The S&P 500 had a seesaw week, with positive employment data and vaccine news on one side opposing rising 10-year Treasury yields and unsettling remarks from Federal Reserve Chair Jerome Powell. Let\'s break this down. We saw a jump on Monday after the S&P 500 had closed out February up over two percent and Johnson & Johnson\'s single shot vaccine was approved for use. By Thursday, stocks fell after Powell failed to reassure investors of inflation fears at the Wall Street Journal Jobs Summit. The 10-year Treasury yield rose to over 1.6%, the highest of 2021, and as a result the NASDAQ moved into correction territory at Fridays open. To illustrate, the ARK Innovation ETF hit a new intraday high of $159.70 on 16 February. On Friday morning it hit an intraday low of $106.25 for a 33% loss in about two weeks. Then, a positive employment report rallied sectors that would benefit from economic comeback to help the S&P 500 close up for the week at 3841. For TSP TIPS and changing gears a little, let’s instead look at the “F” Fixed Income Bond Fund. As noted above, yields have increased this year and when that happens, bond prices decrease. For example, say a person bought a newly issued 10-year bond for $1,000 at the end of last year with a yield of 1%. Fast forward to this week, and if that same person went to the bond market, they could buy that same bond for $1000 but it would now yield 1.5%. If they then wanted to sell that End of Year bond yielding 1%, who is going to pay $1000 for it when they can buy a new one yielding 1.5% for the same price? Demand kicks in so that End of Year 1% bond would have to be discounted to make it attractive to buyers. So how does this relate to TSP TIPS and the F Fund? With interest rates rising this year, the F fund has declined just under 3%, leaving it on the bottom rung of the Performance Ranking (PR) ladder. All told, we’ll see how things evolve next week but for now will stay with our current allocation.
The S&P 500 had a seesaw week, with positive employment data and vaccine news on one side opposing rising 10-year Treasury yields and unsettling remarks from Federal Reserve Chair Jerome Powell. Let\'s break this down. We saw a jump on Monday after the S&P 500 had closed out February up over two percent and Johnson & Johnson\'s single shot vaccine was approved for use. By Thursday, stocks fell after Powell failed to reassure investors of inflation fears at the Wall Street Journal Jobs Summit. The 10-year Treasury yield rose to over 1.6%, the highest of 2021, and as a result the NASDAQ moved into correction territory at Fridays open. To illustrate, the ARK Innovation ETF hit a new intraday high of $159.70 on 16 February. On Friday morning it hit an intraday low of $106.25 for a 33% loss in about two weeks. Then, a positive employment report rallied sectors that would benefit from economic comeback to help the S&P 500 close up for the week at 3841. For TSP TIPS and changing gears a little, let’s instead look at the “F” Fixed Income Bond Fund. As noted above, yields have increased this year and when that happens, bond prices decrease. For example, say a person bought a newly issued 10-year bond for $1,000 at the end of last year with a yield of 1%. Fast forward to this week, and if that same person went to the bond market, they could buy that same bond for $1000 but it would now yield 1.5%. If they then wanted to sell that End of Year bond yielding 1%, who is going to pay $1000 for it when they can buy a new one yielding 1.5% for the same price? Demand kicks in so that End of Year 1% bond would have to be discounted to make it attractive to buyers. So how does this relate to TSP TIPS and the F Fund? With interest rates rising this year, the F fund has declined just under 3%, leaving it on the bottom rung of the Performance Ranking (PR) ladder. All told, we’ll see how things evolve next week but for now will stay with our current allocation.