The S&P 500 ended the week at 2885, approximately 45 points below it’s high of 2930 on 20 September. This week we saw higher Treasury interest rates, increased volatility, and the lowest unemployment rate since 1969. We’ve had a nice run up in the indices over the past few months and the S&P 500 remains within approximately two percent of it’s high, but we have seen emerging weakness in the Small Cap and International markets. However, it feels very similar to this past January. On 26 January, the S&P 500 closed at 2873, right about where it is now. By 8 February, it had dropped more than 10 percent and stood at 2581, all within about two weeks. That said, we are recommending moving the 40 percent allocation in the Small Cap and International funds to cash, while maintaining the C fund at 60 percent. We would have liked to have done that move to cash over two weeks in October, but that would have precluded us from reentering the market if conditions improve in October due to the 2 exchanges per month rule. Lastly, please remember that while the stock market is open Monday, the TSP is not and therefore this reallocation will not take place until Tuesday’s close.
The S&P 500 ended the week at 2885, approximately 45 points below it’s high of 2930 on 20 September. This week we saw higher Treasury interest rates, increased volatility, and the lowest unemployment rate since 1969. We’ve had a nice run up in the indices over the past few months and the S&P 500 remains within approximately two percent of it’s high, but we have seen emerging weakness in the Small Cap and International markets. However, it feels very similar to this past January. On 26 January, the S&P 500 closed at 2873, right about where it is now. By 8 February, it had dropped more than 10 percent and stood at 2581, all within about two weeks. That said, we are recommending moving the 40 percent allocation in the Small Cap and International funds to cash, while maintaining the C fund at 60 percent. We would have liked to have done that move to cash over two weeks in October, but that would have precluded us from reentering the market if conditions improve in October due to the 2 exchanges per month rule. Lastly, please remember that while the stock market is open Monday, the TSP is not and therefore this reallocation will not take place until Tuesday’s close.