Weekly Commentary, 8/29/16 to 9/02/16
Federal Reserve officials have been publically bantering back and forth about the potential for raising rates at the upcoming September 20-21 Federal Open Market Committee meeting. Market participants were hoping Friday’s release of the highly anticipated monthly unemployment would provide a clear signal about Fed intentions. Unfortunately, the release disappointed and will leave traders guessing on the timing of the next rate hike. Payrolls were not weak enough to indicate the economy was stalling and not strong enough to confirm the economy could withstand just the second 25 basis point increase in short term rates in over a decade. Non-farm payrolls came in below street consensus and below the three month average. The unemployment rate held steady at 4.9%.
Fed-funds futures, which are used to estimate central bank policy, showed a 27% chance of a rate hike before the jobs report and by the close Friday the chances dropped to 24%. However, the odds of a rate increase by December remained around 54%.
Equity markets around the world had a solid week. Both the Dow Jones and the S&P 500 Indexes added approximately +0.50%. Small cap stocks continue to outperform with the Russell 2000 gaining +1.11%. The Euro Stoxx 600 advanced and the Nikkei 225 jumped +3.45%.
Since July the market has been stuck in neutral amid rate hike speculation and lukewarm economic data. Periods of sideways consolidation can be frustrating. These periods have a tendency to resolve themselves in the same direction of the original trend. Historically, September has been a difficult month for equities. But for now the Stadion risk indicators continue to flash green and our strategies remain positioned accordingly.
The Stadion Managed Accounts 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 portfolios are overweight their respective benchmark equity allocation at this time.
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 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 Nikkei 225 is a price-weighted stock market index for the Tokyo Stock Exchange and is the most widely quoted average of Japanese equities. The EURO STOXX 600 Index represents large, mid and small capitalization companies across 18 countries of the European region. 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.