If you were invested anywhere outside of the G-fund this week, you likely enjoyed a respectable return. The F-fund underperformed compared to the TSP stock funds but still managed to rise by 0.4%.
November’s market leader, the S-fund, lost some steam in the first week of December, lagging behind both the C-fund and the I-fund. The I-fund led the pack this week with a notable 1.5% gain.
Here are the weekly, monthly, and annual TSP fund returns for the week ending December 6:
A shift from the November action:
This sudden shift toward the I-fund reflects a short-term rebalancing due to the high valuation of the U.S. market compared to international markets. While the U.S. market continues to be buoyed by optimism around AI, favorable economic signals from the new Executive branch, and declining borrowing costs, the valuation gap between U.S. stocks and emerging markets may be exaggerated. Analysts caution that the U.S. stock market is significantly overvalued, and we may see some correction ahead.
There was also a shift out of small caps and into tech stocks early in the week. The Nasdaq and S&P 500 reached new all-time highs. The S-fund then put together a 1.18% rally on Wednesday. Chairman of the Federal Reserve Jerome Powell spoke publicly Wednesday about the resilience of the economy and signaled the Fed may not have to cut rates as fast as first thought. The next day the S-fund gave up 1.05%. On Friday the S-fund outperformed while the I-fund was down for the day.
The market's behavior has been inconsistent, and patterns are shifting. Investors who stayed committed to stocks have seen strong returns, but the potential for a sudden reality check looms large. To gauge sentiment and strategy, let’s turn to the TSP Talk AutoTracker and see how our members are positioning themselves in this dynamic environment.
These allocations reveal a diversified approach focused on the G, C, and S-funds, with limited exposure to the F and I-funds. The 30.3% allocation in the G-fund aligns with a cautious strategy: participating in the market rally while safeguarding capital to seize buying opportunities during potential corrections.
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Their current S-fund-heavy allocation likely reflects the fund's strong performance in November. However, the recent shift in market dynamics serves as a reminder that diversification and caution are key as we head into the end of the year.
Stay updated on the strategies TSP Talk AutoTracker members by subscribing to the Last Look Report, featuring IFTs from leading members and insights from the TSP Talk AutoTracker community. More info here.
Thomas Crowley
(TommyIV)
Writer of the Last Look Report
Weekly Wrap-Ups Archive
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
November’s market leader, the S-fund, lost some steam in the first week of December, lagging behind both the C-fund and the I-fund. The I-fund led the pack this week with a notable 1.5% gain.
Here are the weekly, monthly, and annual TSP fund returns for the week ending December 6:
A shift from the November action:
This sudden shift toward the I-fund reflects a short-term rebalancing due to the high valuation of the U.S. market compared to international markets. While the U.S. market continues to be buoyed by optimism around AI, favorable economic signals from the new Executive branch, and declining borrowing costs, the valuation gap between U.S. stocks and emerging markets may be exaggerated. Analysts caution that the U.S. stock market is significantly overvalued, and we may see some correction ahead.
There was also a shift out of small caps and into tech stocks early in the week. The Nasdaq and S&P 500 reached new all-time highs. The S-fund then put together a 1.18% rally on Wednesday. Chairman of the Federal Reserve Jerome Powell spoke publicly Wednesday about the resilience of the economy and signaled the Fed may not have to cut rates as fast as first thought. The next day the S-fund gave up 1.05%. On Friday the S-fund outperformed while the I-fund was down for the day.
The market's behavior has been inconsistent, and patterns are shifting. Investors who stayed committed to stocks have seen strong returns, but the potential for a sudden reality check looms large. To gauge sentiment and strategy, let’s turn to the TSP Talk AutoTracker and see how our members are positioning themselves in this dynamic environment.
TSP Talk AutoTracker Bias: What Are Members Doing?
To gauge the sentiment and strategy of TSP Talk AutoTracker members, I analyzed the average returns of 497 members who made at least one Interfund Transfer (IFT) this year. This doesn’t discount those who held a single allocation all year — a strategy that has worked well for C-fund and S-fund investors — but rather focuses on those who actively react to market changes.Average Allocation of Active Members:
- G-fund: 30.3%
- F-fund: 2.2%
- C-fund: 32.5%
- S-fund: 29.3%
- I-fund: 2.54%
These allocations reveal a diversified approach focused on the G, C, and S-funds, with limited exposure to the F and I-funds. The 30.3% allocation in the G-fund aligns with a cautious strategy: participating in the market rally while safeguarding capital to seize buying opportunities during potential corrections.
Cautious Optimism: Tom's Take
Tom's Thursday commentary encapsulates this sentiment well:This balanced approach reflects what many TSP investors are doing: staying invested in the bull rally while protecting some capital for potential market corrections.
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Top Performers: Riding the Stock Wave
Looking at the best 100 returns for 2024 among active IFT members, their average allocation tells a different story:- G-fund: 8.8%
- F-fund: 1.5%
- C-fund: 42.5%
- S-fund: 45.7%
- I-fund: 1.2%
Their current S-fund-heavy allocation likely reflects the fund's strong performance in November. However, the recent shift in market dynamics serves as a reminder that diversification and caution are key as we head into the end of the year.
Conclusion: Balancing Growth and Safety
TSP investors are navigating a market where optimism and caution go hand in hand. While the rally continues, investors are keeping one eye on the gains and another on the risks. Those who have seen the most success this year have ignored the risks, but that plan can backfire quickly. Whether the market corrects or climbs higher, maintaining a diversified approach could be the key to sustainable success.Stay updated on the strategies TSP Talk AutoTracker members by subscribing to the Last Look Report, featuring IFTs from leading members and insights from the TSP Talk AutoTracker community. More info here.
Thomas Crowley
(TommyIV)
Writer of the Last Look Report
Weekly Wrap-Ups Archive
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
