Stellar Q1, But Will It Last?

March 31, 2024

Happy Easter, everyone! Spring is a fantastic time for reflection and personal growth. It's during these breaks in life that we find opportunities for improvement. This past weekend, amidst church, friends, and family gatherings, I took a deep dive into my strategies, seeking ways to enhance my performance and results.

With nearly two decades of experience using the TSP Coach program, which blends data-driven models with qualitative analysis, I continuously strive to make informed decisions. While statistical models are insightful, the market often defies standard conventions like "Sell in May and Go Away."

Reflecting on my journey led me back to my core mission: offering a simple and cost-effective investment platform for military and Federal workers to observe how I manage my TSP. My pivotal moment occurred during my tenure as a squadron TSP officer, guiding enlisted Sailors on retirement investing. 

In talking through financial struggles, I became, hopefully, the break in their investment life that allowed them to reflect, learn, and apply lessons toward a better path. 

In light of my recent musings, I urge all readers to ensure that Federal employees and military service members are actively investing in their financial well-being.  Let's empower our peers to secure their future by investing in their retirement, and I will do the same through my social media channels and other outlets available to me.

Reflecting upon the TSP performance this year, I’m still amazed at the gains seen by the C Fund. At over 10.55% in the first quarter, we are on track for a stellar year, but perspective tells me differently. 

I am, believe it or not, somewhat relieved to have the S Fund beat the C Fund this month.  It shows a leveling of investments and market sentiment across both the large cap and small caps and tempered the meteoric rise of the C Fund in January and February.  The rumor of the resetting of the targeted interest rate from 2% to 3% is driving markets to expect three rate cuts in 2024.  No doubt about it, those rate cuts are priced into the market, and when they are finally announced, I do expect a downward trend in stock prices as the models adjust accordingly.  An additional impact of a rate cut before we are close to a targeted inflation rate will probably signal a reset to 3% which will in turn drive other financial models to adjust.  Companies cannot always adjust long-term contracts to reflect inflation, and so when they adjust their financial models reflecting higher inflation, they will, in turn, show reduced real growth, adding further downward pressure on the stock market and the economy.  This might be the Bear in me, but I’ll be watching inflation and the leadup to the next Federal Reserve meeting closely. 

In summary, my models and my qualitative analysis still shows me the C Fund is the best investment for my money.  My models are pretty clear, and I think the large cap funds will be able to handle the potential adjustment to the inflation target better than the small cap stocks.  Keep investing!