The markets went into Friday with slight gains for the week, but all that changed throughout the day with the S&P 500 closing down for the week at 4418. Solid earnings reports got the markets off to a nice start and by Wednesdays close, the S&P 500 was up nearly 2% for the week. However, that changed when Thursdays CPI inflation report showed a 7.5% year over year rise which was its highest reading since February 1982. As a result, the 10-year Treasury yield jumped above 2% for the first time since 2019 and market indices returned to their start of week levels. On Friday, the markets dropped again after oil prices spiked to almost $100/barrel due to increased tension between Russia and the Ukraine. More pressure was also put on the markets when the University of Michigans preliminary consumer sentiment reading for February came in at 61.7, falling from 67.2 the previous month. From a technical perspective, this market is somewhat reminiscent of the last half of 2018. If you go to your favorite charting software, the S&P 500 made a new high on 9/20/2018. By 10/24/2018, it was down 9.88%, almost in correction territory. By 11/7/2018 it rebounded and gained 6.54%. And then a second down wave occurred which lasted to Christmas Eve. All told, the S&P 500 lost a total of nearly 20% from its 20 September high. When you compare it to 2022, we made a new S&P 500 record high on 1/3/2022. By 1/27/2022, it was down 9.8%, almost in correction territory. By 2/9/2022 it rebounded and gained 6.02%. If that 2018 scenario continued and the S&P 500 lost 20% from its 3 January record high, that would bring it down to the 3837 level. For next week we have the latest Fed minutes being released on Wednesday which will most likely drive the markets mid-week. For TSP TIPS the C/S/I equity funds continue to look weak, but lets look further at the F Fixed Income fund. A word of caution here in that there is an inverse relationship between bond prices and interest rates. That said, the price of the F fund decreases as interest rates increase. And, with interest rates rising recently, the F fund made a new 52 week low this week. As such, this may be a concern if you do have an allocation in the F fund. Lastly, we are recommending no changes to our current allocation and are keeping those two monthly exchanges on the sidelines until later in February.
The markets went into Friday with slight gains for the week, but all that changed throughout the day with the S&P 500 closing down for the week at 4418. Solid earnings reports got the markets off to a nice start and by Wednesdays close, the S&P 500 was up nearly 2% for the week. However, that changed when Thursdays CPI inflation report showed a 7.5% year over year rise which was its highest reading since February 1982. As a result, the 10-year Treasury yield jumped above 2% for the first time since 2019 and market indices returned to their start of week levels. On Friday, the markets dropped again after oil prices spiked to almost $100/barrel due to increased tension between Russia and the Ukraine. More pressure was also put on the markets when the University of Michigans preliminary consumer sentiment reading for February came in at 61.7, falling from 67.2 the previous month. From a technical perspective, this market is somewhat reminiscent of the last half of 2018. If you go to your favorite charting software, the S&P 500 made a new high on 9/20/2018. By 10/24/2018, it was down 9.88%, almost in correction territory. By 11/7/2018 it rebounded and gained 6.54%. And then a second down wave occurred which lasted to Christmas Eve. All told, the S&P 500 lost a total of nearly 20% from its 20 September high. When you compare it to 2022, we made a new S&P 500 record high on 1/3/2022. By 1/27/2022, it was down 9.8%, almost in correction territory. By 2/9/2022 it rebounded and gained 6.02%. If that 2018 scenario continued and the S&P 500 lost 20% from its 3 January record high, that would bring it down to the 3837 level. For next week we have the latest Fed minutes being released on Wednesday which will most likely drive the markets mid-week. For TSP TIPS the C/S/I equity funds continue to look weak, but lets look further at the F Fixed Income fund. A word of caution here in that there is an inverse relationship between bond prices and interest rates. That said, the price of the F fund decreases as interest rates increase. And, with interest rates rising recently, the F fund made a new 52 week low this week. As such, this may be a concern if you do have an allocation in the F fund. Lastly, we are recommending no changes to our current allocation and are keeping those two monthly exchanges on the sidelines until later in February.