Weekly Commentary, 11/2/15 – 11/6/15
During the first full week of November the major averages continued to trend higher despite the threat of a Federal Reserve rate hike and against a backdrop of strong employment data. Further, the breadth of the market started to broaden, with the Russell 2000 Index’s 3% rise making it the best performing index for the week. The S&P 500 Index rose approximately 1%. To have a sustainable rally it’s important to have small and mid-cap stocks participate. The Russell 2000 Index rise lifts it out of correction territory, the last of the major averages to accomplish this. However, the Russell 2000 Index remains the only major index yet to clear its 200 day moving average.
The highlight of the week was Friday’s jobs report and the unemployment rate hitting 7.5 year lows. Market participants seem convinced that the Fed will begin raising rates in December and are now even beginning to anticipate the second rate hike. Rates on the benchmark U.S. Treasury 10 year note climbed from 2.17% to 2.34%. Utility stocks, which are highly correlated to interest rates, were down 3.00%, almost a year’s worth of dividends, for the week and nearly 10% for the year. The U.S. Dollar Index also seemed to benefit from the possibility of higher rates gaining 2.5% for the week. Another interesting note is China. China—which had been a source of angst around the globe—resumed bull market status, with the Shanghai composite index rising more than 20% from its August low.
Having closed the week at 2099 the S&P 500 is trading in the middle of its 2015 range. Following the run-up in October a period of consolidation is not unexpected. The questions now become how long we will stay in this range and which direction the market breakout will take. We are monitoring the market for changes that affect our weight of the evidence models and proprietary Sharpe Ratio analysis, continuing to adjust strategies and holdings accordingly.
The Stadion Managed Account Risk objectives are managed using a “core/satellite” 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 satellite assets the remaining 40-60% of each portfolio, Stadion uses a proprietary, rules based weight of the evidence model. The portfolios remain invested 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 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. 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.