March 10, 2021
During February, markets experienced something they had not seen in a while: a sharp increase in interest rates. The 10-year Treasury yield reached a one-year high of 1.614% before ending the month at 1.41%1. This move in yields put pressure on equities during the 2nd half of the month. We saw a slight rotation out of high-growth technology stocks into stocks that would benefit from a return to normalcy. This flight-to-quality resulted in money diverting into stocks which had previously underperformed and were considered undervalued relative to technology. The Federal Reserve remains extremely supportive and it seems likely that an enormous fiscal stimulus package will soon be passed.
For the month of February, the Dow Jones Industrial Average Index led U.S. indices with a return of 3.43% while the S&P 500 Index and the NASDAQ Composite Index increased 2.76% and 1.01%, respectively. Developed markets outperformed Emerging markets as the MSCI EAFE Net Total Return Index rose 2.24% and the MSCI Emerging Net Total Return Index gained 0.76%.
The Tactical Defensive Fund started February with a fully invested a 98% equity allocation and a 2% cash buffer. As markets declined from their February 12th high, the Fund’s underlying technical indicators in the short-term model started to see some deterioration. With the increase in volatility near the end of the month, the short-term model signaled a risk-off environment, and the short-term model ended the month fully defensive. However, the long-term model in the Fund was fully invested in equities throughout the entire month as the long-term trend remained in place. Combined, the Fund closed February with a 50% equity, 50% defensive allocation.
The Stadion Tactical Defensive Fund is a conservative equity fund seeking to participate in expanding market cycles and retains the ability to become 100% defensive if conditions deteriorate. Over a full market cycle, the Stadion Tactical Defensive Fund tends to have a conservative profile that combines two elements of trend following: a focus on longer-term cyclical trends (the core portfolio) and the balance of risk-mitigation and returns-seeking among shorter to intermediate trends (the satellite portfolio). The goal of these collaborative strategies is capital appreciation as measured across full market cycles.
In February, the Tactical Defensive Fund’s A-share returned 2.39% versus its benchmark of the Morningstar Moderate Target Risk Index that returned 1.21%.
To view the most recent performance for the Stadion Tactical Defensive Fund, click here.
Published February 26, 2021; Accessed March 1, 2021.
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 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.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.
The MSCI Emerging Markets Net Total Return Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
Risk-off refers to the market sentiment where traders and investors in the financial market are moving away from risk.
The Morningstar Target Risk Index family is designed to meet the needs of investors who would like to maintain a target level of equity exposure through a portfolio diversified across equities, bonds and inflation-hedged instruments. The Morningstar Moderate Target Risk Index seeks approximately 60% global equity exposure.
One cannot invest directly in an index.
The Report’s commentary, analysis, opinions, advice, and recommendations represent the personal and subjective view of the author and are subject to change at any time without notice.
There are additional costs and potential risks associated with investing in domestic and international Exchange Traded Funds (ETFs). Investment in the Fund is subjective 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 Fund’s assets in fixed income investments which include credit risk, interest rate risk, and maturity risk among others. These risks could affect the value of investments of the Fund, possibly causing the Fund’s share price and total return to be reduced and fluctuate more than other types of investments. Additional information about fixed income risks can be found in the Fund’s statement of additional information (“SAI”). Investment Objective: Seek long-term 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.
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The Stadion Funds are distributed by ALPS Distributors, Inc. An investment in the Funds involves risk, including loss of principal.