The S&P 500 had a rough start to the year recording its second negative week and closing at 4662 on Friday. Beneath the surface, this week was an unusual one as it started with the S&P 500 gapping to the downside at the open, then briefly dipping below the 4600 level, but then recovering most of those losses by the close. Ahead of the mid-week inflation numbers, on Tuesday Federal Reserve Chair Powell restated that the central bank would not be afraid to hike interest rates further than projected to fight high inflation. Prior to Wednesdays market open, it was announced that the Consumer Price Index rose seven percent in 2021, its fastest increase since 1982. Surprisingly, the S&P 500 gapped to the upside at the open and had a mid-morning intraweek high. On Thursday December's Producer Price Index came in showing almost a ten percent year over year reading, the highest since 2010. This inflationary pile-on news was just too much for the markets and the S&P 500 had one of those greater than 1% loss kind of days. Fridays market action was very similar to Mondays as bank earnings reported prior to the open failed to meet expectations, and the S&P 500 gapped to the downside at the open. However, the S&P 500 found support above the 4600 level and finished strong into the close for a positive day, down only 15 points for the week. From a technical perspective, the ability of the S&P 500 to retest 4600 and rebound on Friday was quite bullish, and hopefully lead to more of the same supported by above expectation earnings. For TSP TIPS, the I fund continued to close that record high gap, overshadowing C fund performance and resulting in positive returns for the week. As such, we recommend no reallocations going into the holiday shortened Martin Luther King, Jr. week.
The S&P 500 had a rough start to the year recording its second negative week and closing at 4662 on Friday. Beneath the surface, this week was an unusual one as it started with the S&P 500 gapping to the downside at the open, then briefly dipping below the 4600 level, but then recovering most of those losses by the close. Ahead of the mid-week inflation numbers, on Tuesday Federal Reserve Chair Powell restated that the central bank would not be afraid to hike interest rates further than projected to fight high inflation. Prior to Wednesdays market open, it was announced that the Consumer Price Index rose seven percent in 2021, its fastest increase since 1982. Surprisingly, the S&P 500 gapped to the upside at the open and had a mid-morning intraweek high. On Thursday December's Producer Price Index came in showing almost a ten percent year over year reading, the highest since 2010. This inflationary pile-on news was just too much for the markets and the S&P 500 had one of those greater than 1% loss kind of days. Fridays market action was very similar to Mondays as bank earnings reported prior to the open failed to meet expectations, and the S&P 500 gapped to the downside at the open. However, the S&P 500 found support above the 4600 level and finished strong into the close for a positive day, down only 15 points for the week. From a technical perspective, the ability of the S&P 500 to retest 4600 and rebound on Friday was quite bullish, and hopefully lead to more of the same supported by above expectation earnings. For TSP TIPS, the I fund continued to close that record high gap, overshadowing C fund performance and resulting in positive returns for the week. As such, we recommend no reallocations going into the holiday shortened Martin Luther King, Jr. week.