Stocks broadly rallied this week to climb out of a the previous weeks' volatile rut. The rise in bond yields had investors retreating out of stocks, particularly tech stocks, spooked by the possible implications of a safer asset growing more attractive. Now investors are moving back into stocks despite the yields reaching highs of the past year. The signing of the federal stimulus bill and the beginning of money being sent out has investors wanting to be invested when some of that stimulus money makes its way into stocks and bonds. There is also promising developments as far as near future rise in Covid vaccine availability to more Americans and the backing of at least reasonable economic data that is opening the door to suppressed pockets of the economy. This has caused rotation of money from the pandemic proof stay at home companies to the more in person business we have forgotten about. Tech stocks have fallen behind the rest of the market, particularly small caps (S-fund) that outperformed the indices this week.
It was a reassuring week for the bulls who feared their easy gains were at jeopardy. But the short term (coming months) looks promising thanks to stimulus money that has inflated stock prices in the past along with the general public growing more open to gatherings and less restrictions by governments. Are yields still a concern? Yes for the consumer who will expect it to bleed more into higher mortgage and loan rates that have been attractively low. But those higher interest rates will be good for banks that have struggled to maintain profits at such low rates. As far as the markets go, the rise in yields did not come with a full retreat out of stocks but if they continued to rise out of control than one could see the Federal bank tightening monetary polices.
The TSP funds were mixed to a degree. The S-fund outperformed by more than twice the return of the C-fund. The F-fund slipped 0.42% for the week to be the only TSP funds with losses for the week. Each day more stimulus money makes its way to the public. We will get a glance of how that will affect prices next week.
Here are the weekly, monthly, and annual TSP fund returns for the week ending February 12:
The SPY (S&P 500 / C-fund) closed at new all time highs Friday and spent some time in intraday all time highs of Thursday. A leg higher from here would give very similar chart action moving from late January to the highs produced in February. Getting back above the 20 and 50-day EMAs was a technical win for the index and it established another support trend line at the lows of the previous week that were not tested again this week. The C-fund gained 2.69% for the week.
The Dow Completion Index (S-fund) did not reach previous highs this week but did do some catching up to its poor performance the last couple weeks. The index moved back above its 20 and 50-day EMAs as well falling resistance in the last two days of the trading week. Small caps again became a popular buy this week with the vaccine roll outs and lifted restrictions on the public have money rotating out of the tech stocks and into the person to person businesses. The S-fund outperformed the TSP funds this week with a gain of 5.98% for the week.
EFA's (EAFE Index / I-fund) chart is similar to small caps where we did see a climb out of a technical mess but there is still room to catch up with previous highs. This to me is better than buying and index that is already out of familiar territory. The I-fund lagged the TSP stock funds with a gain of 1.88% for the week.
BND (Bonds / F-fund) were in positive territory at Thursday's close but the its suspected that President Biden's announcement on vaccine availability sparked the index to sell off the next morning. This put the bond index at a lower low of the recent months and left an open gap above. The F-fund was down 0.42% for the week with all the week's losses coming on Friday's action.
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 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
www.tsptalk.com
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