Hello everybody—
Bottom Line Up Front: My TSP Allocation remains 50% C-Fund and 50% S-Fund.
Happy Holidays to you and your families. As we close out 2025, the markets delivered a quiet but positive finish in the holiday-shortened session on December 24. The S&P 500 closed at a fresh record high of 6,932, up about 0.3% on light volume, extending its impressive year-long rally. This “Santa Claus Rally” has been supported by resilient economic data, moderating inflation, and optimism around continued AI-driven growth and a soft landing.
For TSP participants, this strength has shown up across the equity funds. The C Fund, tracking large U.S. companies, has benefited from broad market gains and is up strongly year-to-date. The S Fund, aligned with small- and mid-cap stocks, has shown solid momentum in recent months despite some volatility. The I Fund, focused on international developed markets, has been a standout performer, with strong gains driven by global recovery and earlier currency tailwinds. The G Fund has provided its steady, reliable returns, offering stability for conservative allocations.
Looking back over the past few months, the markets have demonstrated remarkable resilience. After a choppy November with modest gains, December brought renewed buying interest, particularly in technology and growth sectors. The S&P 500 has climbed steadily, with multiple record closes in the final weeks, fueled by better-than-expected corporate earnings, continued AI infrastructure spending, and a Federal Reserve that has eased policy without sparking inflation concerns.
TSP fund performance reflects this positive environment. As of late December, approximate year-to-date returns include the C Fund up around 18-19%, the S Fund up roughly 13-14%, and the I Fund exceeding 25-30% in some periods earlier in the year. The G Fund has delivered consistent, modest gains aligned with short-term Treasury yields. Indeed the I-Fund outperformed, however my personal “comfort level” kept me out of international stocks this year. Yes, some gains were missed but remember, we are balancing risk and reward and the ability to sleep at night. Contrary to what some believe, NO this is not a day-trade-your-TSP site. I want long term trends as much as the next guy.
As we move into the new year, the outlook for the next 30-90 days remains cautiously positive, supported by several factors. The Federal Reserve’s December rate cut to a 3.5%-3.75% range has continued to provide accommodative conditions, with markets anticipating limited additional easing in early 2026. Inflation remains on a favorable path toward the Fed’s 2% target, and economic indicators suggest moderate growth, driven by consumer spending and business investment, particularly in AI and technology.
For TSP funds, this environment could sustain upside in the C and S Funds if large- and small-cap momentum holds. The I Fund may benefit from ongoing global recovery, though currency moves and trade policy remain variables. The G Fund will likely continue its steady, low-risk returns, serving as a safe harbor amid any short-term uncertainty. In more times than not, the best performers in the first quarter of a New Year are domestic large cap and small cap stocks, aka C-Fund and S-Fund.
Key events to watch include upcoming inflation reports, corporate earnings seasons, and any policy developments. While risks such as geopolitical tensions or unexpected data shifts persist, the current setup points to equities potentially carrying forward some of late-2025 strength into Q1 2026.
Beyond the markets, federal employees and retirees have faced some significant developments. The lengthy government shutdown, which lasted over 40 days, has now ended with the passage of funding legislation. Agencies are working to restore full operations, process back pay for furloughed and excepted employees, and rescind any related layoffs. This resolution brings relief after a challenging period, though some backlogs and adjustments may take time to clear. As change (especially during administration changes…) is always constant, it is still-apparent the importance of “having your ducks lined up” for retirement:
– Communications with your HQ retirement / personnel section
– Networking, career fairs, lunch-and-learns, job search activity, resume reviews/prep services
– Financial and benefits awareness (this site, Barfield Financial, The FERS Guide)
-Shocking: HQ has no “find-you-a-retirement-job” section. That is on YOU.
On the benefits side, a small pay raise for most federal employees will take effect in early 2026, with ongoing discussions around adjustments for certain groups like law enforcement. Health and retirement planning remain key priorities—review your FEHB options, survivor benefits, and TSP allocations as the year begins.
In summary, 2025 ended on a high note, with strong performance in TSP stock funds and stability from the G Fund. Looking ahead, moderate growth and supportive policy could keep equities positive into early 2026. For federal employees, the shutdown’s end and steady benefits updates provide a solid foundation for the year ahead.
Possible website changes for 2026
In other news, please anticipate some changes to this website for 2026, to include an expansion of topics that I talk about, such as the stock market in general, commentary regarding business related topics, and other stuff. Being retired, the “world” is much bigger than the C/S/I-Funds, and so is my personal investing. The format may include a tiered plan, with both free and paid options. As most know, this site has been free since it began over 10 years ago. I would need about 100 fingers to count the frequent LinkedIn messages, texts, and folks tracking me down, all conversations that start with “Hey, I am retiring (or not) what do you think about XXXX.” Furthermore, recent WordPress hosting and server security has flagged some image uploads and posts as virus risks, and I have almost had to become an HTML coder to get some of the quirks ironed out recently. Time is money, and my “volunteer community service hours” on this site will likely undergo a transition.
Thank you for reading, and please share with anyone who might benefit from this update.
Before you go, please complete this short retirement poll/survey for 2026:
https://poll-maker.com/poll5680726x004745fb-166
Thank you and MERRY CHRISTMAS
-Bill Pritchard
