Weekly Commentary, 2/15/16 – 2/19/16
Global market sentiment improved this week as oil prices recovered after the Russian-Saudi production freeze and the Chinese equity and currency markets gained stability
Stocks surged around the world with the U.S. lagging as the S&P 500 Index gained only 2.5%. Europe jumped over 4%, as measured by the EURO STOXX 50 Index. The Japanese Nikkei 225 surged 6.8% and the Shanghai Composite tacked on 3.5%. On a year-to-date basis the U.S. is still one of the world’s better markets having declined -6.2%.
The S&P 500 hit a low at 1810 on February 11 and has subsequently rebounded 120 points to 1930 on February 17 (up approximately 6.0% in just 3 days). It is encouraging to see the Russell 2000 Index and the NASDAQ Composite outperform the S&P 500 over the same period. In the near term, the 1950 level on the S&P 500 will likely be a battle ground of likely significant resistance. However, clearing and holding above 1950 could signal the market correction has run its course. It would not be surprising to see the “Bulls” and “Bears” fight it out this week along that 1950 battle line.
The past six years’ bull market has produced some scary pull backs that rewarded investors courageous enough to take advantage of buying opportunities as they arose. The top of mind question is whether the latest decline is yet another buying opportunity or merely a head fake that could punish dip buyers if the market continues its bear slide. We have begun to see improvement in the various risk measures we follow but remain defensively positioned at this time. Given the technical damage the market has experienced this year we anticipate needing more than a couple of good market days before the weight of the evidence shifts positively.
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. There was some improvement in our shorter term risk measures but not enough to add risk into the strategies. The Flex portion of each portfolio remains in its 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 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 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. The Shanghai Stock Exchange Composite (SHCOMP) Index is a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The EURO STOXX 50 (SX5E) Index is Europe's leading blue-chip index for the Eurozone and provides a blue-chip representation of supersector leaders in the Eurozone. The index covers 50 stocks from 12 Eurozone countries. The Nikkei 225 is a price-weighted stock market index for the Tokyo Stock Exchange and is the most widely quoted average of Japanese equities. 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.