Trade war escalation and yield curve inversion signal potential recession risks ahead
F Fund reached new record highs, leading all TSP funds as investors flocked to bonds
Brexit developments and jobs data next week could increase market volatility further
As we finish out a volatile August, trade wars dominated the headlines this week with a new round of tariffs set to click in over our long holiday weekend. Concurrently we had interest rates news about the “yield inversion”. Normally longer term 10 year interest rate products “charge” a higher rate than shorter term 2 year products. The inversion occurs when the longer term bond rate is less than the shorter term rate, and historically this a been a predecessor to recessions. All told, the S&P 500 closed Friday at 2926, up for the week but down for the month. Besides trade and yields, next week brings along Brexit and the employment numbers on Friday. We should also see an increase in volume as traders return from their summer vacations. For TSP TIPS, similar to last week the strong demand for bonds continued with the F fund hitting a new record high on Wednesday and again leading all funds in performance ranking. As such, we are recommending no allocation changes.
As we finish out a volatile August, trade wars dominated the headlines this week with a new round of tariffs set to click in over our long holiday weekend. Concurrently we had interest rates news about the “yield inversion”. Normally longer term 10 year interest rate products “charge” a higher rate than shorter term 2 year products. The inversion occurs when the longer term bond rate is less than the shorter term rate, and historically this a been a predecessor to recessions. All told, the S&P 500 closed Friday at 2926, up for the week but down for the month. Besides trade and yields, next week brings along Brexit and the employment numbers on Friday. We should also see an increase in volume as traders return from their summer vacations. For TSP TIPS, similar to last week the strong demand for bonds continued with the F fund hitting a new record high on Wednesday and again leading all funds in performance ranking. As such, we are recommending no allocation changes.