Weekly Commentary, 11/9/15 – 11/13/15
The S&P 500 and the Dow Jones indexes ended down last week about 3.5% each. The NASDAQ closed down 3.9% and the Russell 2000 Index finished the week down 4.4%, their largest losses since the week ending August 21. The narrative is similar to August when the market moved into correction territory losing over 10%. From a fundamental standpoint, corporate earnings are still challenged. With 93% of S&P 500 companies having reported third-quarter results, earnings are set to contract 1.8% from the year ago period according to FactSet. The majority of the weakness is coming from the energy sector as oil prices have fallen 15% in the last 10 days. This created a similar pattern to August. Additionally, the Federal Reserve seems poised to raise rates as soon as December.
Market breadth, from a technical viewpoint, is weak and continuing to thin as it did in August. The “Big 5” stocks (GOOG, AMZN, FB, MSFT and GE) are doing a lot of the heavy lifting. In August, the major indexes all experienced the so called “Death Cross” and remain in that condition. The “Death Cross” occurs when the 50-day moving average crosses below the 200-day moving average and is interpreted as a long term downtrend. At this time, the S&P 500, NASDAQ, and Russell 2000 indexes are now trading below their respective 200-day moving averages. All three indexes are testing chart support along their September peaks and 50-day moving averages. The consumer sector has been an underperformer specifically in the retail space. This is noteworthy as the consumer sector makes up approximately 70% of the U.S. economy. With risks rising in the market, we will continue to manage our client assets with a defensive bias striving to achieve consistent returns with less risk.
The Stadion Managed Account Risk objectives are managed using a “core/satellite” 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 satellite assets the remaining 40-60% of each portfolio, Stadion uses a proprietary, rules based weight of the evidence model. With significant deterioration in the Stadion weight of the evidence model, the satellite assets were allocated to money market instruments 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.