Happy New Year Everyone!

As we end 2017, let’s take a look back and see how we did. Then, let’s look ahead into 2018 and talk thru the possibilities…  Results for 2017 are not yet available at TSP.gov.  Below are approximate:

C Fund: + 19.4%

S Fund: + 16.5%

I Fund: + 25%

F Fund: + 3.55%

G Fund: + 2.32%

2017 was the best year for the stock funds since 2013!  By any measure, it was a great year to be fully invested in the stock funds to maximize the growth of your TSP account.

Many people are asking how this past year was possible?! The election of President Trump ushered in a year of chaos on many levels and the market supposedly hates chaos. The country is extremely divided; conflict with North Korea seems more likely every day; someone is getting fired from a new sex scandal at least once a week… The news is all bad! How can the stock funds keep going up??

It’s very easy to get sucked into this way of thinking. One way to stay above the 24hr news cycle is to view the stock funds thru the lens of the Elliott Wave Theory.  Here’s a chart I posted 18 months ago and then what that chart looks like today. It’s not an exact science BUT, this stuff clearly works…

 

 

So the Elliott Wave Theory showed us that some serious gains were likely thru 2017. What does Elliott tell us about 2018 and beyond?  What happens after the 5th leg?  The last major bottom was early in 2009. Since then, the S&P500 (C fund) has unfolded along a similar path to the “ideal pattern” in the chart below.   The ideal pattern is only a guide but can be VERY helpful in managing expectations for the future.

IF we are close to completing the Impulse wave that began 9 years ago then the Correction wave should start soon. Ideally, the correction would last about 5 years with the price chart correcting back to the level of the prior 4th leg, about 1800.  This would be about a 33% decline from the current level.  Since stocks tend to fall faster than they rise, in reality the correction could take much less than 5 years.  For some perspective, the C fund declined 50% from 2000 to 2003, then again from 2007 to 2009.     

 

 

As of today, we have not yet completed the Impulse wave. That being said, we are much closer to a major top than a major bottom. Managing expectations is a big part of being able to sleep well at night.  Based on the Ideal Elliot Wave pattern, the next several years are going to be very difficult.  On the positive side, once this correction is complete, a new Impulse wave will begin!

I would like to wish everyone a very happy and healthy New Year!  Cheers!!

Jerry   

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