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Chase or escape? The choices that investors face after a prosperous week for the stocks among a pessimistic stretch. Stocks have spent weeks validating the bear storyline that the Federal Reserve will drive the economy into a recession. But something woke up buyers this week and it snowballed into one of the better weeks of the year. The four-day week started Tuesday with a down day, but this is where we saw the first signs of life of buyers seen in a battle for direction. The last three days (especially Wednesday and Thursday) were owned by the bulls who had been in the shadows for weeks. The cumulative gains erased last week's deep losses for the C and S-fund rewarding anyone who entered stocks or remained in stocks before the weekend.
But where do we go from here? Can this rally continue into the new week? Yes. Could profit taking spark a quick sell-off of this week's gains? Yes. I hope that is helpful.. The real insight is we likely won't see a sell-off to start the week. That is because the almighty Consumer Price Index will be released Tuesday morning and that will be a market mover. Potential buyers want to see a drop in that number to validate that inflation has already peaked. This week Federal Reserve Chairman Jerome Powell made his last public statements before the September FOMC meeting. He remains adamant that the Fed will continue their diligence with little influence of the latest economic reports as they are looking after deeper economic stability over immediate fluctuations in economic data; a luxury central bankers have over politicians. But the everyday investor will be looking for signs in the August CPI report that the Fed's rate hikes are doing their intended job and will hold onto hope that they can be influenced into slowing their pace.
Of course, we have the bears who don't think the worst has been priced in yet and the Fed is steering the economy into a deeper recession than is led on. Their validation will come from higher-than-expected inflation numbers. If the Fed doesn't actually have an influence on inflation, then they are driving the economy into despair with no consolation of future economic promise.
Where you stand is up to you. You don't have a say in where the market moves but you do have a say in where you're positioned ahead of potential market moves. Some of us like the big wins and will withstand full market exposure during volatile times. Other prefer a safer route of partial exposure or even standing on the sidelines until the dust settles. There is opportunity in a market like this, but everyone must be conscious of risk.
The S-fund led the TSP funds with a gain of 4.91%. The F-fund lagged with another week of losses after falling 0.68%.
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Here are the weekly, monthly, and annual TSP fund returns for the week ending September 9:
SPY (S&P 500 / C-fund) made an impressive technical move above its 20 and 50-day EMAs to end the week. The two moving averages are about the same price yet had little, if any, effect on buyers Friday. The index did close at the top of what is a falling trend line marked by the peaks of the second half of August. A move to test the 200-day EMA is a possibility but, like we talked about above, the Tuesday CPI report will have a large influence this week. There was also an open gap produced at Fridays open. The C-fund was up 3.68% for the week.
The Dow Completion Index (S-fund) has a similar chart, but we do see the 20-day MA has yet to be passed. The simple moving average (MA) has calculated differently than EMAs (read more info). DWCPF did move above the equivalent trend line that marked the high in the SPY chart. The index is also a stretch further away from its 200-day EMA which marked the high of August. But the S-fund outperformed this week and accumulated a return of 4.91% in the four days that started with a loss on Tuesday.
EFA (EAFE Index / I-fund) lagged the TSP stock funds for the week but still managed to gain 2.41%. This has not been the preferred fund lately with the latest strength in the dollar, but the dollar did pull back Friday and that allowed the I-fund to outperform the C-fund for the day. The open on Friday did leave behind an open gap. The I-fund remained above its July low this week but was very close on Tuesday.
BND (Bonds / F-fund) has had a consistent stretch of losses and while the stock funds ended their losing streak this week, the F-fund carried it on to a fourth week. The F-fund was down 0.68% for the week.
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
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.
