Weekly TSP Wrap-up from TSP Talk

Hi everyone – It’s your govloop weekly dose of TSP Talk from www.tsptalk.com.

Last week was a volatile week for the stock market as 4 of the 5 trading days ended with the Dow Jones being up or down 90 or more points; two of those were up, and two were down. We had a few important economic data reports released, plus earnings reports from many bellwether companies, which added to the large swings.

When all was said and done, the TSP stock funds ended the week with mixed results. The C and S funds were down 0.72% and 1.7% respectively, while the I-fund, with the help of a weaker U.S. dollar, managed a 0.47% gain. The F-fund (bonds) was basically flat.

For the month of October, all of the stocks funds remain in positive territory, and the F-fund is flat.

The high volatility could be indicating that we are near a short-term top as the bulls and bears jockey for position. Each time we saw one of them move the market in one direction, the other side took advantage and brought it right back. By the end of the week the bears had a small victory as the the S&P 500 did end in negative territory.

So, the bears won this battle but the bulls are still winning the war as the TSP stock funds remain up between 22% to 31% for 2009. That is quite impressive, but of course after the disaster in 2008, the two year returns for the stock funds are losses of between -20% to -24%. We still have some catching up to do.

The chart below shows the average monthly returns of the S&P 500 (which is what our C-fund tracks) for the 56-year period between 1950 and 2005.

As we head into the last week of October, the market can take a look forward to the top three performing months historically; November through January. Actually, we are about to start a 6-month period which includes the top 5 performing months historically. February is the only black eye between November and April.

Chart provided courtesy of www.sentimentrader.com

Of course this is just an average and anything can happen during any given month. For instance, September is the worst performing month historically, yet this year the stock funds all saw very strong gains that month.

I would not trade based solely on this information as I actually believe we are due for a little pullback, but any and all information is worth considering when you have to make an allocation decision.

That’s all for today. Thanks for reading! We update our market commentary daily so we hope to see on TSP Talk.com.

Tom Crowley
TSP Talk