Stocks ended the first quarter of the year going up, but the past three months have been turbulent
During the first quarter of 2023, the stock market was hit by stress and failure in the
banking system and rapidly changing projections for inflation and interest rates. This has led to swings in the markets as investors have reacted to the news
At the beginning of 2023, investors were upbeat. Inflation appeared to be going down
Many were predicting the Federal Reserve would quickly switch from raising interest rates to cutting them
This would be a positive turn of events for stocks, and stocks went up in January based
on the anticipated good news to come. All of the Thrift Savings Plan funds were up in January
The S Fund was up 10.6% in the first month alone. However, economic reality intervened
Silicon Valley Bank and Signature Bank collapsed in March. Big banks intervened to save other banks that were also in danger of collapsing
The annual inflation rate was reported in March to be moving along at 6% over the last year
Anyone who has been to the grocery store in the last year can see the economic impact
of higher inflation. In the last 12 months, food at home is up 9.5%, electricity is up 12.9% and the cost
of shelter is up 8.1%. There are several reasons the TSP performance is still positive in 2023 despite the significant
negative events. A widely anticipated recession is still not here despite the fear rising interest rates
would drive the economy into a recession. In recent months, some large tech companies have reduced the size of their labor force
Despite this, the labor market is still strong and unemployment is low
Inflation is still high but has continued to ease up overall. As mentioned previously, inflation is still up 6% from February 2022, and in some key
areas, inflation is up even higher. As the March report from the Bureau of Labor Statistics showed the smallest annual gain
in inflation since September 2021, there is room for optimism in the economy and in stock prices
Despite the ups and downs, the TSP funds are now up for the year and went up in March
For the month of March, the G fund went up 0.35%, the F fund went up 2.54%, the C fund
went up 3.67%, and the I fund went up 3.11%. The only fund with a negative return last month was the S fund, it went down 2.9%
For the past 12 months, most TSP investors still see declines in the performance of their funds
Except for the G fund, which is up 3.52% over the past 12 months, the I fund up 0.28%, and
the L income fund, up 1.31%. All of the other TSP funds show a negative return for the past year
The turbulence in stocks has not gone away. It is likely to continue, and shocks to the economy will materialize in one form or another
The Federal Reserve has not indicated it will start lowering interest rates, and rate increases
may continue. Americans are not optimistic at the moment. A recent NBC News poll found that 71% of Americans report that the country is going in the wrong direction
Whether this pessimism in the American public is justified remains to be seen
It does mean an uphill battle for the stock market to remain positive by the end of the year
What may happen, it could even be likely. No one can predict the future
TSP investors would be well advised to diversify their investments as knowing where the gains
and losses in stocks will occur are impossible to predict