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Draghi and Crude

Weekly Commentary, 3/7/16 – 3/11/16

Early week trading was listless as investors were reluctant to jump ahead of policy meetings for the European Central Bank (ECB) and the Federal Reserve. That changed Thursday morning when the ECB cut interest rates (pushing the deposit rate deeper into negative territory) and increased monthly bond purchases under its asset-buying program. The ECB will provide banks with long-term cash, interest free but with a twist: the central bank would pay the banks 40 basis points if they actually make loans with the money. Stocks initially rose and the Euro fell but investor enthusiasm quickly faded during ECB President Mario Draghi’s subsequent news conference when he suggested that interest rates would go no lower.

A broad rally on Friday, led by energy and financial shares, carried the U.S. indexes to their fourth consecutive week of gains. Contributing to the gains was the International Energy Agency saying oil prices may have bottomed as non-OPEC producers have scaled back. “For prices, there may be light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance,” the IEA said. U.S. Oil ended the week at $38.50, logging a 4-week win streak and up more than 40% in 2016.

For the week, the S&P 500 rose +1.1%, while the NASDAQ added +0.7%. Advancing stocks led declining stocks almost 2-1.

The Federal Reserve meets next Tuesday and Wednesday, the anticipation of which often fosters a wait-and-see attitude. An immediate change in rates isn’t expected but the stronger U.S. data recently has kept a potential rate increase move later in the year on the table.  

Over the past four weeks, action has been constructive in the major indexes. The S&P 500 has retaken its 50-day and 200-day moving averages. The NASDAQ has retaken its 50-day line but remains under the 200-day line. Now the S&P 500 reaching its 200-day line, which is still trending downward, becomes a key test for the market in the new week.

The Stadion tactical strategies monitor change and events with the objective of positioning assets according to evolving conditions in the global equity markets with special emphasis on managing risk.

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 NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. 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.

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Past Performance is no guarantee of future results. Investments are subject to risk, and any of Stadion's investment strategies may lose money.