TommyIV's TSP Talk Blog

Fear of missing out (FOMO) continued to fuel the comeback rally this week and eventually accelerated Friday following an unexpected jobs report. Stocks continued to be bought up throughout the week but its was the former lagging sectors that outperformed. It seems good deals on strong stocks are drying up and investors are desperate for more discounts. Momentum is powerful. What seemed impossible and was essentially thrown out as a possibility by many has become reality. Bear market level sell off has turned into a V-shape recovery in two and a half months. The S&P 500 is now down only 0.33% for 2020.

Until now, buying has come from pure speculation that the U.S. economy will recover quickly. This was not battered by the accumulation of bad economic data, virus deaths, oil demand crisis, and the most recent unrest across the major U.S. cities. So the lesson has been that stock investors don't mind bad news, but they love good news. The jobs report came out Friday and expectations were low.. real low. The Wall Street Journal expected a loss of 8.5 million jobs. The real number was an addition of 2.5 million jobs. The report was the first major news to support the quick recovery claim the bulls have been preaching since late March. FOMO accelerated and the stock indices gapped up once again.

As we approach all time highs in large caps and inventors have finally received the good news to validate their buying behavior, is it finally time we will see some profit taking? Its fair to point out that question was reasonable back in early April. But rallies like this cannot go on forever and besides the added jobs, we are still in 13.3% jobless rate amongst all of the potential downfall we were already facing. But at what point is the full recovery priced in? I don't know. Maybe a mathematician could come up with a ballpark number but investors for the most part are not mathematicians. Those shorting the market and those still on the sideline continue to grow restless but eventually those invested will grow eager to lock in their gains.

The S-fund outperformed this week with a 7.25% gain. The F-fund lagged as it fell 0.48% for the week.




Here are the weekly, monthly, and annual TSP fund returns for the week ending June 5th:




The SPY (S&P 500 / C-fund) gapped up again Friday and closed about even with rising trend line of the April peaks. The open gap from the initial sell-off is just a stride away. The bottom of the open gap could act as resistance if reached. Investors have gained more than excepted faster than expected and may be looking for a reason to lock in gains. The C-fund was up 4.96% for the week and is now only down 0.33% for the week.




The Dow Completion Indices' (S-fund) outperformed this week but has a bit more catching up to do to be head to head with large caps. Small caps have felt the pressure of the economic shutdowns but have rallied anyway. Friday's rally was kept within the trading channel but did surpass a peak from early March. The S-fund was up 7.25% for the week.




EFA (EAFE Index /I-fund) moved above its 200-day EMA with ease this week and gapped up Friday with U.S. indices. This index is furthest from the positive territory for 2020 but that could be looked at a greater return potential if an investor expects to get there. An open gap from February in within reach but gaps below will also want to get filled. But momentum is strong and profit taking has not been on the minds of investors yet. The I-fund was up 7.09% for the week.




BND (Bonds / F-fund) slid this week as money moved into underperforming stocks. The index fell below its 20-day EMA Friday but it did the same in early May before jumping back above the next trading session. The F-fund was down 0.48% 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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