TommyIV's TSP Talk Blog

The climb in stock prices has officially continued into the new year. The first full week of 2020 demonstrated that buyers are still in control of U.S. stock markets. Geopolitical matters that spooked markets the previous week were shrugged off when Iran's attempt of retaliation ended with no U.S. casualties and Iran accidentally shooting down a civilian plane in Iran carrying their own citizens. With geopolitical tensions on the back burner, buyers went back to work and the growth momentum of the last three months continued on to create new highs for large cap stocks on Thursday.

Stock prices did pull back Friday to take indices off their highs for the week after the jobs report was released and the number of jobs added were less than expected. This was not a huge deal being jobs were added and unemployment remained steady but it was a snapshot of the economy that was not performing at its peak while stock prices are at their all time highs. Naturally we saw some profit taking but it was a pull back many were hoping for in price action. Underinvested bulls are looking for entry points and a chance for many to reposition themselves accordingly before earnings season kicks in over the next couple weeks.

The steady rise in stock prices over the last three months has come as a surprise after the market turbulence and recession fears we had in mid-2019. I have not found a market analysts who thinks 2020 will repeat or outperform 2019's gains. Well if that is the case there should be some turbulence coming to shake this relentless climb. Not to say a major sell-off is due but rather the bears are due to force their hand and create the swings that make for interesting and healthy market action. From a buy and hold standpoint this is not what you want, unless you're underinvested and need an entry point. But steady climb in stocks do not carry the anxiety of market swings even when the net gains are the same. Steady climbs like we're in now can create the illusion of security and euphoria which in the past has led to major sell-offs with too many too exposed. I'm not making predictions but ideals. I would like the market to shake things up, not because I'm particularly bearish but because I'd rather invest in a healthy market with strong technical foundations, not an unstable house of cards.




Here are the weekly, monthly, and annual TSP fund returns for the week ending January 10th:




The SPY (S&P 500 / C-fund) produced a new record high this week before pulling back a bit Friday. All action was done the rising trading channel. Earnings are on the way which will provide some clarity to whether the fourth quarter rise in prices was justified. The C-fund jumped 0.98% in price this week and outperformed the rest of the TSP funds.




The Dow Completion Indices (S-fund) did not fall below its trading channel but has become a bit more stagnant than large cap stocks. New highs were made as well this week for the index but the magnitude is not at pace with large caps and the S-fund lagged the C-fund gaining just 0.46% for the week.




EFA (EAFE Index /I-fund) was up for the week but the I-fund took a slight loss 0.08% after readjustments by the TSP. Action has been flat in the last few weeks and we're seeing a flat top similar to what we say in November. The result of that action was a break out. We'll see if the trend will continue.




AGG (Bonds / F-fund) was down early in the week but reclaimed much of the losses in the last couple days with bond auctions and a lackluster jobs report sending investors to safety. Wages were also steady in the jobs report which is an indicator inflation is also steady. Inflation decreases the purchasing power of bonds when expired. The index failed its test of old highs last week but may have a second chance next week. The F-fund fell just 0.09% 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
www.tsptalk.com
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