All the TSP funds produced gains this week with credit to dovish central banks and word of trade progress. Large cap stocks (C-fund) have already reclaimed the losses of the worst May since 2010 and established record new highs with a week still to go in June. Buyers took a break the previous week with anticipation of the FOMC meeting but were back to work early this week when the European Central Bank president Mario Draghi suggested the ECB would add more monetary stimulus this month. This move gives The Federal Reserve more breathing room to do the same, and although U.S. rates were left unchanged this month, a rate cut was left on the table for July. The dovish nature of central banks sank in Thursday and investors put more money in stocks.
The trade issue also had some promise this week after President Trump tweeted about progress in the trade talks with China. Trade disputes have been a damper for stocks the last few months as it could add to the slow down in the U.S. and global economy if left unresolved. But now we are at an interesting situation for stock investors with the Federal Reserve ready to be the safety net if the economy does slow down. Investors can now buy stocks with a possible reward following trade progress but with less of a risk if trade problems arise.
Central banks loosening monetary policy made the fear of global slowdown very real forcing investors to put money into bonds pushing the F-fund up 0.44% for the week. Trade disputes, poor economic data, and slowing inflation have added for the need for safety. It is interesting to see bonds and stocks both rally but bonds provide a longer-term safety net where stock investors are trying to catch relatively shorter term progress. There seems to be great awareness of the poor economic outlook of the global economy with simultaneous optimism that it can be resolved.
The C and I-fund both led the TSP funds with gains of 2.22% for the week. The I-fund had a push thanks to the recent pull-back in the value of the dollar.
Here are the weekly, monthly, and annual TSP fund returns for the week ending June 21st:
The SPY (S&P 500 / C-fund) gapped up early in the week after Mr. Draghi suggested adding stimulus to Europe. Stocks rallied Thursday after digesting the FOMC meeting pushing the index into new record highs. The index pulled back slightly Friday after published economic data showed weakness in Europe and China. The index still managed to remain above the high produced early May. The C-fund rose 2.22% for the week.
The Dow Completion Index (S-fund) was also up for the week but is still below its previous highs in May. Filling the open gap will depend if momentum of this week will bleed into the next. The initial rally of June was followed by consolidation. The S-fund added 1.82% this week.
EFA (EAFE Index /I-fund) rallied this week thanks to monetary stimulus and the fall of the U.S. dollar. The index closed above its high of May on Thursday but poor economic data sent the index back below the previous highs and partially filled and open gap from Thursdays higher open. The I-fund was up 2.22% for the week.
AGG (Bonds / F-fund) continued to rise with the fear of an imminent economic slowdown. The continued rally in bonds has shocked economists but the step back from tightening monetary policy from the Fed has given investors evidence that the economy is in serious trouble of peaking.
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