Rate Cuts Ahead... or Higher-for-Longer Round 2?

Markets can do something funny around Fed week…

They move before the decision, during the press conference, and then sometimes reverse the next day.

If you’re a TSP investor, that whiplash usually shows up in one place first…

Your expectations for the F Fund.

Not because the F Fund is “risky.”

But because it reacts to interest-rate expectations in a way most people don’t intuitively feel until they watch it happen:

• C/S/I Funds tend to react to “growth vs. slowdown” vibes and how expensive money is.

• F Fund reacts to where investors think interest rates are headed next — and how quickly.

• G Fund mostly ignores the drama. It’s built differently.

So the real question isn’t “Will the Fed cut?”

It’s: What does the Fed signal about the next 6–12 months — and how does that affect bonds?

The F Fund problem: it’s calmer than stocks… until it isn’t

Plenty of federal employees treat F as the “steady” fund.

It can be steady.

But in rate-driven markets, bonds can drop fast…

Especially if the market suddenly believes rates will stay higher for longer.

If you want a simple mental model:

F Fund = a price tag that updates when the market rewrites its rate forecast.

That’s why a single meeting can matter even if the Fed doesn’t move rates at all.

Three Fed outcomes that actually matter (and what they tend to do)

1) “We’re close to cutting” (the dovish lean)

If the Fed talks like rate cuts are getting closer, bond yields often fall.

When yields fall, bond prices often rise.

What that can mean in TSP:

• F Fund gets a tailwind

• Stocks may like it too… unless the Fed sounds dovish because the economy looks weaker than expected

2) “Not yet” (the firm hold)

If the Fed pushes back — especially if inflation is still sticky — yields can pop higher.

Higher yields often push bond prices down.

What that can mean in TSP:

• F Fund can take a quick hit

• Stocks can wobble if investors were counting on easier money soon

3) The “mixed message” (more common than people admit)

Sometimes the Fed’s words say one thing, markets hear another, and longer-term rates do their own thing.

What that can mean in TSP:

• F Fund doesn’t match the headline

• You feel like the market is “wrong,” when it’s really reacting to a different detail

The takeaway

Fed week isn’t dangerous because the Fed is unpredictable.

It’s dangerous if your plan becomes negotiable when charts start moving fast…

If the F Fund is meant to be your stabilizer, keep it in that role.

If the G Fund is meant to be your sleep-at-night money, don’t expect F to behave like G.

And if you’re mostly in C/S/I for long-term growth, don’t let a two-day narrative shove you off course.

Best,
—FWR