09/17/2026
This is not any type of prediction. Don't make investment decisions based on this post! This is more of an explanation of how markets typically work.
Interest rates are going up. They appear to be going up next year as well. What effect does that have on investments? (I'm speaking in generalities here and risking oversimplification, so you finance bros and bras, yes, there are a lot more complications here that could be discussed for hours.)
As interest rates go up, bond prices fall. Bond yield and bond price have what is called an inverse relationship. They move in opposite directions. As interest rates have gone up, you can see how the TSP F Fund has gone down. It is the only fund down for the year right now and it is down 1.41% so far. We saw this in the extreme in 2022 when interest rates skyrocketed quickly. That caused the F Fund to lose almost 13%.
The G Fund is also a bond fund, but it is unique because it is not susceptible to real world accounting. It's protected in the government accounting universe where math doesn't necessarily have to balance. Those treasuries aren't traded so they are not subject to the free market. So rising interest rates actually help the G Fund. This is unique in the financial world. And much could be said on how the G Fund operates outside of the laws of physics and finance.
The C Fund is not as impacted as much. At least compared to the S Fund. Why? Because remember what the C Fund is made of compared to the S? The C Fund has the largest, most establish publicly traded U S Companies. They aren't as interest rate sensitive because they aren't as debt reliant as the smaller companies (the S Fund). Apple has billions in cash. If anything, they'll be earning more interest on their cash deposits. Smaller companies aren't there yet. They are more dependent on debt. As interest rates rise, their cost of debt rises and eats into their profits. This dampens the outlook for future profits, which in turn, weighs down the price.
This is why I think we've seen (and will continue to see) a narrowing gap between C and S this year. C is up 11.24% and S is only up now 12.64% That gap was much wider earlier in the year.
We have had a phenomenal run in the stock market since basically 2008. I think that has made some people overly optimistic. We cannot expect these types of returns to continue indefinitely without a correction. I don't know if that's going to be in 5 years, 10 years, or next Thursday, but you need to have a plan if you are close to using your money how to protect yourself from maybe a 30-40% drop that may stay down for years.
Again, not a prediction, just an observation based on current events.
and invest so that you aren't crushed if things don't go your way.
