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TSP Talk Weekly Wrap Up

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Stock indices stretched higher to or near the June highs this week as earnings season kicks off. A significant reversal Monday after a strong open seemed to be the beginning of the end of stocks rally to the highs but again we saw the bears falter and the bulls prevail. Index prices were back trading around the highs by Wednesday and from there the price range tightened up for the rest of the week. Bank earnings debuted this week and the numbers were surprisingly positive for the most part. Fiscal and monetary stimulus has done its job and has at least kept financials stimulated. These earnings reports had investors positioning for the rest of earnings season to come.

The Nasdaq lagged stock indices this week with a loss while the other major indices added gains. This was surprising with the big growth names that carry the index have been outperforming the recovery but it was an interesting rotational theme this week. Money is moving out of growth stocks and into lagging value stocks. This is primarily driven by the speculation of economic recovery on the horizon. Large corporations with large cash reserves are a safe place for your money while the virus has slowed the economy. If the economy accelerates it will be the underperforming value stocks that will be cheap for their value. If this theme holds and is validated through earnings season, we'd expect the S-fund to outperform the C-fund during the rotation; which is what happened this week.

Speculation drives markets, not the economy. Optimism of recovery and hope for more fiscal and monetary stimulus has been large factor in keeping stocks afloat. But what will happen when we do finally get more stimulus and a vaccine is produced? Its very possible once investors no longer have anything to look forward to they will take their profits and trigger a sell-off. Many still fear the bottom being pulled once again but also wish to make money with everyone else. So if you choose to follow the herd, at least keep your head up to keep a look out for the cliff.

Bonds continue to edge higher at a steady pace. The F-fund grew 0.24% this week. The S-fund led the TSP funds with a 2.21% gain.




Here are the weekly, monthly, and annual TSP fund returns for the week ending July 17th:




The SPY (S&P 500 / C-fund) reached the June highs early in the week and just as fast retreated into negative territory. A bounce off the 20-day EMA Tuesday was all the bulls needed to push the index back to the highs. We are at the top of a trading channel ahead of earnings for possibly the worst quarter of at least the century. Its hard to say how investors will react to the good or bad earnings. The second quarter was bad but we are past it. The question is if buyers are willing to reach for prices not touched since before the February sell-off. They were doing it in early June. The C-fund was up 1.27% for the week.




The Dow Completion Index (S-fund) did not reach the highs of June but did outperform the C-fund. The rotational action I mentioned before give more credibility to this index but is coming close to prices that were refused by buyers in June. Earnings may give buyers the courage to reach higher in prices or it may be an opportunity for profit taking. The S-fund was up 2.21% for the week.




EFA (EAFE Index /I-fund) outperformed the C-fund this week after lagging for some time. It did trade above its June highs on Wednesday but retreated to fill the open gap prices just below. The I-fund was up 2.20% for the week.




The BND (Bonds / F-fund) fell early in the week to the lows of the trading range that it had broken out of the previous Friday. The support held and the index continued to trade in that tight rising trading channel for the week to eventually add 0.24% 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
Weekly Wrap-Ups Archive
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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)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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