Good evening, TSPwire Tactical Investor!

Markets shuddered Friday at the notion that the latest cycle of Fed rate-cutting might be cut short by inflation concerns, sending stocks to their lowest close in more than a week. The blue-chip average (C Fund) ended the week down 2.1%, its worst weekly performance since the week ended Nov 9, though it is still up 7% this year.

The Labor Department reported the biggest jump in the consumer-price index since September 2005, and the biggest gain in core CPI, which excludes food and energy costs, since January. Higher inflation, along with recent signs of resilience in the economy, could make it harder for the Federal Reserve to justify the need for the additional interest-rate cuts. With prices rising and the economy still growing, a bias toward fighting inflation could make its way back into future Fed policy statement raising the threat of higher interest rates – the last thing Wall Street wants because higher rates would raise borrowing costs for businesses and consumers.

Adding to the sense of economic strength, the Fed reported that industrial production in the US rose 0.3% in November, more then Wall Street expected, rebounding from a 0.5% decline in October.

We will keep collecting and analyzing more data but until we will get a better idea about stock market direction we will keep our allocation unchanged: 50% in I Fund, 30% in S Fund and 20% in C Fund.