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TSP Talk Weekly Wrap Up

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There is an apparent imbalance in the market. We had a busy week, but the day-to-day action did not seem to line up with the current events. Company earnings reports have been subpar, yet their shares are up, Jerome Powell was not a dove, but the market rallied during his press conference, and a January Jobs Report should have wiped out recession fears, yet the market sold off. TSP stock funds all performed differently through this confusing week. Leading the group was the S-fund that ended the week up 3.41%, next was the C-fund that gained 1.64%, and lagging was the I-fund that took a small loss of 0.17%.

This was a big week for the current earnings season and the numbers have not added up to anything special. The number of companies beating their earnings and revenue estimates are below the five-year average, those who are beating estimates are doing so on average well below the five-year average (0.6 vs 8.6%), and profits are on track to decline around 5% from the prior year. All the while stock performances surrounding these companies' earnings are doing better than the five-year average; those beating estimates are up more than average, and those who missed estimates are down less than average.

The S&P 500 was trading about even for the week as it headed into Wednesday where the FOMC meeting was wrapping up. The index pulled back intraday in anticipation, but the price took off higher by the time the press conference started. The FOMC raised rates by 0.25% as expected but some were looking for signs that committee was ready to pause its rate hikes by the following meeting after a raising the Fed Funds Rate by nearly 5% over the last year (read other economists' reservations here). But Fed Chairman Jerome Powell said the committee had no discussions of pausing rate hikes but would update their projections in the March meeting. Powell himself reiterated that he still thought the recent disinflation could be transitory, and that the FOMC could still reach their 2% inflation goal without inducing a recession. The most recent Consumer Price Index was up 6.5% from a year prior.

Investor optimism survived the night and stocks continued higher on Thursday. The C-fund added 1.48% on Thursday alone while the S-fund added 2.11%.

Then the most interesting event of the week took place Friday morning, the January Jobs Report. 517,000 jobs were added in January, vastly larger than the 188,000 expected. Unemployment dropped to 3.4%, its lowest rate in more than 50 years. This jobs report nearly flattened recession fears that critics of the Fed and bears alike were warning investors. Yet stocks gave back gains; all three TSP funds were down more than 1% on Friday. What the jobs report did was give the Fed the clearance to continue to raise rates as they pleased without criticism that they are pushing the economy into a recession.

The F-fund was holding a decent gain of 0.84% for the week heading into Friday. The jobs report sparked a sell-off in bonds and shrank that weekly gain to just 0.03% in one day.

The charts for the C and S-fund below are arguably overextended. The S-fund is up 13.69% in the first five weeks of trading. It will be a balance of momentum, FOMO, and the eventual desire to start taking profits in the near future. Earnings season continues next week.

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Here are the weekly, monthly, and annual TSP fund returns for the week ending February 3:

SPY (S&P 500 / C-fund) moved past a rising resistance trend line (left) and highs of December by the close on Wednesday thanks to the Fed induces rally. The ETF continued higher on Thursday filling an open gap from August (right). The C-fund reached its highest prices since August 19th, 2022 on Thursday. Prices pulled back Friday but the EFT prices remained above the resistance it had overcome on Wednesday. The C-fund ended the week with a gain of 1.64%.

The Dow Completion Index (S-fund) accelerated an already impressive start to the year starting Tuesday through Thursday. The index jumped 6.4% over those three days. It also was down for the week coming into Tuesday and pulled back 1.29% on Friday. The next obvious next milestone would be the August highs for the index. The S-fund would need to rise 1.74% from its current price to match the August high. For the week the S-fund rose 3.41%, sharply outperforming the other TSP funds.

The I-fund (EAFE Index /EFA) lagged the C and S-fund this week, but remains in a rising trading channel. The I-fund was a bit less volatile than the C and S-fund this week. A 1.03% loss on Friday drove the I-fund to a 0.17% loss for the week to carry the worst return among the TSP funds.

BND (Bonds / F-fund) also had a good Tuesday through Thursday. The F-fund was up 0.84% for the week after Thursday. But the ETF gapped down in response to the outperforming Jobs Report. The F-fund gave up 0.80% on Friday alone dropping its weekly gain to just 0.03% and leaving an open gap above. The ETF still remains above its 200-day EMA.

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
Last Look Report
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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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Updated 02-07-2023 at 11:44 AM by TommyIV

TSP Talk Weekly Wrap Ups


S&P500 (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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