The S&P 500 had its best week of the year, up every day and closing at 4358 on Friday. On Monday the S&P 500 climbed out of correction territory and posted its best day since late August, gaining more than 1%. Tuesday marked the end of October, logging a third straight losing month for the first time since January to March 2020, when COVID hit. Going back, that period marked the steepest drop in market history, but also marked the quickest rebound. Now back to Wednesday, when the S&P 500 had another 1% daily gain as Fed Chair Powell suggested that rising Treasury yields were aiding the fight against inflation. That set the stage for Thursday as the S&P 500 had its third 1% daily gain for the week. Before Fridays open the October Payroll report came in below estimates with 150,000 jobs added, unemployment ticking higher to 3.9% from 3.8%, and wage growth cooling to its lowest level since 2021. These numbers gave the markets hope that Fed rate hikes may have peaked, resulting in the 10 year Treasury yield falling to 4.5% after hitting a multi-year high of more than 5% last week. From a technical perspective, last Friday the S&P 500 was below its 20, 50 and 200 day Moving Averages (MA). With this weeks rebound, it is now above all three. So the question is, Where do we go next?, and for that we look at resistance. On 27 July the S&P 500 hit a Year To Date intraday high of 4607. It then sold off and rebounded to a lower intraday high of 4541 on 1 September. It sold off a second time and rebounded to another lower intraday high of 4393 on 17 October. From there we had this third sell off with a new low just last Friday, 27 October. We have now seen a third rebound this week with an intraday high of 4373 this Friday. Since the end of July, we have had a series of rebounds with lower intraday highs, or a downward trend. What would be nice to see is a break in that trend and have an intraday high which takes out the 17 October high of 4393, which is less than 1% away. From there we could see more steps up, taking out those three down steps one by one. The question still is, Can the markets perform well in this current geopolitical environment with two wars raging? All I can say is that weve done it before with COVID and that global risk. Specifically, the S&P 500 marched from its COVID intraday low of 2191 on 23 March 2020 to an intraday high of 3021 just two months later, for a gain of almost 40%. While no one can predict the future, a precedent has been set. For TSP TIPS we recommend an increase of our equity allocation given the above conditions. Based on their Performance Rankings and Composite Scores, the C fund is most bullish followed by I and then S. The F fund has also turned more bullish as interest rates have declined. As such, we recommend the following new investment mix.
The S&P 500 had its best week of the year, up every day and closing at 4358 on Friday. On Monday the S&P 500 climbed out of correction territory and posted its best day since late August, gaining more than 1%. Tuesday marked the end of October, logging a third straight losing month for the first time since January to March 2020, when COVID hit. Going back, that period marked the steepest drop in market history, but also marked the quickest rebound. Now back to Wednesday, when the S&P 500 had another 1% daily gain as Fed Chair Powell suggested that rising Treasury yields were aiding the fight against inflation. That set the stage for Thursday as the S&P 500 had its third 1% daily gain for the week. Before Fridays open the October Payroll report came in below estimates with 150,000 jobs added, unemployment ticking higher to 3.9% from 3.8%, and wage growth cooling to its lowest level since 2021. These numbers gave the markets hope that Fed rate hikes may have peaked, resulting in the 10 year Treasury yield falling to 4.5% after hitting a multi-year high of more than 5% last week. From a technical perspective, last Friday the S&P 500 was below its 20, 50 and 200 day Moving Averages (MA). With this weeks rebound, it is now above all three. So the question is, Where do we go next?, and for that we look at resistance. On 27 July the S&P 500 hit a Year To Date intraday high of 4607. It then sold off and rebounded to a lower intraday high of 4541 on 1 September. It sold off a second time and rebounded to another lower intraday high of 4393 on 17 October. From there we had this third sell off with a new low just last Friday, 27 October. We have now seen a third rebound this week with an intraday high of 4373 this Friday. Since the end of July, we have had a series of rebounds with lower intraday highs, or a downward trend. What would be nice to see is a break in that trend and have an intraday high which takes out the 17 October high of 4393, which is less than 1% away. From there we could see more steps up, taking out those three down steps one by one. The question still is, Can the markets perform well in this current geopolitical environment with two wars raging? All I can say is that weve done it before with COVID and that global risk. Specifically, the S&P 500 marched from its COVID intraday low of 2191 on 23 March 2020 to an intraday high of 3021 just two months later, for a gain of almost 40%. While no one can predict the future, a precedent has been set. For TSP TIPS we recommend an increase of our equity allocation given the above conditions. Based on their Performance Rankings and Composite Scores, the C fund is most bullish followed by I and then S. The F fund has also turned more bullish as interest rates have declined. As such, we recommend the following new investment mix.