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Put a Fork in an October Rate Hike

Weekly Commentary, 9/28/15 – 10/2/15

On Monday, stocks collapsed across the board with the S&P 500 falling approximately 2.5% and finishing not far from the August lows.  The emerging market and commodity macro discussion that has dominated for months continued this week. Adding to the discussion was the widening of corporate bond spreads and the complete implosion of the healthcare and biotech sectors, which perhaps, is more important to U.S. stock prices. The markets stabilized mid-week from the violent selling experienced on Monday.  This week wrapped up one of the worst months – and quarters – in recent memory.

The weaker than expected non-farm payroll (NFP) data were released on Friday. This information raised new doubts that the economy is strong enough for the Federal Reserve to raise rates by the end of the year, much less in October.  Following the 8:30 AM release of the NFP data, the S&P 500 initially dropped 1.6% but finished the day up 1.4%. Yields on the benchmark U.S. Treasury note closed at 1.98%, 14 basis points lower on the week. Banks’ stocks, which are seen as a proxy for interest rate expectations, were pummeled.  Through another volatile week that included quarter-end rebalancing, the S&P 500 managed to post a positive 1.1% return.

It is too early to say, but this week’s price action along with the August 25th session may be shaping up to a double bottom pattern, which could signal a forthcoming rebound. It could also turn out to be a rally in a bear market. We don’t predict the market direction at Stadion, but use time tested quantitative measures to determine how much risk is in the market and adapt to the market

The Stadion Managed Account Risk objectives are managed using a “core/satellite” approach. The core positions will comprise 40-60% of the portfolio and be 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 satellite assets the remaining 40-60% of each portfolio, Stadion uses a proprietary, rules based weight of the evidence model. Our satellite portfolios remain in their most defensive risk allocation 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. It is not possible to invest directly in indexes (like the S&P 500) which are unmanaged and do not incur fees and charges. 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.