Good evening, TSPwire Tactical Investor!

US Stocks had their best two weeks since 2004. Euphoria started immediately after the Federal Reserve board announced decision to cut its key interest rate by 0.5%, sending stocks up.

This week we kept 30% of our balance in F Fund. There are two major reasons for that:

1. Within the next few weeks we might observe a little pull back in stock market. While rate cut should give access to cheaper funds and, therefore, improve liquidity on the market, it might take few months before such a move would boost key economic data.

2. Generally, rate cut decreases bond yields which in its turn boosts value of bond funds (F Fund).

This week we will lower F Fund allocation to 20%. That distribution will hedge us against the risk of potential pull-back in the stock market and will allow us to reap benefits of falling bonds yields. If everything will go according to our projections, euphoria should settle down in 2-3 weeks from now and then we will move more funds into stocks.

This week falling dollar also got its fair share of attention on the Wall Street. After the new rate cut on Tuesday, US Dollar hit new low against Euro (i.e. 1 Euro  = 1.41$). Who can benefit from the falling dollar? This is exactly why we currently keep money in I and C Funds. I Fund is a no-brainer - it directly benefits from falling dollar because companies that are tracked by that index earn their revenues in foreign currency. C Fund (S&P 500), on other hand, tracks performance of top 500 companies in the USA majority of which either export products or do business overseas. In both cases falling greenback increases the dollar value of their overseas sales.

Based on our expectations we decided to put 40% in I Fund, 40% in C Fund and 20% in F Fund.