TommyIV's TSP Talk Blog

This week was centered around the Federal Reserve and their FOMC meeting. The Fed has finally acknowledged inflation as the greatest threat to the economy that is not going to fix itself. Leading up to this meeting members, including Fed Chairman Jerome Powell, suggested the Fed would shift its plans and speed up its tapering process to make room for more rate hikes next year if necessary. Stocks sold off in the days leading up to the press conference where the FOMC would come public with decisions made this week. The Fed is essentially lifting their foot from the gas pedal that has fueled rising stock prices since March 2020. When the Fed finally announced their plans Wednesday, they did what they said they would, increased the rate of tapering to put the asset purchasing program on track to end in March instead of June. The lack of surprise boosted stocks and erased the gains produced early in the week. This would be the only day of gains for the C-fund this week. Stocks sold off again over the next two days to put prices back to where they were before the meeting. The exception was a nearly 1% gain in the S-fund Friday while the C-fund fell about 1%.

December has not been its typical self and we're seeing moves in the market that are in response to uncertainty surrounding inflation and covid infections. Small caps have been a real headache for those invested as it's given up nearly six months of gains while the C-fund struggles to produce new highs. They are in different playing grounds. The large cap heavy weights have been a safe place for investors while the rest of the market has struggled. But with the Federal Reserve having plans to tighten monetary policy, they may not be as sought out for next year. Higher rates make riskier assets less attractive to hold. The Fed has stepped aside from being accommodative to markets and are stepping up to take action in hopes they haven't let inflation run off into uncontrollable levels.

Those in the market now are banking on the Santa Claus rally to top off their returns for the year. There are just two weeks left for 2021 and those Santa Claus rallies that bring up everyone's spirit historically come the last week of the year. Of course, every year is different and is not bound to what it's done in the past.

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




The SPY (S&P 500 / C-fund) was down every day this week outside of Wednesday. Luckily Wednesday brought a gain of 1.64% to erase the early losses. But eventually the index gave up 1.89% in the last two days of the week to end week down 1.91%. The index still holds onto a 1.25% gain for December. Thursday was a failed breakout attempt as the ETF SPY opened higher above the closing record but quickly reversed into losses that continued into Friday. The ETF produced an intraday low Friday at its 50-day EMA.




The Dow Completion Index (S-fund) continued to slip deeper below its 200-day EMA this week. The index is volatile and its lowest move in any direction was Friday when the index was up 0.98%. The previous day the index fell 2.00%. The swings evened out to actually have the S-fund outperform the C-fund this week. The net loss was 1.78% for the S-fund.




EFA (EAFE Index / I-fund) filled an open gap from earlier in the month. The I-fund lagged the TSP funds Friday with a 1.54% loss but was actually up for the week going into Friday. Its bounds seem to be its 50 and 200-day EMAs for the moment so a break of either might give some direction. The ETF EFA closed not too far above its 200-day EMA. The I-fund ended the week with a 1.07% loss to beat both the C and S-fund's losses.





BND (Bonds / F-fund) slipped early in the week but strung together its gains for the week in the last two days of trading. The ETF ended back above its 20, 50, and 200-day EMAs Thursday and moved higher to end the week up 0.35% for the week to outperform the TSP funds and nearly erase December's early losses. An open gap still lingers below from a gap up in late November.





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

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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.