TommyIV's TSP Talk Blog

Stocks and bonds were up again this week. It was the third straight week of gains for the C-fund while the fourth straight week of gains for the S, I, and F-fund. The S&P 500 produced new highs this week and finished at previously untouched price action. Standing out was the S-fund with more than 2% in gains while the C and I-fund were under 1% in gains. This rotation into small caps was sparked by the rotation of names in the Russell 2000 that takes place every June moving attention away from large caps. The small cap shift pushed the S-fund to now lead the TSP funds for the year in gains.

Inflation continues to be a topic and economic data such as the Consumer Price Index came out this week with numbers over expectations. Those numbers were shrugged off in the stock and bond markets either because they were not too extreme or investors are trusting the Fed more when they say the higher inflation data is temporary while we are on our way out of a pandemic year. The FOMC meeting is next week and focus will be locked for any clues to how the Fed currently feels about the inflation data and their plan to tighten monetary policy. They have talked about talking about slowing down on their bond buying program so that will be something investors will want to know more about this coming week. When do they plan on slowing tapering their bond holdings? This year? Next year?

Markets are in an interesting place being at or near their highs while volatility is at a low since the pandemic started. Its also noteworthy that stocks and bonds are moving in tandem relatively speaking which is not the usual case. Bonds are vulnerable to inflation as it cuts the purchasing power of the price of a bond at expiration yet the bond market has risen despite all the focus on accelerating inflation.

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Here are the weekly, monthly, and annual TSP fund returns for the week ending June 11:




The SPY (S&P 500 / C-fund) spent some time below the previous week's close and its wasn't until intraday Thursday where the index left negative territory for the last time. Action was tight for the week but a string of buying late Friday pushed the index to a new closing high and to end the week with a 0.43% gain. Following the latest daily lows, the trend has been up the last week and a half despite some down days within.




The Dow Completion Index (S-fund) started the week on a different foot than large caps. While large caps had a slight loss on Monday, the S-fund was up 1.1%. The index climbed higher from their as focus and rotation moved to the broad market over larger names. The index remains in a rising trading channel and is set to test prior highs set earlier this year if it remains in that trading channel. The outcome of the FOMC meeting has the potential of stirring this market but the Fed have talked carefully to market participants as if the market is fragile; its unclear how much the Fed actually cares about market prices.





EFA (EAFE Index / I-fund) had tight action this week but did and produced a new closing high this week Tuesday but shied away from the new high for the rest of the week. The support of the tight trading channel still holds with some momentary slips below during intraday action for EFA. The I-fund was up 0.34% to lag the F-fund.




BND (Bonds / F-fund) moved higher and above its 200-day EMA this week. It was the first time the funds has traded above the 200-day EMA since mid- February. Inflation data seemed to have the opposite effect on the bond market than you'd expect. The index had its best days Wednesday and Thursday this week while coming off the highs on Friday. If the direction continues the open gap from mid-February will be a target price. The F-fund gained 0.48% this week to outperform the C and I-funds.





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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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.