With the increase in the discount rate from 0.75% to 1.00% and with the ongoing bearish technical indicator (my own, not Zweig's), my version of the Zweig stock investment model has entered neutral territory. I have not implemented any changes in my current TSP allocation (100% S) for approximately 3+ years and the last time only for a very short term trade (that lost a small amount of money).
I am not happy with the prospect of moving money into the F fund, since I have long (and wrongly) expected mid- to long-term interest rates to increase significantly at some point. I expect the G fund returns to increase, at least over the short term in response to the discount and funds rate increases on Wednesday.
The F Fund is invested in the mid- to long-term bond category, and therefore could decrease in value if those interest rates (say rates on 5-year Treasury Bonds/Notes) increase. Ordinarily one would expect that to happen, but at present the prices of commodities have been significantly lower and the value of the dollar significantly higher. So if the Fed raises rates too quickly, the economy could decline and longer term interest rates would decline, increasing the value of the F Fund.
Summarizing, the G fund remains a sure bet, but the returns are relatively low. The F Fund could go either way, and stocks are probably "flat" but vulnerable to future Fed decisions. Thus stocks appear to be riskier than they were around December, 2014.
So I do not expect to make a log of money in stocks over the next several months or longer and the current plan of the Fed for 2016 augers for a decline in stock prices. If I move money out of stocks, I will post the changes, for what it is worth.
Good luck and happy holidays.
Tex
Posted by: mrweyl@hotmail.com
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