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A Bad First Quarter for Most TSP Funds – Does It Matter?

The first quarter of 2018 was not kind to TSP investors. The F, C and I Funds declined and stock market volatility -- which was missing in 2017 – returned.

So far, the bad news is short-term but not long-term. Returns over the last 12 months were quite good.

F Fund (US bonds) returns have been poor for some time. The F Fund share price peaked on September 7, 2017 and as of March 31, 2018 was 2% lower. The G Fund increased 1% during the same period.

Calendar year 2017 was very different. Stock market volatility was the lowest level ever and returns were excellent for the stock funds.
The higher volatility and slightly negative returns during of first quarter 2018 are quite different from 2017. What changed?
In my opinion, no one knows exactly. However, some issues that may be affecting the markets include:
  • The beginning of a trade war;
  • Slightly higher interest rates and the possibility of higher rates in the future;
  • Political turmoil in the US.
Looking for some positive trends? Well,
  • The world economy continues to grow;
  • The US tax cut and continued economic growth could stimulate corporate earnings this year;
  • Inflation and interest rates remain relatively low.
Does this tell us anything about future returns? I don’t think so. One, five and ten year average returns are excellent but we are overdue for a major stock market decline. “Major “meaning 20% or more, a “Bear Market.” The average historical occurrence for such large declines was every 3.5 years. The last to occur was 2008 and 2009. So we are five years overdue. It could happen soon or much later but TSP investors need to be aware of the risk.

Arthur Stein Financial, LLC ("ASF") is a registered investment advisor ("RIA"), located in the State of Maryland. ASF provides investment advisory and related services for clients nationally. ASF will maintain all applicable registration and licenses as required by the various states in which ASF conducts business, as applicable. ASF renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or pursuant to an applicable state exemption or exclusion.

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