The first trading week of 2022 was a tale of two stories, with the first being the bullish Santa Claus rally. On Monday the S&P 500 set a new record close of 4796 and Apple shares hit an intraday high of $182.86, making it the first stock with a $3 trillion market cap. Tuesdays close marked the end of the Santa Claus rally, with the S&P 500 gaining 1.43% over those seven trading days. On Wednesday the second story started with the release of the December Federal Reserve meeting minutes which stated that once the central bank completes its bond tapering (which begins in March), they will raise interest rates and consider shrinking its $9 trillion balance sheet. As a result, the tech heavy NASDAQ had its worst day since February 2021. Friday's employment report did have some positive data with unemployment falling to 3.9%, its lowest since February 2021. However, Friday afternoon saw the 10-year Treasury yield topping 1.8%, up from a 2021 year-end level of 1.51% and the highest since January 2020. By weeks end, Apples stock stood at $172.00, down 5.9% from Mondays intraday high, and the S&P 500 closed at 4677, putting it at pre-Santa Claus rally levels. For next week, key economic data will come mid-week when inflation data is released. More importantly, earnings season starts on Friday with the banks reporting before the market opens. Banks perform well in a rising interest rates environment, and weve seen a rotation into the banking and financial sectors this week in anticipation of strong earnings reports. Hopefully that scenario will come through and well only have one story next week, that being a bullish one. For TSP TIPS, the C fund hit a new record high on Monday. While the C fund has also returned to pre-Santa Claus rally levels, the I fund has not and instead has a positive return. Also, both the C and I funds are about 2.4% below their historic highs. However, the C fund came off Mondays high to get there while the I fund has been gaining steam. This is further quantified by the closure in the Performance Ranking gap between the two. As such, we are recommending the following reallocation.
The first trading week of 2022 was a tale of two stories, with the first being the bullish Santa Claus rally. On Monday the S&P 500 set a new record close of 4796 and Apple shares hit an intraday high of $182.86, making it the first stock with a $3 trillion market cap. Tuesdays close marked the end of the Santa Claus rally, with the S&P 500 gaining 1.43% over those seven trading days. On Wednesday the second story started with the release of the December Federal Reserve meeting minutes which stated that once the central bank completes its bond tapering (which begins in March), they will raise interest rates and consider shrinking its $9 trillion balance sheet. As a result, the tech heavy NASDAQ had its worst day since February 2021. Friday's employment report did have some positive data with unemployment falling to 3.9%, its lowest since February 2021. However, Friday afternoon saw the 10-year Treasury yield topping 1.8%, up from a 2021 year-end level of 1.51% and the highest since January 2020. By weeks end, Apples stock stood at $172.00, down 5.9% from Mondays intraday high, and the S&P 500 closed at 4677, putting it at pre-Santa Claus rally levels. For next week, key economic data will come mid-week when inflation data is released. More importantly, earnings season starts on Friday with the banks reporting before the market opens. Banks perform well in a rising interest rates environment, and weve seen a rotation into the banking and financial sectors this week in anticipation of strong earnings reports. Hopefully that scenario will come through and well only have one story next week, that being a bullish one. For TSP TIPS, the C fund hit a new record high on Monday. While the C fund has also returned to pre-Santa Claus rally levels, the I fund has not and instead has a positive return. Also, both the C and I funds are about 2.4% below their historic highs. However, the C fund came off Mondays high to get there while the I fund has been gaining steam. This is further quantified by the closure in the Performance Ranking gap between the two. As such, we are recommending the following reallocation.