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Global Macro Risk

Weekly Commentary, 4/4/16 – 4/8/16

Stocks ended lower in most major markets this week including in the U.S. The S&P 500 Index finished lower by 1.2%. Small cap stocks led the way lower with the Russell 2000 Index shedding 1.8%. Internationally, the Japanese Nikkei 225 lost 2.12%, the Shanghai Composite dropped 0.83% and the Euro Stoxx 600 slipped 0.39%.

Worries resurfaced regarding the ability of central bankers to lift a sluggish global economy after years of easy monetary policy. The Japanese Yen continued its rise despite the Bank of Japan’s efforts to push it lower with a negative interest-rate policy.

Wednesday, Federal Reserve officials signaled an interest-rate increase in April is unlikely. Minutes from their March policy meeting showed that the central bank will move cautiously until the global economy picks up steam. For the last few weeks Fed officials have been building the case for moving gradually on rate normalization while economy faces headwinds from overseas. Fed officials expect those headwinds to subside only slowly and didn’t want to appear to be in a rush to push U.S. interest rates higher according to the minutes of the March 15-16 meeting. The Fed raised its benchmark federal funds rate in December to a range between 0.25% and 0.50%, ending a seven year run with rates near zero. At that time, officials expected to push rates up by a percentage point in 2016, but at the March meeting they scaled back that plan to a half percentage point increase. U.S. Treasury notes ended the week four basis points lower to yield 1.72%.

Thursday, the European Central Bank reiterated their willingness to launch new measures if needed to fight low inflation.

The International Monetary Fund came out with a publication citing growing concerns over contagion risk between emerging and developed markets. The report outlined an increasing influence China has on developed economies and the potential for negative spillover into developed countries like the Unites States.

These actions underscore continuing concerns about global economic health and outsize effect of expansion central-bank policy.  The markets are growing cautious following a nearly two month long rally in prices of riskier assets and remains at the critical junction between 2050-2100 on the S&P 500 Index.

Time will tell if the combined efforts of global central bank accommodation will reignite global growth or will it go down in history as an experiment gone horribly wrong. We will continue to position assets to evolving conditions in the global equity markets with a 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 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 Nikkei 225 is a price-weighted stock market index for the Tokyo Stock Exchange and is the most widely quoted average of Japanese equities. The Shanghai Stock Exchange Composite (SHCOMP) Index is a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. 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 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.