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Squall or Hurricane?

Weekly Commentary, 8/31/15 – 9/4/15

The U.S. equity markets experienced another difficult week losing approximately 3%.  The market remains in the grasp of fear regarding Chinese economic growth and the impact of the Federal Reserve raising rates.  The Friday release of a mixed jobs report makes it more likely the Fed will raise rates later in the year. 

We began encountering stormy weather upon breaking out of the multi-month range on August 20th. Is it a summer squall or a hurricane? The S&P 500 Index had a recent low of 1867, down 12.5% from the high at 2130. It subsequently bounced 6.7% to 1993 on August 28th and finished the week at 1921, down almost 10% from the highs. One of the questions being asked on websites, Twitter, and any other news source is: is this just a correction or are we entering a bear market?

Being defensive managers, we recognize that storms and bear markets are inevitable. The Stadion risk indicators began seeing storm clouds on the horizon in early August. As the markets and weather are both unpredictable, we began preparing for a storm not knowing if the clouds would pass or develop into a squall or a hurricane. Since that time, the storm has increased and we have closed the hatches, raised the storm sail and changed course heading to calmer seas. At some point this storm will pass, the sky will clear and we will raise the sails and steer back to our original course. Our goal is, and always has been, to provide a smoother investment journey for our clients.   

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 adverse as the risk tolerance of each fund changes. .  In allocating the fund’s satellite assets the remaining 40-60% of each portfolio, Stadion uses a proprietary, rules based technical equity model. The model determines a weighted average score for “market risk” based on a combination of technical market measures. Stadion seeks to evaluate the risk levels for different markets and market sectors. Stadion then seeks to participate in markets and market sectors with low risk scores and seeks to divest investments in markets and market sectors with high risk scores.  Based on the weak foundation of the market internals and price we remain in our most defensive positions 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.