Stocks opened the week in positive territory and traded in a tight trading range in the first half of the week up to the anticipated Federal Open Markets Commitee (FOMC) meeting policy decision and press conference on Wednesday. The FOMC raised rates by 0.25% as expected and left more rate hikes in future meetings on the table despite the Federal Fund rate reaching a 22-year high.
The market was unsure how to feel about the policy but the intial reaction was not to sell. Jerome Powell may have handed the market uncertainty about the future of monetary policy, but did so with an optimistic tone. The Fed has been satisfied with the recent inflation data but they want to see it sustain in coming inflation data and eventually reach their 2% inflation goal.
Investors were handed more economic data following Wednesday's FOMC rate hike. The personal-consumption expenditures (PCE) index provided more confirmation that inflation is slowing. The marets gapped up to start the day but suffered a strong reversal in the second half. There has been tension in the markets while it sits at its 2023 highs in a high interest rate environment. Thursday's selling was some relief of the that tension.
Thursday's selling did not trigger any kind of panic. Buyers were back to work on Friday and this time were able to hold onto the early gains and add to them as the day progressed.
All three TSP stock funds ended the week with a gain. The C-fund led the way with its 1.03% gain, nearly all of those gains came from Friday's aciton.
Bonds suffered the most. The F-fund ended the week with a loss of 0.4%.
Monday will be the last chance to use remaining July IFTs. Consider using one if you have had thoughts of repositioning. The move may give you more flexiblity in August.
Here are the weekly, monthly, and annual TSP fund returns for the week ending July 28:
The SPY (C-fund) traded in a tight range for most of the week through the anticipation of and deleviery of the FOMC meeting. It was Thursday, the day after the FOMC meeting, where we saw a change in market character. The large cap index stretched its trading range with a strong open to new intraday highs to eventually a reversal that wiped the week's gains.
Thursday's reversal did not inpsire more sellers. The week ended with the S&P 500 gaining 1% to cap off the busy week. The C-fund ultimaltey took on a weekly gain of 1.03%.
DWCPF (S-fund) had the similar weekly action, except the Thursday reversal was magnified and the S-fund was pushed into a weekly deficit of -0.65%. The index snapped back on Friday by opening higher and holding onto those gains through the rest of the trading day and not repeating another reversal. The S-fund ended the week with a gain of 0.79%.
The ETF EFA (I-fund) was not as affected by Thursday's reversal. But the I-fund did not share the magnitude of the S-fund's Friday rally. The I and S-fund ended the week with the same return, 0.79%, but got their on different paths.
The I-fund grew in populartiy among a few top performers of the TSP Talk AutoTracker. It isn't clear to me why. The open gaps below and the ETF's recent history of oscilation would not inpire me to buy it at its current high.
Thursday's losses were not isloated to the stock market. Bonds sold off and the BND chart fell enough in a single day ot fill the open gap from earlier in the month. The F-fund had a deeper loss on Thursday than the C and I-fund. The F-fund also bounced back some on Friday but ultimately ended the week with a loss of 0.40%.
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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