Weekly Commentary, 9/7/15 – 9/11/15
Volatility subsided to some extent in this holiday shortened week ahead of the September 16-17 Federal Reserve meeting. Volatility, as measured by the VIX index, declined from 28 to 23. Big swings had become the norm in the stock market since late August, when concern about China’s slowdown and its potential effect on global growth grew. After a weak day of trading on Tuesday, both the Dow Jones and S&P 500 rose approximately 2% while the NASDAQ posted a gain of 3% for the week. These were the largest weekly gains in nearly six months.
The late week gains were fueled by fading expectations of an eminent Fed rate increase and the news coming out of China seemed incrementally better. China’s Shanghai Index closed the week up 1.2% but is still down 38% since June. The benchmark U.S. Treasury 10-year note closed the week at 2.18% up from 2.12% over the week as investors await next week’s Federal Open Market Committee meeting.
Is this week’s positive performance an attempt to find a new level of equilibrium, or is this just a rally in a bear market? Only time will tell. We will continue to manage client portfolios by reacting to changes in the risk levels of the market and not attempting to predict the uncertain.
The Stadion Managed Account Risk objectives are managed using a “core/satellite” approach. The core positions will comprise 40-60% of the portfolio and be invested in equity, fixed income and money market instruments with the strategic allocation becoming more risk adverse as the risk tolerance of each fund changes. In allocating the objectives’ satellite assets the remaining 40-60% of each portfolio, Stadion uses a proprietary, rules based technical equity model. The model determines a weighted average score for “market risk” based on a combination of technical market measures. Stadion seeks to evaluate the risk levels for different markets and market sectors. Stadion then seeks to participate in markets and market sectors with low risk scores and seeks to divest investments in markets and market sectors with high risk scores. This week we began to see a very slight improvement in our shortest price and volume indicators along with some improvement in relative strength. However, due to the severe damage done to the technicals of the market since August, we believe it will take some time before we begin to add risk back into the portfolio.
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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The VIX is the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market's expectation of stock market volatility over the next 30 day period. 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. It is not possible to invest directly in indexes (like the S&P 500) which are unmanaged and do not incur fees and charges. 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.