The latest Consumer Price Index (CPI) report came out on Wednesday, a week ahead of the next Federal Open Markets Committee (FOMC) meeting. This is the last major report card on inflation the Federal Reserve gets before making their next monetary policy decision. The CPI report showed an acceleration in inflation from the previous month's report. The report was up 0.6% from the previous month. A lot of that increase came from an increase in energy price. The core inflation index, which excludes food and energy, was up just 0.3% for the month.
The market had a tough time knowing how to react to this report. The FOMC is still expected to hold rates steady, but inflation is still higher than their 2% target and they may signal the possibility of more rate hikes this year. The Produce Price Index came next on Thursday and was also a little hotter than expected. That same day the European Central Bank raised their rates while also signaling an end to their rate hike cycle.
The market rallied on Thursday, which seemed to be an unusual response to the higher inflation data. But whatever drove prices sharply higher on Thursday was short-lived. Stocks pulled back harder to finish the week on Friday to pull the C and S-fund into negative territory for the week.
The I-fund avoided the sell-off the U.S. stock funds took on Friday. The I-fund outperformed for the week with an impressive 1.41% gain while the other TSP funds took losses for the week.
The F-fund fell 0.33%.
This coming Friday the FOMC will vote on monetary policy, but they are highly expected to keep rates steady. But investors will be listening closely for during Wednesday's FOMC press conference to see if the Fed expect to raise rates any further this year.
Here are the weekly, monthly, and annual TSP fund returns for the week ending September 15:
SPY (C-fund) seemed it was heading toward the open gap it failed to fill at the beginning of the month. Instead, the ETF pulled back sharply on Friday to wipe out the gains for the week. It looks like a bear flag that did what it is expected to do; break down from a short-term rising trading channel. The C-fund took a wide turn from Thursday's price to Friday's price. The price action has not strayed too far from the 50-day EMA over the last month. Do we expect it to climb back below the 50-day EMA next? Or will the moving average hold as support as it did at the September low?
The C-fund fell 0.13% for the week after a loss of 1.21% on Friday.
The DWCPF (S-fund) is already on the underside of its 50-day EMA. There may be an open gap above, but it feels less likely to see that filled or even tested in the second half of September. We are seeing more members swap their S-fund holdings for the C-fund in the TSP Talk AutoTracker, but still more members hold the S-fund than the C-fund overall among the community.
The S-fund fell 0.49% for the week, the worst return among the TSP funds this week.
The I-fund vastly outperformed the C and S-funds this week. The I-fund did not suffer the deeper losses the other two stock funds had on Friday, so it was able to keep its gains for the week. Although, it may have been a good day to sell the fund. EFA is in a wedge formation, and it looks like it may have found a short-term top and has fallen back below its 50-day EMA. It slipped deeper after a similar run in late August.
The I-fund gained 1.41% for the week to bring it to just under even for the month of September.
BND traded in a tighter range this week. A range we would expect from the bond market but do not see much of lately. The bond market has had unusual volatility for months. The current price is floating on top of an open gap but is not in any hurry to fill it. The coming FOMC meeting this week could provoke it to fill the gap or test its 50-day EMA for resistance again.
The F-fund fell 0.33% for the week. Most of those losses came on Friday.
Good luck and thanks for reading! We will be back here next week with another TSP Wrap Up. You can read our daily market commentary at TSP Talk - Market Commentary. If you need some help deciding what to do with your account, perhaps one of our premium services can help.
Thomas Crowley
(TommyIV)
www.tsptalk.com
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