Stocks fell for the third consecutive week with news headlines and the yield curve in the drivers seat. Stock indices began the week down before news of a delay on the tariffs promised by the Trump Administration gave instant life to buyers who left when the tariffs were first announced. The good times were short lived after investors were spooked Wednesday when the 10-year Treasury yield momentarily fell below the 2-year yield; a popular indicator of an upcoming recession. Stocks produced their worst day of the year on the inverted yield but the yield curve was corrected and positive consumer data reassured investors the economy was still on a solid foot. A fraction Wednesday’s losses were reclaimed Thursday and Friday but stock indices still fell around 1% or more for the week.
Volatility has been high during this drama filled, but usually low volume, trading month. Indices have been pushed around with ease since the Fed cut rates and President Trump threatened more tariffs on China. There are nearly equally valuable arguments on the future of the economy and stocks. The long-term bond (F-fund) continue to be bought which gives credit to an upcoming recession predicted by markets. Yet we have the Federal Reserve potentially in the process of more monetary stimulus while consumer economic data is strong. Whatever the reality, being bearish and being wrong is less damaging than being bullish and being wrong. Losing out on a rally hurts but protecting capital during times of uncertainty and waiting to jump back in when things stabilize will be more effective than trying to regain losses that could have been gains.
The F-fund continues its streak of outperforming the TSP stock funds. The fund was up 0.96% while the stock indices were down 0.94% and more with the S-fund lagging with a 1.5% loss for the week.
Here are the weekly, monthly, and annual TSP fund returns for the week ending August 16th:
The SPY (S&P 500 / C-fund) had a moment of weekly gains Tuesday but still had resistance from the 20 and 50-day EMA. The index reversed when the yield curve inverted but to lows matche the 200-day EMA that held as support for a second time this month. This is a technical advantage over the other indices that have fallen below their 200-day EMA. The C-fund was down 0.94% for the week.
The Dow Completion Index (S-fund) fell early to fall below its 200-day EMA after the 20 and 50-day EMA acted as resistance the previous week. The index continued to fall mid-week but had a intraday rally Friday to move off the lows. The S-fund lagged the TSP funds with a loss of 1.5% for the week. The index is now dow 4.63% for August.
EFA (EAFE Index /I-fund) had a similar week gapping down Wednesday but filled that open gap by the end of Friday’s trading session. There is potential falling resistance above the current price that will be a challenge to pass without something to give traders a reason to buy; the chart alone is not attractive. The I-fund fell 1.45% for the week.
AGG (Bonds / F-fund) continues to outperform stocks this month. Bonds have been the safe haven of since the Fed cut rates and trade tensions spooked the market. Yields are falling but still look attractive compared to about any other bonds offered accross the world. Bonds in Europe and Japan are don’t have any yield or negative so a chance to lock in any yield during uncertainty in equities has been the driver of the bond rally. The F-fund gained 0.96% for the week to outperform the TSP funds.
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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