China Evergrande debt crisis sparked Monday selloff, but Fed's unchanged policy fueled recovery
All TSP equity funds (C/S/I) dropped below 50-day averages but rebounded by Friday
Market consolidating in trading range - next move will determine breakout direction
The S&P 500 logged a volatile week but was able to stabilize and close in the green on Friday at 4455 for a slight weekly increase. On Monday concerns regarding the potential collapse of Chinese property developer Evergrandes ability to pay $83 million in interest on U.S. bonds led to a sharp and broad market sell-off. This turned around on Wednesday after the Federal Reserve decided not to ease monetary policy by tapering bond purchases and kept benchmark interest rates unchanged. The rally continued into Thursday when initial jobless claims indicated that the U.S. labor market continues its recovery. From a technical perspective, last week we mentioned that there had been no S&P 500 daily moves of more than one percent in September, with the highest being 0.91%. That changed this week with daily moves of -1.70% on Monday, 0.95% on Wednesday and another 1.21% on Thursday. It should also be noted that the S&P 500 stands just above the mid-point between the last S&P 500 record high of 4536 and subsequent low of 4354. It appears as if we are consolidating into a channel and the next move will be a breakout with the follow-on question being Which direction?. For TSP TIPS, all three equity funds (C/S/I) dropped below their 50 day Moving Averages on Monday but rebounded above by Friday. They also remain in that neutral/hold category and within 2.5% of their record highs. As such, this volatile but nearly unchanged market week translates into no changes in our allocation model.
The S&P 500 logged a volatile week but was able to stabilize and close in the green on Friday at 4455 for a slight weekly increase. On Monday concerns regarding the potential collapse of Chinese property developer Evergrandes ability to pay $83 million in interest on U.S. bonds led to a sharp and broad market sell-off. This turned around on Wednesday after the Federal Reserve decided not to ease monetary policy by tapering bond purchases and kept benchmark interest rates unchanged. The rally continued into Thursday when initial jobless claims indicated that the U.S. labor market continues its recovery. From a technical perspective, last week we mentioned that there had been no S&P 500 daily moves of more than one percent in September, with the highest being 0.91%. That changed this week with daily moves of -1.70% on Monday, 0.95% on Wednesday and another 1.21% on Thursday. It should also be noted that the S&P 500 stands just above the mid-point between the last S&P 500 record high of 4536 and subsequent low of 4354. It appears as if we are consolidating into a channel and the next move will be a breakout with the follow-on question being Which direction?. For TSP TIPS, all three equity funds (C/S/I) dropped below their 50 day Moving Averages on Monday but rebounded above by Friday. They also remain in that neutral/hold category and within 2.5% of their record highs. As such, this volatile but nearly unchanged market week translates into no changes in our allocation model.