A trend has finally formed. The bears took over market action on Tuesday and drove TSP prices below their July starting price over the next four days. The TSP stock funds were all down 2-3% for the week. The S-fund's August losses have accumulated to over 7%. But as the August pullback gets deeper, more investors are eager to buy up stocks at a discount and ride the relief rebound back up.
That was true for some of the best investors in the TSP Talk community. This week in the Last Look Report we witnessed six of the top 24 TSP Talk non-premium AutoTracker members move into stock funds. The S-fund was the main target for these dip-buying top performers, and they were just joining the party.
The average allocation for the top 24 members is currently: 35% G-fund, 14% F-fund, 7% C-fund, 34% S-fund, and 10% I-fund.
Most notable is the difference in C-fund and S-fund allocations. S-fund holders anticipate a bounce back proportional to its latest struggles.
We should also take note of the healthy amount of cash still held among the top performers. The best argument to buy stocks now is they've become oversold. But the bulls don't have much ammunition otherwise. Bond yields have reached their highest rate in years, and we can't assume the Fed is finished with rate hikes. There are now better alternatives outside of stocks for a return, and that could be true for some time.
Nonetheless, the dip buyers are swarming. The trend could flip with just a couple days of gains. But buying in this market is the manifestation of the 'catching a falling knife' metaphor. There are more conservative approaches than moving to 100% stock funds for those who want to catch a potential rebound but have capitol to protect. Partial stock exposure is obviously one idea, but there is also keeping your current savings protected in the G-fund while putting your latest TSP contributions into stocks.
Next week market participants look forward to the AI superstar Nvidia's earnings report. You may remember their first quarter earnings report being a catalyst for large caps indices earlier in the year, but expectations could be too high for a repeat response.
The Jackson Hole Symposium is coming up, this will be the latest opportunity for the market to get an idea of where the Federal Reserve Bank's monetary policy is headed.
Here are the weekly, monthly, and annual TSP fund returns for the week ending August 18:
Three-month charts of the TSP funds
Investors had their eye on SPY's (C-fund) 50-day EMA as a support level, but prices slid through the moving average easily. The price broke below the August trading channel on Thursday and Friday. This does not look great, but it could be a sign for investors that the C-fund has become oversold as is prime to buy. If not, the ETF has plenty of room to fall before testing its 200-day EMA. The C-fund fell 2.05% for the week.
DWCPF (S-fund) has already reached its 200-day EMA. It opened below the moving average on Friday before we got a taste of some intraday dip buyers who quickly brought the price back above the 200-day EMA. The open gap from early June is within reach now, that could potentially be a target for those still practicing patience before they buy. The S-fund fell 2.95% for the week and holds the greatest loss for August among the TSP funds at -7.14%. The S-fund did manage a gain of 0.5% on Friday.
The I-fund lagged the TSP funds for the week. The ETF EFA broke through potential support (rising dotted line) with no problem. The free fall ended the ETF's price at its 200-day EMA. Similarly, to the DWCPF, EFA opened below the 200-day EMA on Monday before dip buyers pushed it back above it by the close. The I-fund lost 3.20% through the week.
BND (F-fund) reached new lows on Thursday. Bond yields are near their highest level in years. Bond price fall when yields rise. The bond ETF has quickly lingered from its 50 and 200-day EMAs. Some may be tempted to use the F-fund as a vehicle alternative to stocks or even the G-fund. But this week the F-fund fell 0.51% and has now dropped 1.85% for August.
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 on the Market Comments page. If you need more help deciding what to do with your account, perhaps one of our Premium Services can help.
Thomas A Crowley
wwww.tsptalk.com
Last Look Report
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The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
