The first three days of this holiday shortened week gave us more of the same with minimal market movement. Jerome Powell was renominated for the Fed chair and initial job claims came in at 199,000, which was the lowest level since 15 November 1969. Then came Thanksgiving evening and news reports of a new COVID variant. It was then a true Black Friday as the markets sold off with the S&P 500 down 2.27%, closing at 4594. So here we are this weekend and the question is Whats next?. On the positive side, in 2021 the S&P 500 has had daily losses of greater than 2% four times (27 Jan, 25 Feb, 12 May and 28 Sep) before Black Friday. For each of those dates respectively, the S&P 500 hit a new record 6, 10, 20 and 16 trading days later. It should be noted that 2021 has been a bullish year with the largest dip being just over 5% on 4 October, which is unusual. Now lets look at the negative, and that is volatility. Looking back to the 2020 coronavirus breakout, we had the quickest sell off (down 33% in one month) and recovery in the markets history. But lets look at it from a pre-COVID perspective in December of 2018. On 3 December the S&P 500 closed at 2790 and we were looking for a Santa Claus rally. Over the next 14 trading days, we had 11 down days, and 5 of them had daily losses of greater than 2%. The S&P 500 lost nearly 16% and stood at 2351 on Christmas Eve. So back to Whats next?. Since no one can predict the future, Ive found it beneficial at times like this to make analytical investment decisions rather than emotional ones. That said, we recommend taking some money off the table rather than swing for the fences in either direction. For TSP TIPS, the C fund has the best Performance Ranking and its price is above its 50 day Moving Average (MA), which is above its 200 day MA. The S fund is weaker as its price is below its 50 day MA, but above its 200 MA. The I fund is weakest as its price is below both its 50 and 200 day MAs. As such, we recommend the following reallocation.
The first three days of this holiday shortened week gave us more of the same with minimal market movement. Jerome Powell was renominated for the Fed chair and initial job claims came in at 199,000, which was the lowest level since 15 November 1969. Then came Thanksgiving evening and news reports of a new COVID variant. It was then a true Black Friday as the markets sold off with the S&P 500 down 2.27%, closing at 4594. So here we are this weekend and the question is Whats next?. On the positive side, in 2021 the S&P 500 has had daily losses of greater than 2% four times (27 Jan, 25 Feb, 12 May and 28 Sep) before Black Friday. For each of those dates respectively, the S&P 500 hit a new record 6, 10, 20 and 16 trading days later. It should be noted that 2021 has been a bullish year with the largest dip being just over 5% on 4 October, which is unusual. Now lets look at the negative, and that is volatility. Looking back to the 2020 coronavirus breakout, we had the quickest sell off (down 33% in one month) and recovery in the markets history. But lets look at it from a pre-COVID perspective in December of 2018. On 3 December the S&P 500 closed at 2790 and we were looking for a Santa Claus rally. Over the next 14 trading days, we had 11 down days, and 5 of them had daily losses of greater than 2%. The S&P 500 lost nearly 16% and stood at 2351 on Christmas Eve. So back to Whats next?. Since no one can predict the future, Ive found it beneficial at times like this to make analytical investment decisions rather than emotional ones. That said, we recommend taking some money off the table rather than swing for the fences in either direction. For TSP TIPS, the C fund has the best Performance Ranking and its price is above its 50 day Moving Average (MA), which is above its 200 day MA. The S fund is weaker as its price is below its 50 day MA, but above its 200 MA. The I fund is weakest as its price is below both its 50 and 200 day MAs. As such, we recommend the following reallocation.