Marking the sixth consecutive week (more to follow) of moves less than one percent, the S&P 500 closed the week down 12 points at 4124. Inflation news dominated the headlines mid-week with some good numbers. On Wednesday Aprils Consumer Price Index (CPI) annual inflation rate fell to 4.9%, the lowest since April 2021 and below market forecasts of 5%. The following day the April Producer Price Index (PPI) annual rate eased for a tenth straight month to 2.3%, the lowest since January 2021. Then on Friday we had some offsetting news with the preliminary reading of consumer sentiment falling to a six-month low of 57.7, below the expected reading of 63.0. Additionally it showed 5 year inflation climbing to 3.2%, tying the highest level since June 2008. However, uncertainty is overshadowing the markets as concern around debt ceiling negotiations seemed to be following a Kick the Can strategy with Fridays debt ceiling meeting being postponed until next week. As most of you know, I like to go back to similar times when weve been there. Although it has never happened, the U.S. did come close to a default in August 2011. Ratings agencies downgraded U.S. debt from its top AAA credit rating to AA+ and it sent markets into a freefall. On 26 July 2011 the S&P 500 and 10 Year yield stood at 1331 and 2.95% respectively. On 23 September 2011 the S&P 500 and 10 Year yield stood at 1136 and 1.80% respectively. For the S&P 500 thats about a 15% loss in two months and most economists agree that an actual default would be much worse. Now from a technical perspective, well address that more to follow. On the first trading day in April the S&P 500 closed at 4124, right where we closed this Friday. This has allowed the S&P 500s 20 day Moving Average to move up to 4125, almost mirroring the index. To top that off, we also still have the Bollinger Band Index hovering around a flat 30 reading. While this lends itself to a breakout, that breakout could come in either direction. While the next big periodic event will be the May inflation report and Fed meeting on 13/14 June, in between we have that debt ceiling debate/decision which could lend itself to a volatile breakout to the downside. For TSP TIPS the I fund made four new Year To Date (YTD) highs over the past month going from $37.41, to $37.90, to $38.05, to a new 52 week high of $38.08 on Monday. However, it closed at $37.68 on Friday, below its 20 Day MA of $37.80. Similarly, the C fund has bounced above and below its 20 MA this week but has not made a new YTD high. As such, we are recommending the following new investment mix.
Marking the sixth consecutive week (more to follow) of moves less than one percent, the S&P 500 closed the week down 12 points at 4124. Inflation news dominated the headlines mid-week with some good numbers. On Wednesday Aprils Consumer Price Index (CPI) annual inflation rate fell to 4.9%, the lowest since April 2021 and below market forecasts of 5%. The following day the April Producer Price Index (PPI) annual rate eased for a tenth straight month to 2.3%, the lowest since January 2021. Then on Friday we had some offsetting news with the preliminary reading of consumer sentiment falling to a six-month low of 57.7, below the expected reading of 63.0. Additionally it showed 5 year inflation climbing to 3.2%, tying the highest level since June 2008. However, uncertainty is overshadowing the markets as concern around debt ceiling negotiations seemed to be following a Kick the Can strategy with Fridays debt ceiling meeting being postponed until next week. As most of you know, I like to go back to similar times when weve been there. Although it has never happened, the U.S. did come close to a default in August 2011. Ratings agencies downgraded U.S. debt from its top AAA credit rating to AA+ and it sent markets into a freefall. On 26 July 2011 the S&P 500 and 10 Year yield stood at 1331 and 2.95% respectively. On 23 September 2011 the S&P 500 and 10 Year yield stood at 1136 and 1.80% respectively. For the S&P 500 thats about a 15% loss in two months and most economists agree that an actual default would be much worse. Now from a technical perspective, well address that more to follow. On the first trading day in April the S&P 500 closed at 4124, right where we closed this Friday. This has allowed the S&P 500s 20 day Moving Average to move up to 4125, almost mirroring the index. To top that off, we also still have the Bollinger Band Index hovering around a flat 30 reading. While this lends itself to a breakout, that breakout could come in either direction. While the next big periodic event will be the May inflation report and Fed meeting on 13/14 June, in between we have that debt ceiling debate/decision which could lend itself to a volatile breakout to the downside. For TSP TIPS the I fund made four new Year To Date (YTD) highs over the past month going from $37.41, to $37.90, to $38.05, to a new 52 week high of $38.08 on Monday. However, it closed at $37.68 on Friday, below its 20 Day MA of $37.80. Similarly, the C fund has bounced above and below its 20 MA this week but has not made a new YTD high. As such, we are recommending the following new investment mix.