Discussion of our current recommendations (updated January 8, 2012):

• Throughout 2011, we had expected the stock market to reach an intermediate-term peak around the end of 2011, but we now believe this peak will not occur until some time in the first half of 2012.

• Downward movements in the stock market may occur before the peak, and the possibility of significant downward movements justifies not buying or exchanging into the high growth funds (C or S) during the first half of 2012.

• We do not recommend any exchanges between funds.

• We recommend that new contributions to TSP Funds go into the government bond funds (F or G).

• We currently do not recommend holding or buying the "I" Fund (international stocks) because we believe the U.S. stock market will outperform European and Asian stock markets during coming months.

Basis for our current recommendations:

• Fundamental basis - Improving corporate earnings will be the main driver of higher stock prices in early 2012.  Stock price indices (Dow Jones, S&P 500, and Nasdaq) will recover to levels near their early 2011 levels.  Interest rates and inflation will remain low in early 2012.
  
  

• Technical basis - The stock market continues to recover from its low reached in March 2009. As shown in the long-term business cycle (5-year) graph, the high growth C Fund (which tracks the S&P 500 Index, a broad market measure) is re-tracing to the level of fixed return securities (F and G Funds).  The C Fund re-tracement will continue until the C Fund mean long-term growth rate has reverted to a level that is near the mean long-term growth rate of the F and G Funds.

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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