Weekly Commentary, 8/24/15 - 8/28/15
Coming out of a tumultuous week, which miraculously closed in the green, stock indexes experienced the wildest week in years rattling investors and fueling expectations for further price swings. Anxiety peaked on Monday when the Shanghai Composite Index lost 8.5%, its biggest percentage decline since February 2007. The plunge in China shined an unwelcome spotlight on the country’s financial condition and global growth. That decline was enough to send the S&P 500 Index down as much as 5.3% in the minutes after the opening bell. A cascade of automatic selling halted market trading briefly and triggered circuit breakers, which are trading halts built into the market to mitigate panic selling. The index finished with a 3.9% slump on the day, which was the biggest in four years. At one point, the index was down over 10% on a year-to-date basis, briefly entering correction territory.
On Tuesday, the broader market averages rallied early in the session before succumbing to further downside pressure and closing near their lows. The S&P 500 Index approached Monday’s session low, closing back below the 1,900 for the second straight session.
Stocks snapped a six-day losing streak Wednesday, soaring by the highest single-day percentage in nearly four years amid signs of strength in the U.S. economy and help from central bankers in China and the U.S. The People’s Bank of China—dubbed “Yang Ma,” or Big Mama, stepped in to prop up its stock market. Additionally, Federal Reserve Bank of New York President Dudley said the case for a September rate increase has grown “less compelling” given the turmoil in markets around the world. The S&P 500 Index enjoyed its best day since November 2011, gaining 3.90% to close at 1940.51. In line with the rally, the VIX fell to 30 after trading briefly above 50 on Monday morning.
When the smoke cleared on Friday the major U.S. indices closed up approximately 1% for the week. On a year-to-date basis the S&P 500 is down about 4.50% with the Dow Jones down approximately 7.50%.
Also interesting to note on the week, yields on U.S. Treasury notes rose from 2.06% to 2.15%, in spite of the equity volatility, and oil prices, as measured by West Texas crude, rose 12% to over $45.00.
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 averse as the risk tolerance of each fund changes. In allocating the fund’s 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. Based on the weak foundation of the market internals and price we remain in our most defensive positions per 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 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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. 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.