Weekly Commentary, 9/14/15 – 9/18/15
The highlight of the week was clearly the Federal Open Market Committee meeting and Janet Yellen’s press conference following the announcement. The Federal Reserve left short term interest rates unchanged after weeks of debate. “In light of the developments that we have seen and the impacts on financial markets, we want to take a little bit more time to evaluate the likely impacts on the United States,” said Fed Chairwoman Janet Yellen following the two day meeting.
The equity markets did not like the muddled message about the strength of the U.S. jobs market on the one hand, and the risk created by overseas turmoil on the other hand. Investors were left wondering if the Fed was privy to hidden problems in the global economy.
Stocks began trading off Thursday afternoon after the Fed announcement. The weakness carried into Friday with the S&P 500 falling approximately 1.5% but still managing to close flat on the week. On a year to date basis, the S&P 500 Index is down approximately 5%. On August 25, the S&P 500 traded as low as 1867 down 12% from the market highs in May and has since rallied back 5%. The Stadion weight of the evidence risk measures have improved along with the equity markets and based on this improvement we began adding risk back into our portfolios. We still have the ability to increase equity exposure should market price and breadth improve, but if the market weakens we have the tactical capabilities to reduce risk quickly.
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 objective’s satellite assets the remaining 40-60% of each portfolio, Stadion uses a proprietary, rules based weigh of the evidence model. We began seeing improvement in the satellite’s weight of the evidence indicators last week and it followed through this week. The 5% bounce in the S&P 500 from the recent low combined with improvement in our breadth and relative strength indicators have allowed us to add broad U.S. equity exposure to the satellite portion of the portfolio based on 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. 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.