The S&P 500 closed February up 2.6%, but the last week of this month sure was not a pretty one due to fears of higher inflation and interest rates. On Tuesday, Federal Reserve Chair Jerome Powell addressed Congress stating “We are a long way from our employment and inflation goals". This eased some fears on Wednesday, but on Thursday the 10-year Treasury yield spiked above 1.5%, the highest level since February 2020, and the markets sold off. On Friday, the S&P 500 broke below the 3800 level one hour after the opening bell, but bounced around during the day and ten minutes before the close, it stood at 3853. Then it got ugly and in those last ten minutes the S&P 500 lost over 40 points and closed the week at 3811, about three percent below its most recent high. And then I heard one of the CNBC pundits talk about investor concerns stating “Come on people, it’s only three percent!” Well, the S&P 500 has gained approximately 20% since October of last year through its most recent high, and the Russell 2000 Small Cap index has performed even better. Seeing how this all happened in a five month period, that “come on three percent” comment made my stomach churn as you can take it two ways. 1) From a technical perspective, I consider a drop of 2.5 percent below the indices most recent high a minor break through of a support level. 2) From an emotional perspective, that three percent comment was probably a prelude to every correction or bear market. So now it is Saturday, the House passed the $1.9 trillion COVID relief bill and is sending it to the Senate, and next week we’ll see how the markets react. For TSP TIPS, on Thursday both the S and C funds dropped below that 2.5 percent support level. We took notice of this and as such, issued an intraweek alert to reduce the S and C fund’s allocation. While no one can predict the future, we consider it prudent to take some money off the table.
The S&P 500 closed February up 2.6%, but the last week of this month sure was not a pretty one due to fears of higher inflation and interest rates. On Tuesday, Federal Reserve Chair Jerome Powell addressed Congress stating “We are a long way from our employment and inflation goals". This eased some fears on Wednesday, but on Thursday the 10-year Treasury yield spiked above 1.5%, the highest level since February 2020, and the markets sold off. On Friday, the S&P 500 broke below the 3800 level one hour after the opening bell, but bounced around during the day and ten minutes before the close, it stood at 3853. Then it got ugly and in those last ten minutes the S&P 500 lost over 40 points and closed the week at 3811, about three percent below its most recent high. And then I heard one of the CNBC pundits talk about investor concerns stating “Come on people, it’s only three percent!” Well, the S&P 500 has gained approximately 20% since October of last year through its most recent high, and the Russell 2000 Small Cap index has performed even better. Seeing how this all happened in a five month period, that “come on three percent” comment made my stomach churn as you can take it two ways. 1) From a technical perspective, I consider a drop of 2.5 percent below the indices most recent high a minor break through of a support level. 2) From an emotional perspective, that three percent comment was probably a prelude to every correction or bear market. So now it is Saturday, the House passed the $1.9 trillion COVID relief bill and is sending it to the Senate, and next week we’ll see how the markets react. For TSP TIPS, on Thursday both the S and C funds dropped below that 2.5 percent support level. We took notice of this and as such, issued an intraweek alert to reduce the S and C fund’s allocation. While no one can predict the future, we consider it prudent to take some money off the table.