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TSP Talk Weekly Wrap Up

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A fresh record in the S&P 500 Monday started off the new year but was followed by four days of losses. Some of those losses were small but some were significant like Wednesday's 1.93% loss. All the TSP funds outside the G-fund produced a loss for the week with the S-fund falling 4.23% to start the year. The Fed minutes came out Wednesday and investors got to see the urgency to tighten monetary policy in the FOMC meeting. Investors have been aware of the winding down of bond purchases and the plans to raise interest rates as much as three time this year, but they were introduced to talks of reducing the bonds they already hold, thus taking more cash (liquidity) out the markets. The dilemma of rising inflation is forcing the Fed to be less accommodative to markets and essentially put effort into slowing down the economy. Of course, the Fed is doing this with good intentions to prevent worse problems down the road with runaway inflation. But for now, it's growing harder to be a buyer with the Fed hitting the brakes on the economy and large caps near all-time highs.

The December jobs report came out Friday and while jobs added significantly missed expectations, the unemployment rate fell and wages rose signaling a strong labor market. This is fuel for the Federal Reserve's justification to continue with their monetary tightening.

It was a difficult week to navigate the TSP. There was nowhere to park outside the G-fund this week. The I-fund performed well most of the week comparatively, but one would have needed to avoid Thursday's 0.7% loss to obtain gains for the week. The F-fund fell at a magnitude not typical for the fund in a week's time. The F-fund was down 1.44% for the week. The greatest weekly loss of 2021 was 0.94% and also came the first full week of 2021.

Stock prices had tightened up the last week of 2021, but it seems the volatile swings are back. This can be an opportunity of swing traders who find themselves positioned right. The frustration comes with getting in and out with just two moves to work with.

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Here are the weekly, monthly, and annual TSP fund returns for the week ending January 7:




The SPY (S&P 500 / C-fund) closed at an all-time high Monday and even opened higher the following day. But late selling would cut the gains and lead to Wednesday's sell-off following the Fed Minutes. The ETF currently sits between its 20-day and 50-day EMAs. There seems to be a trading channel emerging but whether support will be tested depends on how well the 50-day EMA holds going into next week. The C-fund was down 1.83% for the week.




The Dow Completion Index (S-fund) never could make progress past its 50-day EMA. The index had traded between the 50 and 200-day EMAs eight consecutive days before the FOMC meeting minutes sparked sell-off across stocks. Small caps were hit the hardest with the selling and eventually closed below a 280-day EMA that had shown some areas of support in December. An open gap was filled Thursday that was left open in mid-December. The S-fund lagged the TSP funds with a 4.23% loss.





EFA (EAFE Index / I-fund) was up after two days into the week and even held onto some gains following Wednesday's sell-off. Thursday's 0.70% loss put the I-fund into negative territory but came back Friday with the only gains amongst the TSP stock funds. The ETF may be facing resistance now from the trend line produced from the November and December highs. The I-fund made it out the wild week for stocks with just a 0.28% loss.





BND (Bonds / F-fund) fell significantly this week for bonds that are supposed to be relatively stable, but yields spiked this week and we ended up with a 1.44% loss in the F-fund.



The bond market did not start 2021 off a good not either. The index was down 0.94% in the first week and later fell consecutively for weeks. The current price hit levels not seen since May. It also feels similar to the sell-off in bonds last spring. Will it continue, or will investors run to bonds if there is more trouble in stocks.





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.

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SPY (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes