Discussion of our current outlook (written June 24, 2016):

  • We believe the overall stock market is likely to move lower in the last half of 2016.  A strong case can be made now for exchanging from the stock funds (C, S, or I Funds) into the TSP government bond funds (F or G Funds).  New contributions would also be directed to the bond funds.

Basis for our current outlook:

  • Fundamental basis – 

    • Overall, U.S. companies will have lackluster earnings growth in the second half of 2016 and the U.S. "real" gross domestic product is expected to remain near 2.3% in that time period.  ("Real" GDP is GDP adjusted for inflation.)

    • Negative interest rates are expected in Japan and Germany, and near negative rates are expected in the U. S. and Great Britain.  A negative interest rate is a drag on an economy, as a government that is operating with a budget deficit is using borrowed money to pay borrowers to buy bonds (loan the government even more money). 

  • Technical basis - The stock market rose from March 2009 through May 2015.  In the first half of 2016, the market tried to reach the May 2015 high, but failed.  Downward pressure on the market in late 2016 will result from the failure of the market to reach the May 2015 high, and uncertainty caused by the British exit from the EU and the U. S. Presidential election.

Market timing strategy of TSPFundTracker.com - We advocate cautious and infrequent market timing, exchanging between high growth funds (C, S, I) and fixed return funds (F, G), typically 1 to 3 times each year.  The aim of this timing strategy is to wait out market downturns in the fixed return funds and reap the profits of upturns in the high growth funds.

Methodology - Our buy/sell (exchange) market timing calls are based on analysis of  fundamental (corporate earnings) data and technical (cyclical trend) data.

Timing Success - We do not claim to be able to predict stock market performance, although we have had considerable success timing the market in our own TSP Funds over the last 15 years.

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