Stocks managed to produce a gain in the first week of the new year. It wasn't easy, both the C and S-fund were down for the week coming into Friday. The December Jobs Report saved the bulls in the short week. Job additions were higher than expected in the report, but the 223,000 jobs added were the smallest gain in a monthly report in over two years. But what really got buyers excited was the slow down in wage growth, which is thought to be a catalyst to rising inflation.
All of this reaction to the December Jobs Report is speculation to what it means to the The Federal Open Market Committee (FOMC). Buyers see the report as evidence that the FOMC is pulling off a soft-landing in their efforts to lower inflation by increasing borrowing costs. The hope is FOMC will lean towards smaller rate hikes in the FOMC meetings ahead; the next is January 31 to February 1. The concern now is whether or not jobs data brought too much optimism and the Fed will need to set a more hawkish tone in public statement in order to lower expectations.
The FOMC mentions this scenario in their December Fed minutes released on Wednesday. They find it necessary to be cautious in how they communicate, "An unwarranted easing in financial conditions, especially if driven by a misperception by the public of” how the Fed will react to economic developments “would complicate the committee’s effort to restore price stability". They are trying to portray that they have a tighter road map to their end goal of 2% inflation than the public perceives.
Many of us have been desperate for gains after 2022 and the lack of a Santa Claus Rally. And although Friday's gains were a light at the end of a tunnel, caution is still warranted.
Outperforming for the week was the I-fund which gained 3.25% in just the first four days of the year. It also stepped beyond its own milestone along the way (see EFA chart below). The C and S-fund were both up around 1.5% but they were not only overshadowed by the I-fund, the F-fund gained 2.03% in its first week of the year.
Here are the weekly, monthly, and annual TSP fund returns for the week ending January 6:
SPY (C-fund) has remained in a flat range in half a months' worth of trading days, but took a step out of that range on Friday. The C-fund was down for the week coming into Friday but a 2.28% gain following Friday's Jobs Report pushed the ETF above its 50-day EMA where it had been below since mid-December. This left the C-fund with a gain of 1.47% which actually underperformed all the TSP funds outside of the G-fund.
The Dow Jones Completion Index (S-fund) did not rise above its 50-day EMA. Instead the moving average acted as resistance and marked the highs for the day. Nonetheless, the S-fund made a stretch higher that could carry on without major obstacles outside of the charts. The S-fund ended the week with a gain of 1.60%.
The I-fund continues to stand out from the U.S. TSP stock funds. While we celebrate a more than 1% start the C and S-fund in the new year, the I-fund accumulated a 3.25% gain. The trading range had been tight for the ETF EFA but took off with U.S. stock Friday and outperformed for the day after already having the better return for the first three days. The I-fund closed on Friday above its December high at $35.04 a share.
The I-fund had not closed above $35 a share since June 7th.
BND (F-fund) filled an open gap and stepped back above its 50-day EMA to start the year off on Tuesday. But the real excitement came on Friday where the F-fund rallied 1.06% for the day, more than doubling the F-fund gains for the week. The F-fund ended the week with a gain of 2.03% to outperform the C and S-fund 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
LLast Look Report
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