Weekly Commentary, 4/18/16 – 4/22/16
Oil prices careened wildly on Monday after talks between the world’s largest exporters on capping production collapsed over the weekend. Oil prices fell more than -6% in overnight trading, rebounding in the U.S. only after news of a strike in Kuwait that took more than half of the country’s production off line. By day’s end, oil prices finished down -1.4% and closed the week up +4.80% to $43.75. Oil prices have become a key ingredient affecting global equity prices
It was a mixed week in the U.S, with the S&P 500 Index and Dow Jones indices showing mild gains of approximately +0.5%-0.6%. The Russell 2000 index tacked on almost 1.4%, while the NASDAQ slumped approximately -0.65%, with the majority of the decline occurring Friday, following GOOG/MSFT/SBUX as they moved lower. The safe haven/defensive groups were hit hard, including utilities losing -3.23%, consumer staples shedding -2.13% and telecom down -1.24%. Conversely, these were among top-performing sectors in the first quarter. Leadership could be changing as investors rotate to areas more levered to growth and commodities. The banks extended their gains with the banking index up over +5%. Rails rose more than +9%.
From a pricing/market breadth perspective, the number of advancing versus declining stocks is as bullish now as it has been in a year. Other bullish signs include the trend of small caps, cyclicals, and multinationals beating, respectively, large-cap, defensive, and domestic stocks. The small cap Russell 2000 finally reached its 200-day moving average, the last of the four major indexes to climb above its long term average.
As discussed above, the underlying breadth of the market continues to improve. However, fundamental concerns persist. Global growth is sluggish and corporate earnings are contracting. The S&P 500 Index has risen more than 15% from its 2016 low hit in February and stands less than 2 percent away from its record close almost a year ago. Will the technicals of the market lead the indexes to new highs or will the fundamentals weigh on investor sentiment and pressure equity markets lower?
Risks and imbalances are present in every market. A successful investment strategy demands sound principles and solid research applied effectively over a period of years. We believe this explains the critical importance of discipline and sticking to a proven investment process through a full market cycle.
At Stadion, our portfolio managers believe our strategies are well positioned for the current risk levels in the market and will be adjusted according to model dictates as risk levels 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 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 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 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. 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.