Stocks came back from early trouble to extend over 1 percent in weekly gains, capping the best January in over 30 years. Poor earnings early in the week provided examples of what kind of effect a global slowdown was having on larger stocks. Big name tech companies pulled back ahead of releasing earnings but the modest numbers of their earnings reports were enough for a sell the news reaction and the indices followed.
A dovish stance by the fed suggesting a longer pause in rate hikes brought more optimism to the markets. To keep things in motion President Trump announced a meeting with him and China’s president in attempt to finalize a deal in coming weeks. To top off the week the December jobs report came out and the number outreached expectations adding to the consensus lately that a lot of fears that pushed indices down last year are dwindling.
The positive numbers from the jobs report did bring along some confusion on how the Fed will justify keeping rates low when the earlier argument was to keep the economy from becoming overheated. The wait and see approach may bring along surprises when the Fed claims to be in a data reactive state.
Bond prices were up early with poor economic data coming from Europe brought along more demand for Treasurys. Bond then fell late in the week following the positive numbers of the jobs report.
Next week we will have more earnings reports. The earnings reports may be the sole catalysts with no fed news and with China trade talks on hold until the meeting announced by President Trump.
The S-fund led the TSP funds with a gain of 1.91% while the all the other funds all put up positive gains for the week.
Here are the weekly, monthly, and annual TSP fund returns for the week ending February 1st:
The SPY (S&P 500 / C-fund) moved above its 200-day EMA late in the week while also moving above the falling trend line of previous peaks. The fear now is the index is technically over extended and due for a pull-back, but analysts were saying that weeks ago. For now support is holding and the trading channel held through January. The C-fund was up 1.61% for the week.
The Dow Completion Index (S-fund) climbed along the bottom of its trading channel and reached its 200-day EMA near its highs. This led the S-fund outperforming the TSP funds but is it still attractive to new buyers? It is also possible to see a pull-back to test moving averages below before extending. The January action was a product of the fear of missing out mentality of January, but if everybody is already in the market then the new month will bring a new psychological twist along with it.
EFA (EAFE Index /I-fund) pulled back early to fill the open gap from last week and then was kept from falling further by falling support. The index extended higher from there but did not test the December high. The I-fund was up 0.94% for the week.
AGG (Bonds / F-fund) was finally pushed higher this week thanks to poor economic news coming from Europe as well as the dovish tone of the Fed. This even came with a gap open Thursday which was filled Friday when bonds fell in reaction to the positive numbers of the December jobs report. The F-fund was up 0.53% 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.
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