The stock-oriented funds of the TSP posted their strongest returns in six years in 2019, led by the common stock C fund’s gain of 31.45 percent, followed by the small company stock S fund, 27.97 and the international stock I fund, 22.47; those funds gained 3.01, 2.15 and 3.24 percent, respectively, in December.
The bond F fund fell 0.08 percent in December but still was up 8.68 percent for the year while the government securities G fund rose 0.16 percent for a 2.24 percent annual return.
The December and annual returns for the lifecycle L funds were: Income, 0.74, 7.6; 2020, 0.86, 9.38; 2030, 1.83, 17.6; 2040, 2.15, 20.69; 2050, 2.43, 23.33.
Equities have become quite expensive. The S&P 500 (think C Fund) average price-to-earnings ratio increased from less than 20 to over 24, and the S&P 500 provided very strong returns in 2019. Positive sentiment for stocks became very bullish by the end of the year – and extended into 2020 on additional positive news on trade.
A good example of this is Apple stock, which is currently the biggest stock in the C Fund. The C Fund has 500 companies in it, but Apple alone accounts for 4-5% of the fund, with Microsoft accounting for another 4-5% of it, because they are so big. Together, these two companies account for about 9% of the 500-company C Fund.
Read more: 2019 Was All About Valuation Expansion