The seeming lockstep price of Crude Oil and the Morgan Stanley Capital International EAFE based TSP
A friend of mine at work got into the I fund (based on the Morgan Stanley Capital International EAFE) at the right time and rode it to some great profits. He said that as oil prices rose so did the I fund. Being a curious fellow I decided to take a look and an interesting pattern appeared.
I graphed the five funds available in the Thrift Savings Plan, 401k retirement plan.
The funds are:
The C Fund is based on the S&P 500
The F Fund is designed to match the bonds in the Lehman Brothers U.S. Aggregate (LBA) index.
The G Fund invests in short-term U.S. treasuries
The S Fund follows the Wilshire 4500 index
The I Fund follows the EAFE index
I chose the start date of this graph as 5/1/2005. I chose this date for a reason. This was the start of the great price increase in oil last year. During this period, the C fund (based on the S&P 500) had a slow and steady rise. The S fund (based on the Wilshire 4500 index) had a greater rise but it was the I fund which almost seems to be in lock step with oil prices. When the price of NYMEX Light Sweet Crude rose, the I fund rose. When the price of NYMEX Light Sweet Crude fell, the I fund fell. There was not an exact percentage by percentage match but the pattern was unmistakable.
We know that the I fund, which is based on the Morgan Stanley Capital International EAFE does hold a portion of its assets in foreign oil companies including BP and Royal Dutch Petroleum. Could this explain the seeming link? Not in it