Weekly Commentary, 1/25/16 – 1/25/16
The broader equity markets finished the week on a strong note. The S&P 500 Index rose 1.75% and the Dow Jones Industrial Average tacked on 2.3% for the week. However, both indexes fell over 5% for the month. The benchmark U.S. 10-year Treasury Note closed the week at 1.93%, its lowest level since last April.
Japan’s central bank stunned the markets Friday by taking one of its main lending rates into negative territory in an attempt to stimulate its economy. The unexpected move shows the Bank of Japan’s determination to fight the global headwinds that threaten to tip the country back into deflation. The Bank of Japan is now another major central bank to set negative interest rates, joining the European Central Bank and the central banks of Sweden, Denmark and Switzerland. The Bank of Japan’s move could also add further pressure on the Federal Reserve to hold back on raising interest rates, less than a month after it started tightening again, as economies throughout the globe show signs of distress and weakness.
Also contributing to Friday’s strength was a discussion between Russia and OPEC to alleviate the global oil supply glut. Oil prices staged a notable advance approaching 5% from sub $30.00 levels.
Wednesday the Federal Reserve signaled concern about the global economy in its policy meeting, saying in a statement that it is “closely monitoring global economic and financial developments.” The statement raised questions about a slower pace of interest-rate increases, but didn’t rule out raising short-term rates at its next meeting in March.
Risk management and patience are key components of the Stadion investment process. While the world looks a bit brighter than it did a few weeks ago we have yet to see enough improvement in our indicators or models to add risk back into our portfolios.
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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. 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.