Weekly Commentary, 04/10/17 to 04/14/17
U.S. equities closed the week lower for what could be a litany of reasons. The Dow Jones Industrial Average, S&P 500 Index and Nasdaq Composite each lost about 1%.
Geopolitical tensions grabbed the headlines with the U.S. military dropping the “mother of all bombs” on Afghanistan following the previous week’s airstrike in Syria. Adding to the geopolitical tensions were comments from the Secretary of State, Rex Tillerson, saying U.S. - Russian relations were at a “low point” and that there are increasing concerns over a pre-emptive military strike in North Korea.
Domestic concerns also increased. Details on President Trump’s plan to overhaul taxes, decrease regulation and increase infrastructure spending remain scarce. Federal Reserve (Fed) Chairwoman, Janet Yellen, reiterated her theme that the era of extremely accomodative monetary policy is coming to an end.
Retail sales dropped for the second straight month. Additionaly, slowing bank loan growth and a weaker than expected jobs report were causes for economists to begin reevaluating their growth forecasts for 2017. Friday’s release of the Consumer Price Index (CPI) showed a decline in March for the first time since January 2010.
The demand for safe haven assets rose over the week. The yield on the benchmark 10-year U.S. Treasury note fell to a five month low, closing at 2.23%. Gold rose to a five month high and is up 12% this year versus a 4.60% gain for the S&P 500.
Volatility, as measured by the CBOE Volatility Index, spiked to 16 breaking a multi-month range after trading near all time lows.
Beneath the surface of the market, technical deterioration continues. The defensive sectors like staples, healthcare and utilities remain the recent winners versus the more growth oriented sectors. Declining stocks on the Nasdaq outnumbered advancing stocks by about 2-1 with a disappointing associated volume. The major U.S. indices are trading below their popular 50-day moving averages, indicating a break in the short-term uptrend. The S&P 500 penetrated key support at 2350.
Despite the recent sluggish price action, the S&P 500 is only off about 3% from the all-time highs. The market is facing many headwinds with uncertain outcomes. As risks increase, we believe it becomes even more important to have a disciplined investment process that has been tested over multiple market cycles. We will continue to follow our proprietary investment processes and adjust allocations as conditions warrant.
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 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 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. The VIX is the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market's expectation of stock market volatility over the next 30 day period. 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.