs, the TSP Funds are now up for the year and up in March.
The S&P index 500 was up 7% in the first quarter. This is the index on which the C Fund is based. The C Fund is up 7.49% so far in 2023. The Fund with the best return so far this year is the I Fund which is up 8.63%.
Some investors will note that the I Fund is near the bottom in popularity among TSP investors. 3.6% of participant allocation goes into the I Fund. The only TSP Fund lower than the I Fund is the F Fund with a 2.6% allocation rate by TSP participants.
So far in 2023, these TSP investors with some of their money in the I Fund have made a good choice.
For the past 12 months, most TSP investors still see declines in the performance of their Funds. Except for the G Fund, which is up 3.52% over the past 12 months, the I Fund (up 0.28%), and the L-Income Fund (up 1.31%), all of the other TSP Funds show a negative return for the longer time period.
This table displays the latest TSP performance for all of the TSP Funds.
TSP Performance for March, 2023 Year-to-Date, and Past 12 Months
| Fund | Month | Year-to-Date | 12-Month |
|---|---|---|---|
| G Fund | 0.35% | 0.97% | 3.52% |
| F Fund | 2.54% | 3.13% | -4.57% |
| C Fund | 3.67% | 7.49% | -7.76% |
| S Fund | -2.90% | 5.85% | -14.00% |
| I Fund | 3.11% | 8.63% | 0.28% |
| L Income | 1.05% | 2.76% | 1.31% |
| L 2025 | 1.38% | 3.72% | -0.73% |
| L 2030 | 1.87% | 5.19% | -2.09% |
| L 2035 | 2.01% | 5.60% | -2.73% |
| L 2040 | 2.13% | 6.00% | -3.34% |
| L 2045 | 2.24% | 6.34% | -3.91% |
| L 2050 | 2.34% | 6.67% | -4.42% |
| L 2055 | 2.54% | 7.67% | -5.68% |
| L 2060 | 2.55% | 7.67% | -5.69% |
| L 2065 | 2.55% | 7.68% | -5.69% |
Why Is TSP Performance Up in 2023 Through March Despite the Turbulence?
There are several reasons the TSP performance is still positive in 2023 despite the significant negative events.
A widely anticipated recession is still not here despite the fear rising interest rates would drive the economy into a recession.
In recent months, some large tech companies have reduced the size of their labor force. Despite this, the labor market is still strong and unemployment is low.
Inflation is still high but has continued to ease up overall. As noted above, inflation is still up 6% from February 2022 and in some key areas, inflation is up much higher. As the March report showed the smallest annual gain in inflation since September 2021, there is room for optimism in the economy and in stock prices.
Will Stocks Go Up in 2023?
The turbulence in stocks has not gone away. It is likely to continue and shocks to the economy will materialize in one form or another. The Federal Reserve has not indicated it will start lowering interest rates, and rate increases may continue.
Americans are not optimistic at the moment. A 2023 Gallup poll reported, “More than six in 10 think prices will rise at a high rate and the stock market will fall…[A]bout eight in 10 U.S. adults think 2023 will be a year of economic difficulty with higher rather than lower taxes and a growing rather than shrinking budget deficit. More than six in 10 think prices will rise at a high rate and the stock market will fall….Regarding world affairs, 85% of U.S. adults predict the year ahead will be fraught with international discord rather than peaceful. And while 64% think the United States’ power in the world will decline, 73% think China’s power will increase.”
No one can predict the future. 71% of Americans report that the country is going in the wrong direction as reported in one poll.
Whether this pessimism in the American public is justified remains to be seen. It does mean an uphill battle for the stock market remaining positive by the end of the year. That may happen; it may even by likely to happen. TSP investors would be well advised to diversify their investments as knowing where the gains and losses in stocks will occur are impossible to predict.
