Has Coronavirus Infected the TSP? Sponsored by:Richard Brenner

For those in the TSP, you’ll know that the returns for all investors were positive in April and May. It was worrying times in March, but there was a recovery by May. Of course, the C Fund is based on the S&P 500, which increased by 4%. The month before, we experienced the best monthly percentage gains for significant stock market indexes since the late 1980s. 

TSP Stock Fund Gains  

Over the past two months, the C Fund was up 12.8% and 4.8%, respectively. Despite the positive news, it still pales in comparison to the S Fund, which increased by 8.79% in May. Even the I Fund got close to the C Fund last month. 

 

Currently, the biggest problem is differentiating between short-term figures and genuine trends. With such a dramatic year for the market, all TSP stock funds, and Lifecycle funds, are sadly posting a negative return for the year-to-date. 

 

Does this mean we need to worry? Well, most funds are performing fine if you consider 12-month returns. Over the last year, only one fund has a negative return (of 2.5%) – this is the I Fund. What’s more, there’s a positive return for all Lifecycle funds over this time. With this in mind, it means that those who can stay calm with their TSP plan are still up over the last 12 months. 

 

In terms of the May increases, these are likely to be a result of the optimism currently taking hold in the country. For a time, there were fears and uncertainty regarding the COVID-19 pandemic, with much of the country shutting down. Now, states are reopening, and we’re returning to some form of normality. 

 

TSP Fund Returns 

It’s interesting to look at the performance of all five TSP funds, as well as the Lifecycle funds. While all five of the Lifecycle funds are down year-to-date, they all recover and post a positive return over the past 12 months. For example, the L 2050 Fund is down nearly 6.7% in 2020 but up 6% if we take the last 12 months into account. 

Meanwhile, the C, S, and I funds are all down in 2020; as mentioned previously, the I fund is the only one to not recover over the last 12 months. The S Fund is down 5% in 2020 yet still 12.75% up for the previous year. 

Will the market rebound? This is what the optimists are hoping as unemployment falls and businesses reopen to the world. Sadly, some businesses have been forced to close permanently, and only time will tell the impact this has had on employment figures. Elsewhere, we need to consider the growing tensions with China. The government in China cut down the freedom for Hong Kong locals, and there’s Chinese military activity around Taiwan and the South China Sea. There has also been much debate about COVID-19 and just how transparent the country has been. 

Just in case this wasn’t enough, we mustn’t forget the election towards the end of the year and how this could affect stock investments. Currently, the most significant factor affecting stock prices is the aforementioned optimism around the country. Later in the year, we could see problems depending on how the economy recovers (as well as developments on the international stage). 

Ultimately, TSP participants can be happy that their accounts were boosted in May and are still up over the last 12 months! 

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