Market swings and divergent returns tested TSP investors this week. The market changed direction every day leading up to the highly anticipated speech by Federal Reserve Chairman Jerome Powell. His speech ultimately led to the week’s best day of returns across the TSP funds, but it was the S-fund investors who took home most the gains.
The TSP Talk community mostly took profits on the peaks or swapped their C-fund for some S-fund.
For each of the TSP funds, the week held three days of gains (Monday, Wednesday, and Friday) and two days of losses (Tuesday and Thursday). The choppy action provided opportunities for TSP investors to increase stock funds at lower prices or take exits on a day of solid gains.
Here are the weekly, monthly, and annual TSP fund returns for the week ending August 23:
The S-fund accumulated a second consecutive week of gains of over 3%. Yet it gave its investors the largest swings of the week. The S-fund was down 0.97% twice, yet never gained less than 1% on the three other days. Friday’s rally reached 2.56% for the S-fund, overshadowing the C-fund’s 1.15% gain for the day.
What did Powell say to provoke Friday’s rally? Powell lit the runway for a Federal Open Market Committee (FOMC) to cut interest rates in September. This has been highly anticipated, but his speech added priority to the health of the labor market.
The FOMC was criticized for not cutting rates in their July meeting after the July Jobs Report revealed a weakening labor market. Fear that the Fed was behind a spiraling unemployment rate led to stock prices taking a sharp pullback to start August, you probably remember.
But since then, initial jobless claims and other economic data have settled those fears and prices have quickly bounced back. Powell’s speech helped when he argued the rise in unemployment is not from layoffs but an increase in participants in the labor force and a slowing demand for new workers. Yet, Powell feels the FOMC is in a position to ward off further labor pressures with their rate cut potential.
Powell was careful not to clue in at what pace the FOMC is likely to cut rates, leaving room for improvised adjustments. The FOMC will get to take in another jobs report and inflation data before the September FOMC meeting. The Personal Consumption Expenditures Price Index (PCE) will go public this coming Friday.
TSP Talk AutoTracker
The TSP Talk AutoTracker Community reduced its C-fund exposure this week and shifted to the G-fund. Both the average S-fund and I-fund allocations were up over the week, yet the greater loss of C-fund allocations meant the community decreased its overall stock exposure.
The average G-fund allocation climbed 0.52% from the previous week as the choppy week had members taking profits on gains more than retreating on down days. Eleven non-premium members moved to 100% G-fund this week, and more made partial moves to the G-fund. Five of those eleven came on Friday while the market was rallying. Only three of the eleven came on the days where the market was down.
Best of 2024
The S-fund's overperformance of the C-fund lifted two of its investors to the top of the TSP Talk AutoTracker.
The 2024 returns of TSP Talk AutoTracker members Johnny (1) and cowboyaug4 (3) rose above the C-fund's 2024 return on Friday. Both hold S-fund heavy allocations. The two now share the top with Timberwoof (2) who holds 100% C-fund.
Best of August
Some impressive market timing has led to some members to pull large profits out of the wild month of August. Leading the August standings, Viettim holds a gain of 7.20% for the month of August. They are joined by a group of TSP investors who side stepped the initial sell-off of early August and have enjoyed the rebound gains since.
Second place BigBully moved to 100% F-fund on Friday. A pull-back in stocks may lift them to the number one position in the final week of August.
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Thomas Crowley
(TommyIV)
www.tsptalk.com
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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.
