The S&P 500 made it three straight down weeks, closing at a September low of 4320. What started as a flat week quickly changed on Wednesday afternoon when Fed Chair Powell announced that they intended to keep interest rates higher for longer and forecasted one more rate hike for 2023. In those last two hours the S&P 500 dropped nearly one percent, which set the stage for Thursday when the S&P 500 gapped open to the downside. Bond yields surged as the 10-year Treasury yield popped to its highest level since 2007, while the 2-year rate touched its highest level since 2006. When Thursdays dust settled, the S&P 500 had a daily down move of over one percent. Then it seemed to be plow on time with expanding strikes by the UAW, oil continuing its climb towards $100/barrel, and the threat of a government shutdown. From a technical perspective, our 3 September update noted two indicators which turned bullish, that being 1) the S&P 500s 20 day Exponential Moving Average (EMA) crossing above its 20 day Simple Moving Average (SMA) and 2) a bullish two bar reversal. Well these two unwound themselves this week and are now signaling a risk-off allocation. For TSP TIPS, those two indicators mentioned above to the S&P 500/C fund also apply to the S and I funds. As such we are recommending the following new investment mix.
The S&P 500 made it three straight down weeks, closing at a September low of 4320. What started as a flat week quickly changed on Wednesday afternoon when Fed Chair Powell announced that they intended to keep interest rates higher for longer and forecasted one more rate hike for 2023. In those last two hours the S&P 500 dropped nearly one percent, which set the stage for Thursday when the S&P 500 gapped open to the downside. Bond yields surged as the 10-year Treasury yield popped to its highest level since 2007, while the 2-year rate touched its highest level since 2006. When Thursdays dust settled, the S&P 500 had a daily down move of over one percent. Then it seemed to be plow on time with expanding strikes by the UAW, oil continuing its climb towards $100/barrel, and the threat of a government shutdown. From a technical perspective, our 3 September update noted two indicators which turned bullish, that being 1) the S&P 500s 20 day Exponential Moving Average (EMA) crossing above its 20 day Simple Moving Average (SMA) and 2) a bullish two bar reversal. Well these two unwound themselves this week and are now signaling a risk-off allocation. For TSP TIPS, those two indicators mentioned above to the S&P 500/C fund also apply to the S and I funds. As such we are recommending the following new investment mix.