Weekly Commentary, 4/11/16 – 4/15/16
Major U.S. stock indexes finished up about 2% this week. The rally was sparked by a rise in financial shares, improving news about China’s economy and a report that a “consensus” had been reached between Russia and Saudi Arabia regarding an oil production freeze.
China’s first quarter gross domestic product expanded by 6.7%, down from 6.8% in the 4th quarter, but higher than investors had expected. The country’s March retail sales and industrial production both rose. The Shanghai Composite tacked on 3.8%
The price of West Texas Crude jumped over 5% on a report that the aforementioned Russia/Saudi “consensus” on restricting oil production. The world’s largest oil export countries will meet over the weekend. Hopes are that a deal will be struck to freeze output and lift sagging oil prices, though a breakdown in talks could lead to increased pricing volatility.
From a stock price perspective things are looking brighter. The cumulative advance-decline line of the S&P 500 Index (the daily tally of the number of rising stocks minus declining ones, going back to the birth of the bull market on March 10, 2009) did make a new bull market high. That suggests the S&P 500 is actually stronger than what the index’s price implies, and the expectation is that pricing will catch up with breadth and a new high will be made, which hasn’t happened since last May. The percentage of stocks trading above their 200-day moving average is higher than the stock rallies seen last September and November. The recent improvement in breadth could bode well for a test of the 2015 highs.
We say this with caution as new index highs have been in reach several times before but not yet breached. Global growth remains sluggish as we enter corporate earnings season. The question then remains, how much further can equity markets rally.
At Stadion the challenge stays the same: how to grow investor assets over the long term while attempting to mitigate risks.
The Stadion Managed Account Risk objectives are managed using a “core/satellite (Flex)” approach. The core positions will comprise 40-60% of the portfolio and are invested in equity, fixed income and money market instruments with the strategic allocation becoming more risk averse as the risk tolerance of each fund changes. In allocating the objective’s Flex assets (the remaining 40-60% of each portfolio) Stadion uses a proprietary, rules-based weight-of-the-evidence model. The portfolios currently maintain benchmark allocations per risk objective.
Past performance is no guarantee of future results. Investments are subject to risk, and any of Stadion’s investment strategies may lose money. The investment strategies presented are not appropriate for every investor and financial advisors should review the terms and conditions and risks involved. Stadion’s actively managed portfolios may underperform during bull markets. Some information contained herein was prepared by or obtained from sources that Stadion believes to be reliable. There is no assurance that any of the target prices or other forward-looking statements mentioned will be attained. Any market prices are only indications of market values and are subject to change. The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock price. The Shanghai Stock Exchange Composite (SHCOMP) Index is a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. It is not possible to invest directly in indexes (like the S&P 500) which are unmanaged and do not incur fees and charges. The Sharpe ratio measures the excess return per unit of deviation, or risk. Any references to specific securities or market indexes are for informational purposes only. They are not intended as specific investment advice and should not be relied on for making investment decisions.
Past Performance is no guarantee of future results. Investments are subject to risk, and any of Stadion's investment strategies may lose money.