Caronavirus fears and its threat to the global economy led to a volatile week for the markets with the S&P 500 closing at 2972 on Friday. In the 12 trading days since the S&P 500 hit its last record high on 19 February 2020, 9 of those days have seen S&P 500 moves of over 1%. More volatility evidence is the Bolllinger Band Index (BBI), which has quickly expanded and crossed the “200” threshold, its highest level since we began tracking it at the end of 2015. This past week we also saw the Fed make an emergency move and dropped interest rates by 50 basis points. This resulted in the 10-year Treasury yield tumbling below 0.7% for the first time ever, and bond funds hitting historic highs. The last time the Fed made such an emergency move was during the financial crisis more than a decade ago. So let’s look back to that financial crisis and the fallout. That bear market started on 9 October 2007 with the S&P 500 at 1565. Over the next 13 months it continued its descent until it bottomed out on 20 November 2008 with the S&P 500 at 752 for a 52 (yes 52)% loss. Fast forward to 19 February 2020 when the S&P 500 set a new record high of 3386. If history repeats itself, a 52% loss would bring the S&P 500 down to 1625, close to where it was in October 2007. From a historic perspective, major bear markets occur about once a decade, and we’re essentially been in a bullish market since that November 2008 bottom. Have we been lulled into complacency? Let’s now change the focus to the TSP, more specifically the F fund. In the same last 12 trading days since the S&P 500 hit that record high on 19 February 2020, the F fund hit new record highs on 11 of the 12 days, with the only down day being a loss of less than a penny. Now here is something you don’t see every day. As mentioned above, the Fed dropped its interest rate by 0.5% this week. Bonds funds reacted positively and the F fund had a move of over one percent to the upside on Friday. I then went to the TSP web site and downloaded F fund prices since inception (2 June 2003). Some quick F fund analysis showed that 1) this was only the third time since inception that the F fund had a daily move of over one percent, 2) all three were positive and 3) the other two occurred within four months of each other, between November 2008 and March 2009. Based on the potential downside with equity funds (C/S/I), and the bullishness of the F fund, we are recommending the following reallocation. Lastly, we’ve had an outstanding response to our “The TIPS” bundle free offer, which is still open. We did have a couple of “delivery failure” responses when we hit “send”, so if you haven’t received it yet, please send us an email directly at ultratips@weisertinvestments.com.
Caronavirus fears and its threat to the global economy led to a volatile week for the markets with the S&P 500 closing at 2972 on Friday. In the 12 trading days since the S&P 500 hit its last record high on 19 February 2020, 9 of those days have seen S&P 500 moves of over 1%. More volatility evidence is the Bolllinger Band Index (BBI), which has quickly expanded and crossed the “200” threshold, its highest level since we began tracking it at the end of 2015. This past week we also saw the Fed make an emergency move and dropped interest rates by 50 basis points. This resulted in the 10-year Treasury yield tumbling below 0.7% for the first time ever, and bond funds hitting historic highs. The last time the Fed made such an emergency move was during the financial crisis more than a decade ago. So let’s look back to that financial crisis and the fallout. That bear market started on 9 October 2007 with the S&P 500 at 1565. Over the next 13 months it continued its descent until it bottomed out on 20 November 2008 with the S&P 500 at 752 for a 52 (yes 52)% loss. Fast forward to 19 February 2020 when the S&P 500 set a new record high of 3386. If history repeats itself, a 52% loss would bring the S&P 500 down to 1625, close to where it was in October 2007. From a historic perspective, major bear markets occur about once a decade, and we’re essentially been in a bullish market since that November 2008 bottom. Have we been lulled into complacency? Let’s now change the focus to the TSP, more specifically the F fund. In the same last 12 trading days since the S&P 500 hit that record high on 19 February 2020, the F fund hit new record highs on 11 of the 12 days, with the only down day being a loss of less than a penny. Now here is something you don’t see every day. As mentioned above, the Fed dropped its interest rate by 0.5% this week. Bonds funds reacted positively and the F fund had a move of over one percent to the upside on Friday. I then went to the TSP web site and downloaded F fund prices since inception (2 June 2003). Some quick F fund analysis showed that 1) this was only the third time since inception that the F fund had a daily move of over one percent, 2) all three were positive and 3) the other two occurred within four months of each other, between November 2008 and March 2009. Based on the potential downside with equity funds (C/S/I), and the bullishness of the F fund, we are recommending the following reallocation. Lastly, we’ve had an outstanding response to our “The TIPS” bundle free offer, which is still open. We did have a couple of “delivery failure” responses when we hit “send”, so if you haven’t received it yet, please send us an email directly at ultratips@weisertinvestments.com.