Weekly Commentary, 5/9/16 – 5/13/16
Stocks swung wildly during the week. The Dow Jones Index rose 200 points on Tuesday, fell 200 on Wednesday and lost another 175 on Friday, its biggest moves since the markets swooned in January and February, underscoring how wary investors have become about the next move in stocks. It was the third consecutive week of declines for the Dow and the S&P 500. For the week, the Dow Jones Index lost 1.16% and the S&P 500 Index declined 0.51%. The yield on the U.S. Treasury 10-year note fell to 1.70% from 1.78% on the previous Friday. 10-year yields were as high as 1.92% as recently as April 26th.
In other developments, the market value of Apple fell below that of Alphabet (Google). Apple is down 13% year-to-date. Traditional retailers like Macy’s, Kohls and Nordstrom reported dismal first-quarter earnings results, with double digit losses. Americans are still shopping, just not at retailers. “Nonstore” retailers, such as online merchants and car dealers, enjoyed a 2.1% jump in sales according to High Frequency Economics. Amazon gained 6% on the week.
As for indexes, the S&P Consumer Staples Index was unchanged while the S&P Consumer Discretionary Index fell 1.40%. Employed as a market breadth measure, this might constitute a warning signal. Consumer staple stocks are perceived as more defensive, offering attractive dividends. The same holds true with utilities. The S&P Utility Index rose 0.87% for the week. This flight to safety suggests a lack of confidence as investors have much to worry about. Other technical measures also deteriorated. Stadion’s advance/decline indicator turned down after nearing recent highs, with important moving averages also crossing under.
The markets are constantly seeking equilibrium between fear and greed. This year we have seen both extremes with the first quarter selloff and the subsequent return to near record levels. Important questions remain about the timing of the next interest rate hike by the Federal Reserve, a UK vote on remaining in the European Union, growth prospects for China, and the upcoming U.S. presidential election. It seems reasonable to expect that the volatility we have experienced in 2016 will extend into at least the summer. Ongoing risk management and patience are key components to the
Stadion strategies and we continue to have our defensive teams on the field.
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 is in a transition zone. The portfolios are under the benchmark equity allocation at this time but above minimum equity allocation.
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. The U.S. 10-Year Treasury Note is a debt obligation issued by the United States government that matures in 10 years. 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 S&P 500® Consumer Staples Index comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector, which generally includes products such as food, beverages, tobacco and household items that people are unable or unwilling to cut out of their budgets regardless of their financial situation. The S&P 500® Consumer Discretionary Index comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector, which generally includes businesses that sell nonessential goods and services. The S&P 500® Utilities Index comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector, which generally includes stocks for utilities such as gas and power. 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.