Forget the Yield Curve—Here’s What Actually Predicts TSP Turbulence

July 03, 2025

The yield curve used to be the gold standard for predicting recessions.

Now? Even Wall Street is questioning its reliability.

If you’re managing your TSP with one eye on the markets, it’s time to upgrade the signal you follow.

Signal #1: The VIX (Wall Street’s “Fear Index”)

The VIX measures expected volatility in the S&P 500. It’s often called the “fear index” for good reason:

  • When it rises while stocks are still climbing, it means smart money is hedging.

  • Spikes in the VIX usually precede sharp corrections in equity funds like the C, S, and I Funds.

Translation: if your TSP is heavy in stock funds, this indicator can offer advance warning—giving you time to rebalance before a downturn.

Signal #2: Financial Stress + Unemployment “Flashes”

Two more tools worth watching:

  • The St. Louis Fed’s Financial Stress Index blends credit risk, spreads, and market instability. When it spikes, equity markets often tumble shortly after.

  • The Sahm Rule detects early job market pain—flagging recessions faster than GDP reports. If unemployment jumps sharply, it’s a red flag for consumer demand and portfolio returns.

These aren’t obscure theories. They’re actively used by hedge funds, macro strategists, and institutions to de-risk early.

The Smart Fed’s Shortcut

You don’t need to memorize these indicators.

But you should know when they’re flashing red.

That’s why tools like Opening Bell Daily are useful. It’s how 190,000+ investors stay in sync with the signals that matter—without needing to live on CNBC.

A quick daily scan can reveal:

  • Where volatility is building

  • Whether equity momentum is stalling

  • And whether your TSP’s exposure matches the current risk climate

TSP success isn’t about reacting late.

It’s about knowing what smart money is already doing—and adjusting accordingly.

—FWR