TSP Stock Funds Falter Amidst Fear of Trade War and Inflation
Concerns about a possible trade war and the possibility of inflation resulted in a loss for most TSP Funds in March. The C Fund dropped 5.64% for the month, and the S Fund was down 7.92%. For the TSP’s core stock funds, only the I Fund showed a positive return, rising 0.02% in the month.
As the United States has been warning Europe not to take America’s military protection for granted, European countries are proposing an increase in their defense spending. That spending could result in stronger stock market returns in Europe which in turn could result in stronger returns for the TSP’s I Fund.
Summarizing March TSP Performance
The G Fund performs better than stocks when the stock market goes down.
As a result, the G Fund was up 0.37% in March and is up 4.47% over the past 12 months. The F Fund was up 0.04% in the last month and up 4.92% over the past 12 months.
The F Fund is called the Fixed Income Index Investment Fund. It invests in bonds and is a broad-based fixed-income index as an alternative to investing in stocks.
Here are the latest results for all of the TSP Funds.
TSP Returns in March 2025, 12 Months, and YTD
| Fund | March 2025 | 12 Month Returns | Year-to-Date |
|---|---|---|---|
| G Fund | 0.37% | 4.47% | 1.12% |
| F Fund | 0.04% | 4.92% | 2.77% |
| C Fund | -5.64% | 8.20% | -4.28% |
| S Fund | -7.92% | -0.41% | -8.94% |
| I Fund | 0.02% | 2.98% | 4.65% |
| L Income | -0.81% | 4.90% | 0.46% |
| L 2025 | -0.93% | 5.08% | 0.38% |
| L 2030 | -2.27% | 5.27% | -0.53% |
| L 2035 | -2.52% | 5.30% | -0.69% |
| L 2040 | -2.78% | 5.33% | -0.86% |
| L 2045 | -3.00% | 5.35% | -1.01% |
| L 2050 | -3.21% | 5.36% | -1.17% |
| L 2055 | -3.94% | 5.35% | -1.81% |
| L 2060 | -3.94% | 5.35% | -1.81% |
| L 2065 | -3.94% | 5.35% | -1.81% |
| L 2070 | -3.93% | 2.30% | -1.80% |
Fluctuating TSP Results in a Volatile Market
In January 2025, the C and S Funds were up significantly. The C Fund was up 2.78% and the S Fund was up 4.99%. There are years when a return of this size for a stock fund in an entire year would be welcomed. Investors may have gotten used to significant returns in a month.
But, in February 2025, the C Fund dropped 1.30% and the S Fund dropped 5.8% before dropping again in March.
How do investors in the Thrift Savings Plan (TSP) react to short-term events like this in the stock market? The answer is not surprising. When the market goes up, there is a tendency to invest more money into the funds with positive returns. When it goes down, there is a tendency to withdraw money from these funds.
As an example, in February, as the market was declining, TSP investors added more than $10 billion to the G Fund. They also withdrew more than $10 billion from the S and C Funds. When the March data for changes in TSP investments by investors are released later in April, this trend is likely to continue.
This chart shows the changes in investments by TSP participants in the G Fund and the two largest TSP stock funds (C and S Funds) that have taken place in recent months. When the stock market is trending higher, more money is often placed into the C and S Funds. When the stock market drops, the trend reverses.
| Fund | Nov 24 ($ in billions) | Nov 2024 Return | Dec 24 ($ in billions) | Dec 2024 Return | Jan 2025 ($ in billions) | Jan 2025 Return | Feb 2025 ($ in billions) | Feb 2025 Return |
| G Fund | -3.46 | 0.36% | -1.4 | 0.36% | -1.4 | 0.39% | 10.2 | 0.36% |
| C Fund | 1.04 | 5.87% | 1.17 | -2.39 | 1.2 | 2.78% | -7.3 | -1.3% |
| S Fund | 3.5 | 11.97% | 1.08 | -7.05 | 1.1 | 4.99% | -2.9 | -5.8% |
TSP Fund Results From 2021-2024 and Changes in Participant Allocation of Investments
The G Fund has a positive return every month and every year.
It is a unique TSP Fund and is only available to investors in the Thrift Savings Plan. It is the safest Fund available because it never goes down. While it is considered the safest TSP Fund, the return of money invested in the G Fund usually provides a smaller return than investing in the TSP stock funds.
It does not have the disparity in values often experienced in stock market investing. That makes this Fund very popular with retirees living on an income that is relatively fixed. It is also popular for those nearing retirement, as these investors often want to avoid volatile swings in the stock market just as they are about to retire and facing potentially smaller income increases during retirement.
How do TSP investors change their investment allocation over time?
The G Fund was the largest TSP Fund at one time. The C Fund is now the largest TSP Fund. With the next bear market in stocks, this may change again, and TSP investors revert to the safety of the G Fund. During a long-running market trend, the percentage of TSP investors in stock funds will increase or decrease depending on whether there is a bull market (stocks rising) or a bear market (stocks declining).
As of December 31, 2021, the G Fund had 30.7% of participant allocated assets, and the C Fund had 32% of assets. By February 28, 2025, the C Fund had 35.4% of participant allocated assets while the G Fund had 24.5%.
From 2021-2024, stock market returns were very good in most years. The exception was 2022. Here is how TSP investors changed their allocation during each of these four years.
We used participant allocation data from the TSP to calculate the percentage of gain or loss of the amount invested in each of the three funds. The participant dollar investments compared were from the end of December for the first year, compared to the total dollar value of each fund as of the end of December for the second year.
| Fund | 2021 Return | 2021 $ Change | 2022 Return | 2022 $ Change | 2023 Return | 2023 $ Change | 2024 Return | 2024 $ Change |
| G | 1.38% | 12.94% | 2.98% | 10.29% | 4.22% | -2.5% | 4.4% | -2.69% |
| C | 28.68% | 21.85% | -18.13% | 5.10% | 26.25% | 29% | 24.96% | 28.49% |
| S | 12.45% | -29.39% | -26.26% | -21.84% | 25.3% | 24.52% | 16.93% | 19.29% |
Some TSP investors follow the stock market closely and change their investments based on what they think will happen next—often, this amounts to investing based on how the market performed in the previous month or week.
For example, in 2021, the S Fund investments dropped. This may have been due to the Federal Reserve’s potential move to raise interest rates creating uncertainty for investors. Typically, rising rates can hurt growth stocks, especially for smaller companies in the S Fund, because higher rates can increase borrowing costs and reduce the value of future earnings. These factors will often impact small-cap stocks more than the stock in larger companies.
Some TSP investors have become quite sophisticated in making their investments. That increasing knowledge and sophistication may have been reflected in how investors were viewing the S Fund during that time.
TSP officials frequently comment in their monthly meeting that only a small percentage of TSP investors trade into different TSP Funds in a month, typically around 2% of investors. With $792 billion in the TSP as of last month, a small percentage switching funds is still a few billion dollars moving around each month. Over time, especially during an obvious market trend, this small monthly percentage amounts to a large amount of investment dollars.
Part of the reason for the increase in stock fund investments in the TSP may be that the TSP investors have become more knowledgeable and more comfortable investing in the stock market. For many of these investors, stock market investing may have been their first time investing in stocks.
The longer the TSP has been available, the more experience with stock market investing may impact more TSP investors. Seeing the advantage of staying invested, instead of selling stocks when the market has gone down, may impact how some investors react during a market decline.
With the decline in the stock market in March, there may be a trend in declining stock market returns in the near future. How will TSP investors react in a market turn this time? Will they again turn back to the G Fund for more safety? We may have a chance to find out if stock market volatility continues over the next several months.
