TommyIV's TSP Talk Blog

The big focus this week was the FOMC meeting, and as you can see in the chart below, the stock market didn't take it well. This week the Fed informed investors that they were more concerned about inflation than they had led on in the last few months. Tapering plans were officially talked about and the projection for rate hike moved up the calendar to two hike by the end of 2023. Previously no rate hike were expected until 2024 which was very dovish. On Friday Fed member James Bullard said publicly that he expects a rate hike as soon as late 2022. The market sold off Friday to solidify losses across the board for the TSP stock funds.

This week was a change in character for the market that now has to re-calculate. On one hand, everybody loves cheap money being put into the economy to boost growth. However inflation can be a real problem if left unsupervised. The hawkish nature of the Fed this week was surprising compared to previous statements but still a relief that they are ready to step in and do their job keep inflation and growth from getting out of hand and leading to bigger problems later. This pull back also gives some relief to the market; the S&P 500 was up for three straight weeks leading up to this week. The Fed correction may continue but the economy is still growing and there is now an opportunity for entry for those who can't get justify buying a market at its highs.

The bond market fluctuated this week in response the Fed's plans ultimately ending the last day with a highest prices since mid-February. The F-fund outperformed the TSP funds with a 0.12% gain on the week. The S-fund lagged the TSP funds with a 2.55% loss after four straight weeks of gains.

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Here are the weekly, monthly, and annual TSP fund returns for the week ending June 18:




The SPY (S&P 500 / C-fund) spent the first couple of days this week trading around the highs but it was slow action ahead of the highly anticipated FOMC meeting. The FOMC meeting did exactly what was expected by moving the markets and spike volatility. Friday the C-fund fell 1.31% in response to more hawkish talk out of the Fed. That pushed the C-fund down below its 20-day EMA and towards the 50-day EMA. The index has been reluctant to spend much time below its 50-day EMA, seen in the couple of days the moving average was passed in May; both instances were short lived. The C-fund ended the week with a 1.87% loss to end a three week steak of gains.




The Dow Completion Index (S-fund) turned on a dime this week after trading nearly straight up in a trading channel the four previous weeks. The index also fell below is 20-day EMA Friday and now sits between its 20 and 50-day EMA. The index has spent time below its 50-day EMA multiple times in the last few months so its not as much a buying signal for traders and therefore less likely to hold as support as with the large caps index. The S-fund lagged the TSP funds for the week with a 2.55% loss.





EFA (EAFE Index / I-fund) had a hard change in character this week starting Wednesday. Three straight sell offs pushed this index price below its 50-day EMA by Friday's close. This index has not closed or traded multiple days below its 50-day EMA since December. The I-fund fell 2.4% for the week.




BND (Bonds / F-fund) fluctuated its price this week but ultimately spent the last two days of the week reclaiming lost ground. Friday's close pushed the index to a new high in the last four months. The high of this week's action came at the bottom of an open gap from February. Open gaps tend to get filled but can in some cases be seen as support or resistance. The F-fund led the TSP funds this week with a slight gain of 0.12%.





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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