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ECB QE

Weekly Commentary, 10/19/15 – 10/23/15

The week began in a ho-hum fashion, but awakened Thursday and Friday. Stocks soared on Thursday as the European Central Bank’s Mario Draghi hinted that the ECB would expand its easy money policies later this year. He also hinted that it was prepared to do more to boost inflation and growth. Draghi’s language about a reassessment in December was more direct than many expected. The S&P 500 Index closed up 1.6% and the Dow Jones Industrial Average closed up 1.9%. The euro fell almost 2% against the dollar.

Helping to boost stocks on Friday,  a surprise announcement came from the People’s Bank of China. The PBC announced that it would be cutting its benchmark rate by a quarter-point and reducing reserve requirements. Monday, China reported that its economy grew by 6.9% helping to dispel fears of a hard landing. The S&P 500 Index and the Dow Jones each added approximately 1%,while the tech heavy NASDAQ added over 2% on favorable earnings announcements from leading tech companies.

For the week, the Dow Jones finished 2.50% higher, the S&P 500 2.07%, and NASDAQ 2.97%.

Closing at 2075, the S&P 500 has now entered back into the tortuous trading range of 2040 to 2130, where it spent the better part of 2015 before breaking down in August. From the August 25th bottom, the S&P 500 Index is up 11% and has clawed its way to be just about even on the year. The Dow Jones is down approximately 1% year-to-date, but the big winner is the NASDAQ, up approximately 6% year-to-date and up almost 16% from the August low.  

It is interesting to note, but also concerning, that the Russell 2000 Index is down approximately 3% year to date, lagging the other major indexes, and the only major index not to clear its 200 day moving average. According to Howard Silverblatt of Standard & Poors, Alphabet (Google), Microsoft and Amazon accounted for approximately half of Friday’s rise in the S&P 500. In July (before the major decline), the NASDAQ was being driven higher mostly by six stocks.  Only 47% of stocks in the S&P 500 are above their 200 day moving average, a measure of a long term trend. At Stadion, we like to see broad market participation (breadth). The weight of the evidence indicators that we measure are improving but not at the same rate of the price appreciation in the broad equity indexes.  For the market to continue higher, it is important that we see breadth expand. We are heavily invested in our portfolios and will continue to monitor price and breadth over the next few weeks to see if market breadth can catch up with price.

The Stadion Managed Account Risk objectives are managed using a “core/satellite” 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 satellite assets the remaining 40-60% of each portfolio, Stadion uses a proprietary, rules based weight of the evidence model. The portfolios remain invested per the 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. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. 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. It is not possible to invest directly in indexes (like the S&P 500) which are unmanaged and do not incur fees and charges. 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.