Currently, the American stocks are trading at their highest premiums to international stock shares that has been seen in years. This reflects the belief by investors that the economy will continue growing more than stock shares across the globe.
The S&P 500 had a slow start in the first half but moved up 7.2% in the third quarter. This represents its biggest gain since 2013.
The surge also means that domestic stock shares are more expensive compared to major indices outside the United States. Analysts are concerned that domestic stocks could fall back later this year to bring them in line with foreign company share prices.
Tax Package Impacting Profits and Stock Prices
Analysts say that the economic growth can be largely attributed to the tax package that passed in Congress last year. The changes were largely unpopular and included a cut in the corporate tax rate. These changes have positively influenced company profits through the 1st and 2nd quarters. It’s predicted that the 3rd quarter will also be strong.
For the fiscal year 2018, tax revenue went up $50.5 billion compared to the previous year. Tax revenue set a record high level for this five-month span.
The 4th quarter started with a surprise; there appears to be an agreement reached on an American and Canadian trade deal reached on Sunday night. The deal revises the North American Free Trade Agreement that had been in effect for approximately 25years.
Although the deal is still pending approval, once approved it will allow Canada to join the agreement between the US and Mexico that was reached at last year. It’s expected to have a positive impact on stock prices for American companies.
TSP Results for Last Month
The fund with the best return for September was the I Fund with a return of 0.91%. However, the I Fund is still down with a negative return of -1.06%.
The fund with the highest rate of return is the C Fund with a return of 17.88%. For the past five months, the I Fund had a negative return. It’s not unusual for a fund to bounce back.
The S Fund was the fund with the lowest monthly return at -1.76%. The S Fund still has the highest rate of return for the year-to-date at 10.85%. Investors will be happy that for the last one year, they will have had a return of 16.22% which is the second highest return among all the TSP funds.
Should TSP Investors Fear Stock Market Returns in This Month?
October is the best month for both the Dow and the S&P indices when there’s a midterm election. Also, October is often the most volatile month of the year. The volatility, however, does not result in below-average returns.
When ranked according to the average monthly returns, October takes the 8th position. September is usually the worst month for average performance in the stock market, but September 2018 has been different.
As we see this year, statistical averages may not mean much in one particular year. Investors hope that the stock market will continue to go up. However, that doesn’t happen in perpetuity, and we cannot correctly predict when a downturn will happen.