[TSP_Strategy] Re: Current Trend

 

Michael,

We are entering the traditionally "sweet" season for the markets.  Yet, to date, the C fund has been bearish since August.  The S fund has been bearish since early September.  And the Dow Theory remains bearish.

I agree that markets are assuming impending higher rates, which has also been bearish for bonds.

That said, equities may continue to fall, short term, on several bases.  First, valuation is high.  Second, higher interest rates are anticipated.  Third, quarterly profits have been disappointing in many cases.

Should equities continue to fall, there should be less pressure to raise interest rates, which would benefit bonds.  Further, if profits continue to disappoint, there may eventually be calls (believe it or not) for added stimulus.  Political roiling is another factor in the mix that may provide greater interest in bonds, particularly over the next week or so.

For these reasons, I don't see the need to move to G.

That said, should we see a sharp decline in equities over the coming weeks, I may be inclined to return to stocks.





Sarah,

I agree about stocks appear to be skating on cracking ice once again.  

You might want to consider moving to the G fund soon since it does not incur capital losses when interest rates rise.  If rates remain flat, its interest rates match the TSP F fund's current yield.  

I think the longest bull market in history (bonds) hit its top recently.  The central banks in Europe and Japan appear to have capitulated in forcing rates lower.  I posted a chart of the German 10-year bund in my recent post.

If the stock market corrects soon (and the odds are increasing), you might see a short term bump in the F fund, but I think the long trend trend in lower interest rates is over. 

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Posted by: sarah_oz@yahoo.com

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