Good evening, TSPwire Tactical Investor!

Stocks ended the week with gains after a sharp turnaround late Friday undid losses recorded for the most of the day and the second half of the week on concerns about the US economy. That recovery highlights how important the bond insurers have become to confidence in financial system. They guarantee principal and interest repayment on both low-risk municipal bonds and the riskier complex debt instruments that have come under pressure during the housing downturn. If the insurers become unable to make good on their commitments, it could mean more troubles for banks and investors who hold the debt.

Minutes of Federal Reserve Open Market Committee meeting in late January, which came out on Wednesday, spoke of increasingly difficult financial conditions for consumers and businesses. On Thursday, the Federal Reserve Bank of Philadelphia’s survey of local economic conditions slipped well into contraction territory as it recorded its lowest reading since 2001.

Warning signs about inflation also caught stock-market off guard. Oil surge to $100 a barrel on Tuesday, combined with a January rise in consumer-price inflation, put a dumper on any rally under way at the start of the week. Oil futures fell back from their highs by Friday’s close.
Overall investors continued to flock to the safety of Treasury bonds (F Fund). The Standard & Poor 500 stock index (C Fund) gained 0.2% on the week but it is still down 7.8% this year.

Because of concerns about inflation, weakening dollar and recession we will continue to stay away from F, G and S Funds and will keep our allocation at 50% in C Fund and 50% in I Fund.