Mixed earnings and mixed messages from the Fed gave investors mixed feelings. The bulls lost their control of the market this week as poor earnings like we saw from Netflix were punished while outperforming earnings like we saw from Microsoft could not hold onto to gains. The only life we saw from buyers this week came Thursday when comments from a Fed member were interpreted to mean a 0.5% rate cut was coming at the next FOMC meeting. However, this was short-lived as the Fed corrected itself and signaled the lesser 0.25% rate cut was more likely. Investors who had celebrated the idea of a rate cut earlier turned into the equivalent of a toddler who was getting the smaller toy off the shelf. Stocks sold off sharply the last half of Friday to solidify more than 1% in weekly losses for the C and S-fund.
Bonds outperformed this week with poor earnings signaling trouble in the economy for investors. The long-term bond market has been relentlessly climbing since November when talk of an economic slowdown entered the conversation. Despite the rebound in stocks that put them at new highs, the long-term outlook of the economy has not gotten brighter for investors. The F-fund was up 0.37% for the week.
Next week will be more earnings to focus on but it was not a good start for the season. Index charts are not technically damaged but sentiment has been. Geopolitical concerns over oil will also hold a stake in how investors move forward.
Here are the weekly, monthly, and annual TSP fund returns for the week ending July 19th:
The SPY (S&P 500 / C-fund) fell early in the week but became wedged in an opening apex of trend lines. The support held and there is the 20-day EMA to add support but there is also an open gap under support that has momentum on its side to be filled. The C-fund fell 1.22% to lag the TSP funds but is still up more than 1% for July.
The Dow Completion Index (S-fund) could not stay above rising support Friday as stocks collectively sold off in light of the lessor rate cut from the Fed. This not the worst place for the index but it will have a hard time rebounding and testing the May highs again without consistent strong earnings to carry the broad market. The S-fund fell 1.09% for the week.
EFA (EAFE Index /I-fund) did not falter as much as U.S. stocks. The index did open below its 20-day EMA Thursday but was back above it for the week before the close. The index is in a bull flag formation but the falling resistance of the flag continues to hold. The I-fund was down 0.14% for the week.
AGG (Bonds / F-fund) jumped between its 20-day EMA early in the week but finished the second half of the week with gains; but not enough to fill the open gap from earlier in July. The long-term bond market has been relentless but the Federal Reserve has goals to fix the inverted yield curve in the bond market with cutting rates. There is no guarantee this will be the case but bond investors are showing signs of fatigue with the saturation of bonds put into the market this year. The F-fund was up 0.32% for the week to outperform the TSP funds this 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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