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French Anxieties (Round 1)

Weekly Commentary, 04/17/17 to 04/21/17 

U.S. equities managed to close the week higher despite continued global macro tensions. The Dow Jones Index added 0.46%, the S&P 500 Index gained 0.85%, and the NASDAQ Composite spiked 1.82%.

Macro risks were front and center in investors’ minds entering the week. The U.S. was no closer to resolving tensions with North Korea, and the French election was becoming too close to call. National security moved to the top of the French political agenda following the killing of a policeman by a suspected Islamist militant. Investors had become comfortable with the moderate candidate Macron making it to round two of the elections. However, the more populist and anti-euro candidates (Le Pen and Melenchon) rose in the polls. Sunday night’s election was closely watched here in the U.S., and it appears the market liked what it saw based on overnight futures trading.

Adding to the rising tide of nationalism across the continent, British Prime Minister Theresa May called for an early election vote on June 8, saying she needed to strengthen her hand in divorce (Brexit) talks with the European Union by shoring support for her Brexit plan.  

Treasury Secretary Steven Mnuchin commented on Thursday that tax reform was back on the table and that a major tax plan would be released “very soon.” President Trump then told the Associated Press that he will unveil a tax plan next week that includes “massive” tax cuts for individuals and businesses, both of which seemingly outweighed elevated political risks.

Technically speaking, the market outlook moved in a positive direction over the week with the S&P 500 Advance-Decline improving. Small-cap stocks and the NASDAQ outperformed the larger-cap broad indexes. The NASDAQ tested all-time highs and never dropped below its 50-day moving average. The Russell 2000 Index is barely back above its 50-day moving average while the S&P 500 and Dow Jones remain below their respective 50-day moving averages.

Stocks have been struggling since mid-March when Republican leaders pulled President Trump’s plan to repeal or replace Obamacare because Trump could not gather enough support from Republicans or Democrats to ensure passage. The failure brought into question the President’s ability to successfully implement his other campaign promises, specifically, revamping the tax system. The market appears to want to give the President another chance to fulfill his campaign promises as his administration makes attempts to revamp the tax code.  

Macro concerns like North Korea and a French election that could potentially signal the end for the euro can have far reaching effects and will not likely be resolved quickly. We will continue to monitor risk levels in uncertain markets while attempting to provide a smoother ride for our clients.


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 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 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. 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.