Weekly Commentary, 10/24/16 to 10/28/16
Stocks trended lower through the week behind disappointing corporate earnings results and the shocking news on Friday that the FBI would reopen the investigation into Hillary Clinton’s email. The S&P 500 Index tumbled 20 points to 2120, a key support level, in the hour after the FBI’s announcement and closed at 2126 down -0.69% on the week.
The tech-heavy NASDAQ composite shed -1.28% as heavyweights Amazon and Apple missed analyst forecasts. Of the major indexes, the Russell 2000 Index—used by many as an indicator of the equities market’s health—suffered the greatest damage losing -2.51%. With this week’s loss, the Russell 2000 is the first major index to close below its major support level. All the major U.S. equity indexes are trading below their 50-day moving averages. Other technical indicators continue to deteriorate. The advance-decline line and stocks setting new highs versus those setting new lows continue their trend downward.
Solid economic releases helped push interest rates higher and increase the odds of a December rate hike by the Federal Reserve. U.S. 10-year yields rose to 1.84% from 1.74% a week earlier. Sovereign yields are also on the rise with rising inflation expectations and uncertainty about future monetary policy.
The S&P 500 continues to hover just above the well-defined key support level at 2120. Similarly, the Dow Jones Industrial Average remains just above the key level of 18,000. Further volatility could be expected with weakening market internals and headline risk heading into the elections. The summer BREXIT vote and the market’s response highlight the difficulty of forecasting. At the time, very few analysts were predicting that the U.K. would vote to leave the European Union and even fewer were predicting the that Euro Stoxx 600 would rally 10% over the next three months. At Stadion we won’t attempt to predict the election or the market’s response but we will continue to follow our disciplined processes and allocate assets accordingly with a focus on risk management.
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 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. 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 EURO STOXX 600 Index represents large, mid and small capitalization companies across 18 countries of the European region. 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 U.S. 10-Year Treasury Note is a debt obligation issued by the United States government that matures in 10 years. 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.