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Surge and Slump

Weekly Commentary, 12/14/15 – 12/18/15

The Federal Reserve’s first rate hike since 2006 whipsawed stocks over the past week.  Major U.S. equity indexes closed virtually unchanged but those returns don’t convey the extreme volatility of the week.  The S&P 500 Index was up 3% by Wednesday’s close, however, early gains of the week were wiped out by Friday afternoon.  Heading into this year’s final stretch, the S&P 500 Index is down about -2.50% year-to-date.     

The Fed’s first rate hike in nearly a decade ended a seven-year experiment with near zero interest rates.  The rise in rates signals faith that the U.S. economy has largely overcome the wounds of the 2007-2008 financial crises.  But Fed officials are proceeding with great caution, having said they would raise the benchmark Federal-Funds rate from near zero to between 0.25% and 0.5%, then adjust their strategy as economic conditions permit.  There is no explicit timetable for the next possible rate increase.  The median projection of policy-makers suggests the central bank will raise rates four times next year, which may hint at follow-up tightening in March.  Economic and financial developments could easily change that forecast. 

Market breadth, leadership, and short- and long-term price momentum remain weak, calling for continuing caution.  The major averages are all below their respective 50 and 200-day moving averages and nearing major support levels. 

This week’s trading action will determine if Santa brings the market shiny baubles or pieces of coal.  We will continue to monitor the markets, attempting to follow their direction in capturing market gains while minimizing portfolio volatility over full market cycles.  

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. 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.

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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.