Buyers have had the advantage in the first two weeks of the new year. The lull of December has passed and January has so far held what many expected for the holiday trading. Two major economic data publications have helped fuel the January climb. Last week was the December Jobs Report, this week it was the December Consumer Price Index. Stocks were up for the week leading up to its publication on Thursday. That optimism by investors did not lead to a sell the news reaction when the CPI landed about even with expectations. Instead, the inflation data provoked more buying and stocks outperformed their first week gains. That was especially true for the S-fund which gained 5.26% this week following a 1.60% gain in week one of 2023. In just two weeks the S-fund has accumulated a 6.95% gain for 2023. Not far behind is the I-fund's 6.91% gain in the same time frame.
The Consumer Price Index did not reveal any surprises, but rather it was validation that inflation is shrinking accordingly. Thursday's CPI was the sixth straight month of a lower year-over-year (YOY) price comparison than the previous month. The CPI YOY came in at 6.5% after being as high as 9.1% for the June CPI. We are in a time where investors can afford to be optimistic about the future. Inflation is dropping and there is still a chance the Fed can pull-off a 'soft landing' and avoid suppressing the United States' economy into a recession. But reality is unclear, more choices will need to be made by the U.S. central bank, and the unpredictable nature of the world will do as it will. Investors, especially those investing for retirement, have been thirsty for gains following stocks' performance in 2022. For now many will enjoy the ride up and block out those warning of a correction and future recessions. Others will take these early gains and happily stick them in their pocket. The investors I worry the most about are those who have been watching on the sidelines and will eventually be overcome by FOMO and risk catching the wave at its peak.
We saw some bank earnings on Friday to kick off earnings season and the market reacted well. There will be more earnings to come next week for traders to stir up liquidity in the market. The bulls hope momentum will be on their side but face a long weekend that could potentially be a damper on the latest exuberance.
There a couple technical boundaries being crossed in the charts below that we haven't seen in some time. These can be seen as a win for the bulls but also a warning that these charts are out of their comfort zone.
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Here are the weekly, monthly, and annual TSP fund returns for the week ending January 13:
SPY (S&P 500 / C-fund) broke out of its flat trading channel this week. The ETF moved above its 200-day after trading below it for about a month. In blue below I'm focused on the last trip to the 200-day EMA for the index and its struggle to moved higher; rather the ETF traded back and forth between the moving average for a month before pulling back mid-December. Can the new year and the latest momentum carry this ETF higher? Maintaining the current price a little longer will establish some support from the moving averages the ETF overcame in the last week of trading. The C-fund lagged the TSP funds this week but still put together a 2.71% gain.
The Dow Completion Index (S-fund) was the star of the week. The gains picked up really quick this week and maintained through the week. The index has now put together six straight day of gains; something it has not done since the beginning of August 2022. The S-fund outperformed this week with a gain of 5.26%. This week's gains also gave the S-fund the lead over the I-fund for best fund performance for January (+6.95%)
The index quickly approached its 200-day but has not quite reached the price before the week ended. The index has been below its 200-day EMA for the past year.
The I-fund (EAFE Index /EFA) pressed forward after reaching past highs last week. The I-fund has now reached its highest price since April 8, 2022, at $35.29 a share. The I-fund gained 3.55% this week but underperformed the S-fund and lost its place for the best return in January. But it is close, the I-fund is currently up 6.91% in January.
The next peak of price that could be a milestone for the I-fund is $37.55 established on March 29th, 2022. That would be another 6.4% gain from the current price.
BND (Bonds / F-fund) has nearly kept its pace for 2023. The bond fund added another 0.88% this week adding its monthly return up to 2.93% in just two weeks. If the gains were not overshadowed by stock performance, this would be the talk of the town. We are not use to these type of gains in bonds over a two week period. The chart jumped the technical hurdle of its 200-day EMA on Thursday, pulled back some on Friday but maintained a price above the 200-day EMA.
The EFT BND has not been above its 200-day EMA since the end of 2021.
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.
