FEDweek

For TSP Investors, ’17 Was a Very Good Year

The three stock-oriented TSP investment funds posted strong gains in 2017, in turn pulling up returns of the lifecycle L funds, particularly those with a longer time frame and thus a heavier orientation toward stocks.

The international stock I fund led with a whopping 25.42 percent return, followed by the large company stock C fund, up 21.82 percent, and the small company stock S fund, 18.22 percent.

The bond F fund gained 3.82 percent and the government securities G fund 2.33 percent. The L fund gains were: Income, 6.91 percent; 2020, 9.86; 2030, 14.54; 2040, 16.77; 2050, 18.81.

In early December, the Fed Open Market Committee of the Federal Reserve voted to increase the federal funds rate from 1.25% to 1.50%. This will eventually impact most interest-bearing securities, such as mortgage rates, bond rates, savings accounts, and other types of consumer and corporate debt, and should translate to higher interest rates for the G Fund and F Fund.

Meanwhile, corporate tax cuts in the new tax law could lower the effective rate companies actually pay from around 20% to perhaps as low as 10%, boosting the income of corporations in the C Fund and S Fund (something the market has been anticipating for some time, pushing up valuations).

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