Howdy folks
Bottom Line Up Front: My TSP is now 50% S-Fund and 50% I-Fund. This allows “exposure” to both international stocks, many of which will benefit from international AI manufacturing, and the small cap stocks which I anticipate will do well in 2026.
OK, lets get started…..Hope you’re all doing well out there and staying warm as we kick off the new year in earnest. January wrapped up with a solid start for TSP participants—all the core funds posted positive returns, giving everyone a nice boost right out of the gate for 2026. That’s the kind of momentum we like to see early in the year, especially after the strong finish to 2025 where the international side really carried the load.
Let’s dive right into what happened in January. The markets opened the year on a positive note overall, with stocks showing resilience despite some choppiness toward the end of the month. The S&P 500, which the C-Fund closely follows in its performance, ended up about 1.45% for the month. That put the C-Fund right at +1.45% for January, and the same for year-to-date since we’re still early. It’s a modest gain, but steady—markets spent parts of the month hitting new highs before pulling back a bit on rotation out of some big tech names and digestion of earnings reports. Still, breadth improved under the surface, and the index held firm overall. For TSP folks in the C-Fund, that’s a reliable step forward, reflecting the ongoing strength in large-cap U.S. companies.
The S-Fund, focused on small- and mid-cap U.S. stocks, did even better at +2.41% for the month. That’s a nice out-performance compared to the large-caps, showing that smaller companies caught a bid as investor attention broadened out a little. Year-to-date matches that at +2.41%. We’ve seen this pattern before where small-caps can lead when sentiment shifts toward more domestic-focused plays, and January gave us a taste of that potential.
Now, the standout performer by far was the I-Fund, up a strong +5.94% in January. International developed markets really delivered, building on the momentum from late last year when the I-Fund led with over 32% for all of 2025. Year-to-date is the same +5.94%, and trailing 12-month numbers are still impressive around 35%.
Overall, TSP returns for January looked like this across the main ones we watch closely:
- G-Fund: +0.37%
- C-Fund: +1.45%
- S-Fund: +2.41%
- I-Fund: +5.94%
That’s a clean sweep positive, with the international exposure leading the charge. Not every month starts this way, but when it does, it’s a great foundation—especially for those of you who stayed the course through any late-2025 volatility.
Shifting gears to the outlook for the next 30-90 days—February through April—we’re in a period where patience and steady hands usually pay off. The Federal Reserve met at the end of January and held the federal funds rate steady in the 3.5% to 3.75% range. That was widely expected after the cuts through late 2025, and Chair Powell emphasized data-dependent moves ahead. Markets aren’t pricing in aggressive easing anytime soon—maybe one cut later in the year, possibly summer or beyond, if inflation continues to moderate and growth holds steady without overheating.
Economic data so far this year points to solid activity: job gains continuing at a measured pace, unemployment stabilizing, and consumer spending holding up. Inflation remains somewhat elevated but not runaway. The risk balance looks manageable—no major shocks on the horizon right now, though we’ll watch incoming reports on jobs, CPI, and retail sales closely. Earnings season is ramping up too, with big tech and others reporting, which could drive some volatility but also upside if results beat expectations.
For the TSP funds, this setup suggests continued potential for positive equity moves, especially if broadening continues. The C-Fund and S-Fund could benefit from domestic resilience, while the I-Fund has room if global growth stays supportive. The G-Fund will keep chugging along at its reliable clip, acting as the anchor. Volatility might pick up here and there—markets don’t go straight up—but nothing screams major correction in the near term. Stay diversified, rebalance if needed per your plan, and avoid chasing short-term noise. This is marathon territory, not sprint.
Now, on to other topics of interest to federal employees right now: the partial government shutdown that kicked in at midnight on January 31, 2026, after funding lapsed for several major appropriations bills.
This is a partial shutdown affecting agencies under the remaining unfunded bills, including parts of DHS, DOD (with some exceptions), Labor, HHS (except certain areas), Education, Transportation, HUD, Financial Services, National Security, State Department, and others. Many non-essential functions have paused, and agencies began issuing furlough notices to affected employees over the weekend and into this week. Essential or excepted personnel continue working, though without immediate pay until resolved.
The good news is this one looks short-lived. The Senate passed a package late last week funding most areas (including Defense) through the year, plus a short-term continuing resolution for Homeland Security to allow more negotiation time. House Speaker Johnson has expressed confidence in having the votes to pass and end the lapse quickly—potentially by Tuesday or very soon after the House returns and acts. Lawmakers are aiming to minimize disruption, and historical precedent shows brief lapses like this often wrap up fast when momentum builds.
Importantly, under the Government Employee Fair Treatment Act, furloughed employees are entitled to retroactive pay once funding resumes—no lost income in the end. Back pay is guaranteed for the period affected. Agencies like the IRS have already signaled exemptions or extensions for certain staff to keep operations smooth during tax season. For most feds, this means some inconvenience (possible delayed services, closed offices for non-essential work), but paychecks should catch up fully.
Hang in there if you’re impacted—stay in touch with your agency’s guidance, and this should resolve without turning into a prolonged event. We’ll keep an eye on developments and update as needed.
Wrapping this up, January gave TSP accounts a strong launch into 2026 with gains across the board, led by international strength. The near-term outlook remains constructive with steady rates and solid fundamentals supporting equities, while the G-Fund provides that dependable sleep-at-night fund. On the federal side, the partial shutdown is underway but appears headed for a quick resolution.
This is for informational purposes only and is not investment advice. Past performance does not guarantee future results. Please consult with your own financial advisor or do your own research before making any investment decisions regarding your TSP or other accounts.
Talk to you soon—stay safe and take care
-Bill Pritchard
