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The Worst Start Ever

Weekly Commentary, 1/4/16 – 1/8/16

The stock market got off to its worst January ever as major indexes fell 6% to 7%. Last week’s decline put the major averages in correction territory. The Russell 2000 (small stocks) is down 19% from its peak of last year approaching a bear market signal. A correction is generally defined as a 10% decrease from a stock or indexes high, whereas a bear market is usually defined as a 20% drop.

The brutal beginning primarily reflected concerns about the pace of the decline in the Chinese currency, the Yuan, raising worries over the country’s economic conditions. Through various attempts Chinese regulators and the People’s Bank of China were unsuccessful in stemming the declines. The Shanghai Index fell approximately 10%. China was not the only concern fueling investor anxiety.  Other developments over the week included a marked deterioration in Saudi-Iranian relations, U.S. economic growth estimates being taken down, North Korea claiming to have successfully tested a hydrogen bomb, continued weakness in energy and oil prices, and concerns that corporate profits will disappoint as earnings season begins next week. On top of everything else, the U.S. Federal Reserve began raising interest rates in December.

Technically, the market internals continue to deteriorate and could not look much worse. As for support levels on the S&P 500, keep an eye on the 1880-1860 level.  

All aforementioned factors result in a very muddled outlook for 2016. Periods like this highlight the need for portfolios to include investment strategies with a defensive bias to help navigate challenging markets.

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. 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 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. 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.