Weekly Commentary, 10/17/16 to 10/21/16
U.S. equities fluctuated between gains and losses ending higher in another low volume week. The S&P 500 Index rose 0.38%. The gains posted by the NASDAQ Composite and the Russell 2000 Index, which rose 0.83% and 0.46% respectively, were far more encouraging.
Although trading volume was muted, it was a busy news week. Investors survived the 3rd and final presidential debate. So far earnings season is reassuring investors. FactSet reported earnings are on track to decline -0.3% from last year; this is better than the -2.1% projected at the beginning of the year.
Thursday, the European Central Bank (ECB) disappointed investors by not providing clarity on a decision to extend the central bank’s bond purchase program which expires in five months. Delaying this decision raises the stakes for a policy change at the next meeting on December 8.
Investors are getting more comfortable with the idea that the Federal Reserve (Fed) will raise rates in December, despite strong U.S. economic data and hints from policy makers that a hike could be on the way. Higher rates in the U.S. tend to increase the value of the dollar making it more attractive investors seeking yield. The dollar has gained 3.34% since September 30.
The market internals improved slightly on the week but are not providing a clear signal on the direction of the next short term trend. The longer term trend measures are still positive. The S&P 500 remains between the support level of 2,220 and resistance level of 2,250. With last week’s gain, the NASDAQ was able to close above its 50-day moving average. An improving growth picture is stemming from an outperformance in the financial and consumer discretionary sectors versus more defensive sectors such as utilities and consumer staples.
Broader equity markets have basically traded sideways since early September. We are still awaiting a catalyst to determine the next major move in the market. At Stadion we won’t attempt to forecast what direction that will be. However, we will stay focused on seeking the proper asset allocation for our strategies and continue to emphasize maintaining the proper levels of risk for the current environment.
The Stadion Managed Accounts 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 40-60% remaining of each portfolio), Stadion uses a proprietary, rules-based weight-of-the-evidence model. With increased risk levels in the markets the flex is in its most defensive position holding cash equivalents.
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 Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. It is the most widely quoted measure of the overall performance of the small-cap to mid-cap company shares. 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. The core personal consumption expenditures index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices. 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.