Investors faced a parade of economic data this week. The price action displays how investors were struggling to process the information as it came. Prices changed sporadically in a trading range for most of the week until the bears finally got an upper hand in large caps as the week closed out. Stock prices were up quickly to start the week ahead of the very popular Consumer Price Index which has become a monthly report card for the Fed who has been consistently raising borrowing costs. The year over year CPI was down from the previous month but not by as much as expected. This was the beginning of choppy inconsistent price action for the week. Neither the bulls nor the bears could keep any momentum.
Market participants also had to process higher than expected U.S. Retail Sales, a higher than expectedU.S. Core Producer Price Index, and continued historically low weekly jobless claims despite the recent tech layoffs. All this adds up to a more resilient economy, an argument for the bulls, but also resilient inflation, an argument for the bears. Recession fears have dissipated, and the new fear is an aggressive Federal Reserve and inflation that won't cooperate. Coming into the week the bulls expected a CPI report that would fall on target and set up a slow down or termination of rate hikes from the FOMC. But now it looks like the Fed might have reason to reaccelerate their pace of rate hikes.
Investors may get some more insight to this on Wednesday when the Fed Minutes from the last FOMC meetings get released to the public.
All of the TSP funds outside the G-fund have fallen from their 2023 peak which they all established on February 2nd. Yet both the C-fund and S-fund still carry a gain for the month, +0.20% and +0.98% respectively. The I-fund and F-fund have fallen for the month of February. -0.76% and -1.95% receptively. The S-fund still manages to continue outperforming. That was as true as ever this week when despite the back and forth in price action, the S-fund managed to gain 1.55% while the C-fund fell 0.20%.
Bonds underperformed stocks. The rising likelihood of more rate hikes is driving bond yields higher and driving bond prices down. The F-fund lost 0.47% this week.
Holiday Closing per tsp.gov: "Some financial markets will be closed on Monday, February 20, in observance of Washington’s Birthday (President’s Day). The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (February 20) will be processed Tuesday night (February 21) at Tuesday's closing share prices."
Looking for an edge on your TSP return? Get the Last Look Report for as low as $4.19 / month. The report is a daily email on the TSP Talk AutoTracker moves, news, forum threads, and more before the IFT deadline. The service is aimed to help you make your own IFT decisions by giving you relative information 30 min prior to the deadline including where the members of TSP Talk are moving their money.
Here are the weekly, monthly, and annual TSP fund returns for the week ending February 17:
SPY (S&P 500 / C-fund) quickly jumped to the top of the falling raising channel that makes up the bull flag on Monday. The ETF even broke above the resistance line intraday Tuesday and close above it Wednesday. That could not propel the price higher and C-fund gave up all its gains and more over the last two days of trading. The ETF even traded below the 20-day EMA on Friday but managed to close just above it after some buyers lifted the price after a lower open. The C-fund lagged the TSP stock funds with the only weekly loss falling 0.20%.
The Dow Completion Index (S-fund) broke above its bull flag on Tuesday but remained above it for the rest of the week. The index found support before reaching its 20-day EMA on Friday. Despite falling the last two days of the week the S-fund still managed to gain 1.55% for the week to outperform the TSP funds.
The I-fund (EAFE Index /EFA) gained 0.38% this week but did not make any moves that showed it was going to continue higher. The ETF price has been in a trading range that continues to lower its high. The recent trading range has been back and forth between its 20-day EMA trading channel.
Resilience in inflation put pressure on BND (Bonds / F-fund) this week. The CPI and PPI numbers rose the likelihood the Federal Reserve would raise rates more aggressively than previously thought. This drove U.S. bond yields higher which naturally drove U.S. bond prices lower. U.S. bonds also saw their first weekly net selling since the week ending January 4th. More money moved out of the bond markets than into them. BND slipped further below its 50-day EMA and fell 0.47% for the week to lag the TSP funds. Its yearly gain has shrunk to just 1.24% after being up more than 4% as recent as February 2nd.
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
Facebook | Twitter
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.
