In last week’s update I talked about the 600 point Dow swing on 1 August. Well the Dow topped that mark this week when its low on Monday was 952 points lower than last Friday’s close. On Tuesday, it crossed that 1,000 point lower threshold from last Friday. However, on Wednesday and Thursday it had recouped the majority of that loss and the S&P 500 actually turned positive for the week. After all that volatility, the exhausted markets ran out of wind and the S&P 500 closed Friday at 2918. It just so happens that I was on a flight to New Orleans during Monday’s volatility and in some ways it was reminiscent of my flight to San Diego on Monday, 19 October 1987. I got off the plane (before the internet as we know it) and the Dow had lost 508 points, closing at 1,738 which equated to a 22 percent loss during my flight. While 1,000 point swings on the Dow are definitely uncomfortable, we have to take some solace since the Dow is now at 26,287, or 15 times higher than that San Diego flight back in ’87. The cause of all this volatility has been trade tariff wars, which now seems to be expanding to currency. As a result there has been a move to the safety of bonds, with the increasing demand causing a decrease in interest rates which is positive for bond prices. For TSP TIPS, the F Bond fund has the best performance ranking so we are recommending an increase in that allocation. Among the equity funds (C/S/I), the C fund has the best ranking so overall, we recommend the following reallocation.
In last week’s update I talked about the 600 point Dow swing on 1 August. Well the Dow topped that mark this week when its low on Monday was 952 points lower than last Friday’s close. On Tuesday, it crossed that 1,000 point lower threshold from last Friday. However, on Wednesday and Thursday it had recouped the majority of that loss and the S&P 500 actually turned positive for the week. After all that volatility, the exhausted markets ran out of wind and the S&P 500 closed Friday at 2918. It just so happens that I was on a flight to New Orleans during Monday’s volatility and in some ways it was reminiscent of my flight to San Diego on Monday, 19 October 1987. I got off the plane (before the internet as we know it) and the Dow had lost 508 points, closing at 1,738 which equated to a 22 percent loss during my flight. While 1,000 point swings on the Dow are definitely uncomfortable, we have to take some solace since the Dow is now at 26,287, or 15 times higher than that San Diego flight back in ’87. The cause of all this volatility has been trade tariff wars, which now seems to be expanding to currency. As a result there has been a move to the safety of bonds, with the increasing demand causing a decrease in interest rates which is positive for bond prices. For TSP TIPS, the F Bond fund has the best performance ranking so we are recommending an increase in that allocation. Among the equity funds (C/S/I), the C fund has the best ranking so overall, we recommend the following reallocation.