As discussed in this article, March 1 is here and the Sequestration deadline has arrived. I will not get into the Sequestration discussion too much here, as plenty of that is available elsewhere. However, lets take a look at the below charts of the SP 500 futures (showing trading after today’s regular stock exchange closures) and of the SP 500 Index.
The SP 500 closed today March 1 at 1518, on slightly lower than average volume, likely indicative that some fear existed and some market participants didn’t play today. The SP 500 futures traded after hours hitting 1516. The “1500 level” remains a key “floor” for the SP 500 Index. Any drops below that are not desired. Multiple days below that is a red flag. The farther and farther we get above that floor, the better we are.
In summary, this week’s market behavior reflected that Sequestration is “priced into” the market. We didn’t see any panic selling with the exception of Feb-25, which made headlines as “The Worst Day of 2013”. Lets reflect that 2013 is only 60 days old. I posted on Feb-26 that I was not overly concerned and was remaining in S-Fund. I discussed what happened, market-wise, in the last government shutdown, in 1995 (not much happened). After the Feb-25 sell-off, the markets rallied with the Dow up over 100 points the following days.
Sequestration (from the market standpoint) is “here”, although the President reportedly will not “sign anything” until 11:59 PM March-1. However the date itself has come and is almost gone, and tomorrow is March-2.
So what does this mean for the TSP participant? Well, speaking for myself only, I am still 100% S-Fund. I am not loosing sleep over Sequestration, from the TSP standpoint. If the markets crash hard next week, that will be a different story. But my indicators and proprietary system reflect that no red flags exist. I plan to remain 100% S-Fund for now.
Official Feb TSP performance data is not posted on the TSP site yet, but you will likely see S-Fund as the top performer or possibly C-Fund but S-Fund #2. C-Fund flashed a few isolated days of strength that may throw the data to favor the C-Fund as being the leader in February. However big-picture wise, S-Fund is still the place to be right now. I don’t recommend chasing performance based on just a 30 day snapshot. I prefer to look at overall behavior and trends, not a short time frame. Obviously if we have a few bad days, we need to seek the safety of G-Fund. But I look at this through the lens of other factors and indicators of mine. This is akin to your child at school, he may have a bad quiz, but overall big-picture he brings home good grades. A bad quiz does not make a bad student. Multiple bad report cards could indicate something else (or maybe not, but we need to dig deeper). So I approach the markets in a similar manner.
I am 100% S-Fund for now.
Thank you for reading
Bill Pritchard
