The Trump effect on your TSP account: The 16 percent factor
Many of the pundits and experts who predicted that Donald Trump would never be elected also said that if he did, the stock market would tank, big time. Were they...
Before the November presidential election, some experts predicted that in the unlikely event Donald Trump made it, the stock market would plummet. Some people, including a number of federal TSP investors, said they would immediately move all the money they have in stocks (the C, S and I funds) and put them in the super-safe (but low yield) treasury securities G fund.
Trump, as we know, is now president and the stock market has hit new records since last November. Although well overdue for a major correction (20 percent to 30 percent), the various stock indexes have repeatedly hit new highs. So what happened to the people who played it safe, and switched their TSP accounts from stocks to treasury securities? We put the question to Washington-area financial planner Arthur Stein. He says that from as of last week, and assuming no new investments between the election and Aug. 16, that $100,000 invested in the C fund “on the day before the election would now be worth $117,750,” whereas if the $100,000 had been switched to the G fund, it would now be worth $101,774.
Oops. That gives a new meaning to “safe” investment.
Could the market crash and burn? Sure. It almost certainly will have a major correction. Normally, they occur every three years, but it has been eight years since the last one.
The question is, can you (or anyone) “time” the market? Know when to get out, and even more importantly, when to come back? Hundreds of thousands of federal investors left the TSP’s stock funds during the Great Recession. Many have never come back, despite the huge gains in the market and those funds.
Here’s a chart Stein worked up showing The Trump effect so far:
Nearly Useless Factoid
In 1992, WENZ 107.9 FM, a Cleveland, Ohio, a radio station, highlighted a change in format by playing R.E.M.’s “It’s the End of the World as We Know It (And I Feel Fine)” repeatedly for 24 hours straight.
Source: Wikipedia
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Mike Causey
Mike Causey is senior correspondent for Federal News Network and writes his daily Federal Report column on federal employees’ pay, benefits and retirement.
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