The “Great Rotation” in the stock market has started.
It has been a good year for the stock market, but not all stocks have performed the same. The C Fund in the Thrift Savings Plan (TSP) was the market leader for the first six months of the year. At the end of last month, the C Fund was up 15.28%. The I Fund was in second among the TSP core funds with a return of 5.85%.
At the end of July, the C Fund was still the best-performing Fund giving investors a return of 16.67% for the year to date. The S Fund comes in second at the end of July with a YTD return of 9.71%, and the I Fund third at 8.87%.
What is the Great Rotation?
The “great rotation” turned the market around in July. Small company stocks and value stocks did better in July. Investors started to stop assuming that artificial intelligence (AI) returns impacting high-tech stocks would continue. The run-up in stocks benefiting from the AI boom made small and midcap stocks too cheap to pass up.
Last month, small companies and value stocks have outperformed large-cap and growth rivals by some of the widest margins in years.
As a result, the S Fund went up 6.23% in one month while the C Fund returned 1.21%. The impact of this “great rotation” can also be seen in the Lifecycle Funds. The TSP Funds with the best returns are the more aggressive Funds for federal employees likely to retire in 2055.
Here are the returns for July and so far in 2024.
TSP Returns for July and Year-to-Date
| Fund | July | Year-to-Date |
|---|---|---|
| G Fund | 0.39% | 2.61% |
| F Fund | 2.33% | 1.69% |
| C Fund | 1.21% | 16.67% |
| S Fund | 6.23% | 9.71% |
| I Fund | 2.86% | 8.87% |
| L Income | 1.04% | 5.21% |
| L 2025 | 1.16% | 6.00% |
| L 2030 | 1.75% | 8.80% |
| L 2035 | 1.89% | 9.39% |
| L 2040 | 2.02% | 9.99% |
| L 2045 | 2.14% | 10.50% |
| L 2050 | 2.24% | 11.02% |
| L 2055 | 2.46% | 12.90% |
| L 2060 | 2.46% | 12.90% |
| L 2065 | 2.46% | 12.90% |
| L 2070 | N/A | N/A |
Rotation into C Fund Continues in the TSP
Last month, FedSmith noted, “C Fund Increases Lead as Most Popular As TSP Investors Continue Switching to C Fund”. At the end of the month, the C Fund had 34.3% of participant allocations in the TSP. The G Fund went down to 25.7% at the end of May. The article noted, “This trend is likely to continue when June statistics are calculated, and investors continue to show confidence in the upward trend continuing in the near future.”
Based on the latest TSP reports, the trend for the C and F Funds did continue in June.
In the July report (reporting on the TSP’s June data), the G Fund decreased to 25.1% of participants’ asset allocation, while the C Fund increased to 35.4%.
At the end of June 2024, the S Fund had 9.1% of participant allocations, compared to 9.3% one month earlier.
With the surge in the S Fund’s returns in July, will we see TSP participants increase their investment in the small company fund? Chances are, that will be the result of the latest change. Of course, the ones that had the highest rate of return probably have a balanced portfolio rather than chasing after the latest returns—which are likely to change by the end of the next month.
TSP Facts
The Thrift Savings Plan’s assets are continuing to grow. At the end of May, total assets in the TSP were $898 billion. At the end of June, total assets were $912 billion. At the end of December 2023, total assets were $845 billion.
To put this into a better perspective, at the end of December 2014, total TSP assets were $418 billion.
Average TSP Balance
The average TSP balance at the end of June 2024 was $186,645. At the end of December 2023, the average FERS balance was $175,692. For comparison, the average FERS balance in January 2015 was $114,001.
