Weekly Commentary, 2/8/16 – 2/12/16
It was a wild week for various global asset classes, leaving investors with more questions than answers. U.S. stocks slid some 1% but managed to rally from the lows. While many U.S. economic indicators are not flashing concern, the global financial turmoil is causing investor anxiety and pundits to begin to talk of a recession.
After raising rates in December for the first time in 9 years and signaling it would raise rates a full percentage point this year, Federal Reserve Chairwoman Janet Yellen emphasized that rates are not on a “preset” course. The Chairwoman later said the central bank is studying the feasibility of pushing short-term interest rates into negative territory joining other central banks in an attempt to stimulate economic growth. The mention of negative interest rates fueled a rush in to safe haven assets. The benchmark U.S. Treasury Note fell to 1.53% before closing the week at 1.73%. Gold spiked 5.5% and prices are up nearly 18% in 2016.
Oil prices surged over 6% on Friday. The rally began late Thursday after the Wall Street Journal reported on comments from the United Arab Emirates’ energy minister that OPEC countries are open to cutting output.
China is still a worry for many but their markets were closed for the week in celebration of the Chinese New Year. However, Japan’s Nikkei Stock Average fell 4.8% as it reopened from a holiday, bringing losses for the week to more than 11%.
Political uncertainty looks to get worse this year rather than better. The victories of Republican Donald Trump and Democrat Bernie Sanders in the New Hampshire primary this week raise the odds that Americans may elect a populist president in November on a platform of radical economic change. The odds of an extreme election outcome could pose a major risk to the stock market.
The market’s fundamentals are clearly presenting more pressing questions than answers. The technical measures remain decidedly negative.
Against this backdrop of unknown answers, our strategies maintain defensive positions and will respond via a rules based process as market conditions change.
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 Flex portion of the portfolios remain in their most defensive position 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 Nikkei 225 is a price-weighted stock market index for the Tokyo Stock Exchange and is the most widely quoted average of Japanese equities. 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.
Past Performance is no guarantee of future results. Investments are subject to risk, and any of Stadion's investment strategies may lose money.