Economic uncertainty led to a challenging month for TSP funds, particularly the stock-based funds. Here’s how the core funds performed:
- G Fund (Government Securities): This fund, known for its stability, typically sees modest, positive returns regardless of market conditions. In March, it gained 0.37%, consistent with its historical monthly performance. Up 1.12% YTD and 4.47% over the past 12 months, it’s slow but steady.
- F Fund (Fixed Income Index): The F Fund, tied to bond market performance, tends to fluctuate with interest rate expectations. Continued economic uncertainty kept returns flat at 0.04%. Despite that, at 2.77%, it’s ahead for the year, though less than its 4.92% 12-month return.
- C Fund (Common Stock Index): Tracking the S&P 500, the C Fund faced significant losses as a volatile market drove it to -5.64%. Down 4.28% YTD, it still boasts a 12-month return of 8.2%.
- S Fund (Small Cap Stock Index): The S Fund, which follows small and mid-cap stocks, was hit harder, with a decline of 7.92%. YTD, it’s down 8.94%, and its 12-month return dipped to -0.41%.
- I Fund (International Stock Index): Unlike the C and S Funds, the I Fund eked out a slight gain of 0.02%, as European markets were bolstered by proposed defense spending increases amid geopolitical shifts. Its 4.65% YTD returns are an improvement on its 2.98% 12-month gains.
Outlook
March highlighted the G Fund’s role as a stabilizer in the TSP, with its guaranteed returns appealing to risk-averse investors amid stock market declines. The F Fund offered a slight buffer, while the C and S Funds bore the brunt of U.S. equity weakness, driven by tariff fears and economic uncertainty. The I Fund’s resilience suggests potential in international markets, possibly tied to European defense spending initiatives.
YTD figures show a tough first quarter for U.S. stocks, with the C and S Funds lagging, while the I Fund and G Fund hold positive ground. Over the past 12 months, however, the stock funds (C, S, and I) have demonstrated the benefits of long-term investment, capitalizing on 2024’s bull market despite recent setbacks.
TSP investors may be reassessing allocations. The G Fund’s safety is attractive in uncertain times, but the C and S Funds’ long-term gains suggest potential for recovery if economic conditions stabilize. The I Fund’s performance hints at diversification benefits, particularly if global markets continue to diverge from U.S. trends. Reach out to a Federal Retirement Consultant® who can help you weigh your risk tolerance and retirement horizon as you navigate volatile market conditions.
