The Thrift Savings Plan (TSP) experienced a mixed bag of results in February amid a notably volatile stock market. The performance of TSP’s core funds — the G, F, C, S, and I Funds — offers insight into how broader market dynamics influenced federal retirement portfolios during the month.
A Volatile February
The U.S. stock market grappled with uncertainty, driven by economic reports, Federal Reserve speculation, and global pressures. The S&P 500nexhibited fluctuations as investors reacted to mixed signals. Major indexes like the Dow, S&P 500, and Nasdaq experienced divergent daily movements, with the Dow gaining 0.37% and the S&P 500 dropping 0.47% on February 25 alone.
TSP Fund Performance
G Fund: Known for its stability, the G Fund maintained modest, positive growth in February, with a gain of .36%. This fund, tied to U.S. Treasury rates, typically thrives in volatile periods as a safe haven, offering guaranteed principal protection. Its performance, while low compared to equities, provided a buffer for risk-averse investors.
F Fund: The F Fund, which tracks the Bloomberg U.S. Aggregate Bond Index, appeared to benefit from a flight to safety and reported a 2.2% increase. February’s volatility likely drove demand for bonds, boosting the F Fund’s returns relative to stock funds.
C Fund: Mirroring the S&P 500, the C Fund faced headwinds from a choppy market resulting in a -1.3% return. While January 2025 saw a 2.78% gain, February’s volatility may have tempered its year-to-date strength, though it remains a long-term outperformer.
S Fund: The S Fund, tied to the Dow Jones U.S. Completion Total Stock Market Index, experienced sharper swings, with a -5.8% drop. Small and mid-cap stocks, more sensitive to economic shifts, often amplify market volatility.
I Fund: The I Fund, tracking the MSCI ACWI IMI ex USA ex China ex Hong Kong Index, posted a 0.91% return, buoyed perhaps by a weaker U.S. dollar or regional resilience. International markets, however, also faced volatility, and the I Fund’s monthly performance may have been uneven despite its January strength (3.68%).
Was Volatility the Driver?
The stock market’s turbulence undoubtedly influenced TSP performance. The C and S Funds bore the brunt of market swings, with small-cap stocks (S Fund) particularly vulnerable. Conversely, the G and F Funds capitalized on investors’ risk aversion. The I Fund’s performance hints at international factors partially offsetting U.S. market woes, though global volatility remained a wildcard.
Looking Ahead
For TSP participants, February highlights the importance of diversification and time horizon. Younger investors with higher risk tolerance might weather equity declines in the C, S, and I Funds, banking on long-term recovery. Those nearing retirement, favoring the G and F Funds or L 2025, likely appreciated the stability.
Reach out to a Federal Retirement Consultant® who can advise you on an investment strategy that fits your individual goals.
