February was another excellent month for U. S. equities, which have now risen for four consecutive months. Large and small cap stocks have been setting consecutive records boosted by improved corporate earnings and continued investor enthusiasm regarding President Trump’s policies to decrease regulation, overhaul the tax system, and increase infrastructure spending. The President’s announcement that his tax plan will be “phenomenal,” reignited investor demand for stocks. Trump’s statement was supported by comments from U.S. Treasury Secretary Steven Mnuchin. According to Mnuchin, a tax reform package that includes tax cuts and the repatriation of cash held overseas could be passed by Congress before the August recess.
Prior to President Trump’s evening address to Congress, investors became cautious in anticipation of how his speech would be received. Investor apprehension resulted in the Dow Jones Index ending its 12 day streak of record closes. For the month, the Dow Jones Index rose 5.01% followed by the S&P 500 Index returning 3.92%. Smaller cap stocks, as measured by the Russell 2000 tacked on 1.97. Additionally impressive, the S&P finished positive 15 out of the 19 market days in February—79% of the time. And of the 4 days that finished down, they were down only -0.25% or less. The international markets fared well despite various headwinds that included a stronger dollar and concerns over elections in France and Italy where populist parties are gaining strength.
Interest rates trended lower for the month in spite of the threat of higher interest rates. The minutes from the Federal Open Market Committee (FOMC) indicated the Federal Reserve (Fed) could take a more aggressive course of action and raise rates as early as the March meeting. Federal Reserve Chairwoman, Janet Yellen, stated recently in testimony on Capitol Hill that “the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.” The Chairwoman later commented that “I can’t tell you exactly which meeting it would be.” Yields on the benchmark 10-year U.S. Treasury note have established a new trading range between 2.60% and 2.30% settling on the low end at 2.35%.
The new President’s pledges to reflate the economy were reflected in the price of gold. The SPDR Gold Shares Exchange Traded Fund (ETF) rose 3.09% for the month and has risen almost 9% this year compared with the 6% rise for S&P 500 Index.
Technically, the market remains strong. The market currently sits at the upper end of a multi-month trading range and could be considered overbought. Nevertheless, markets can remain overbought for extended periods of time. The S&P 500 Advance-Decline has been setting new highs. 81% of stocks are above their 200-day moving average and 75% of stocks are trading above their 50-day moving average. However, there are the very early signs of market breadth weakening. Defensive sectors of the market are beginning to outperform the more cyclical sectors. After having led the market higher following the election, small cap stocks and growth stocks have been lagging versus their more defensive counter parts, large cap stocks and value stocks. Market breadth has a tendency to weaken before market prices which could be a warning signal for the market, but currently, breadth remains at acceptable levels within the Stadion models.
Given the reaction to the President’s first month in office, his every action will be closely watched by domestic and foreign markets as he attempts to clarify the policy details of his new administration. With only the slimmest of Republican majority in Congress, President Trump will have a difficult road ahead in implementing his pro-growth programs.
The trends remain positive and the Stadion Tactical Defensive Fund is well positioned for further gains. If conditions change and warrant adjustments to asset allocations we will follow our disciplined investment processes in implementation.
The Stadion Tactical Defensive Fund seeks to combine two elements of trend following. One of which focuses on longer term cyclical trends (the core portfolio) and another which seeks to balance safety and return among shorter to intermediate trends (the satellite portfolio).
Both the core and satellite portions of the Stadion Tactical Defensive Fund entered the month fully invested in broadly diversified U.S. equity ETFs and small positions in a currency hedged international equity ETF. The Fund gained 3.28% for the month versus a gain of 3.92% for the S&P 500. The Fund’s international position and small-mid cap ETF holdings were cause for the slight underperformance versus the S&P 500.
To view the most recent performance for the Stadion Tactical Defensive Fund, click here.
Performance data quoted represent past performance. Past performance is no guarantee of future results. Investments are subject to risk, and any of Stadion’s investment strategies may lose money. Stadion’s actively managed portfolios may underperform in bull markets. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance data may be lower or higher than the performance data quoted. To review our most recent monthly performance, please visit www.stadionfunds.com.
An investor should consider the investment objectives, risks, and charges and expenses of the Stadion Funds carefully before investing. The prospectus contains this and other information about the Funds. A copy of the prospectus is available by calling Stadion Funds directly at (866) 383-7636 or Stadion Money Management, LLC, the investment advisor, at (800) 222-7636. The prospectus should be read carefully before investing.
The index shown is defined as follows.
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 prices. All Benchmarks composite data supplied by third party vendors, assumes re-investment of all dividends.
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 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.
One cannot invest directly in an index. All Benchmarks composite data supplied by third party vendors, assumes re-investment of all dividends.
Yield is the annual return on an investment, expressed as a percentage of the price. For stocks, yield is the annual dividend divided by the purchase price, also known as a dividend yield. For bonds, it is the coupon rate divided by the market price, called current yield.
The U.S. 10-Year Treasury Note is a debt obligation issued by the United States government that matures in 10 years.
Stadion Tactical Defensive Fund held 0% of the SPDR Gold ETF as of 2/28/16.
Diversification does not eliminate the risk of experiencing investment losses.
*Performance numbers as of February 28, 2017
There are additional costs and potential risks associated with investing in domestic and international Exchange-Traded Funds (“ETF’s”). Investment in the Fund is subject to investment risks, including, without limitation, market risk, management style risk, risks related to “fund of funds” structure, sector risk, fixed income risk, tracking risk, risks related to ETF net asset value and market price, foreign securities risk, risks related to portfolio turnover and small capitalization companies risk. Since each Stadion Fund is a “fund of funds,” an investor will indirectly bear fees and expenses charged by the underlying ETFs and investment companies in which a Stadion Fund invests in addition to a Stadion Fund’s direct fees and expenses. More information about these risks and other risks can be found in the Fund’s prospectus.
There are risks associated with the potential investment of the Tactical Defensive Fund’s assets in fixed income investments, which include credit risk, interest rate risk, and maturity risk. Investment objective: Seek capital appreciation.
The Fund’s foreign investments generally carry more risks than funds that invest strictly in U.S. assets, including currency risk, geographic risk, and emerging market risk. Risks can also result from varying stages of economic and political development; differing regulatory environments trading days, and accounting standards; and higher transaction costs of non-U.S. markets.
The Stadion Funds are distributed by ALPS Distributors, Inc.
An investor should consider the investment objectives, risks, and charges and expenses of the Stadion Funds carefully before investing. The prospectus contains this and other information about the Funds. A copy of the prospectus is available by calling Stadion Funds directly at (866) 383-7636 or Stadion Money Management, LLC., the investment advisor, at (800) 222-7636. The prospectus should be read carefully before investing.
The Stadion Funds are distributed by ALPS Distributors, Inc. An investment in the Funds involves risk, including loss of principal.