Good Evening everybody
Well, it is October 7 and we are in shutdown mode with no budget agreement in place, and face a rapidly approaching Oct 17 debt ceiling deadline. If you read the news reports (and lets admit, some fear mongering by both parties is going on…) , one would believe that the world is going to end if the debt ceiling is not raised.
In the end, what the market does is what matters most, not opinion, emotion, or crystal-balling the future. Or TV interviews of politicians from either party. In the end, the market is going to do what it is going to do, so lets just go straight to the market and take a look. Lets take a look at the SP 500 charts since Oct 1, a key milestone reflecting the new Fiscal Year, a term most of us are familiar with.
The chart above, with my comments, shows the SP 500 Index over the last few weeks, and it is fairly obvious that the index has been mostly flat, on average to below average volume, since Oct 1. It should be noted that on Oct 1, the index went up, not down, and then entered a listless sideways mode on average to below average volume. I discussed the prior government shutdowns on this site, and received some emails (and good for my subscribers for being engaged) on what would happen on Oct 1 2013, versus what happened before. In the end, history tends to repeat itself and this shutdown was no different.
Which brings me to a more serious concern. It can be argued (and I am entering the realm of speculation which I promised myself I would avoid) that this shutdown is “different” than prior shutdowns, because this shutdown, coupled with a debt ceiling violation (we have no debt ceiling modification prior to the ceiling being hit, expected to occur Oct 17), is a dangerous cocktail for the markets and the economy. Our reputation on a global scale is in question (“look at those clowns over there” etc. etc.), and a failure to make payments on our obligations would most likely result in a downgrade by ratings agencies. This could be an additional reputational problem on the global scale for our country. Again, I am speculating and I promised not to do that. But you probably can see where I am coming from.
Lets take a look at a slightly longer term chart of the SP 500, below, in which I have placed channel lines to show the recent downtrend since mid Sept. See comments on chart.
In summary, I am still 100% S-Fund, however I am watching things extremely closely. I am not waiting until Oct 17 to make any TSP Allocation changes, and trust me, if the markets merely hiccup wrong, I will advise everyone. However, with that said, there have been no sell offs or major down days, and my opinion is that there is no evidence to push me out of S-Fund at the present time.
Thank you for reading….
– Bill Pritchard
