February 12, 2021
January was an interesting month for U.S. markets as they reached new all-time highs before selling off the last week of January. There was a transition in the White House and Congress as President Biden was inaugurated and the Democratic party won both Senate seats in Georgia’s special run-off election, leading to a blue majority in both the Senate and House. Hopes for a widespread vaccine remain optimistic but it seems like it might not come as quickly as originally thought. The Federal Government’s “Operation Warp Speed”, while successful in some respects, has thus far been beset by unanticipated inefficiencies and even possible security issues surrounding the vaccine’s roll out.1
The Federal Reserve remains extremely supportive and it seems very probable another round of fiscal stimulus will be passed within the next couple months. For the month of January, the NASDAQ Composite Index increased 1.44%, but the S&P 500 Index and the Dow Jones Industrial Average Index lost -1.02% and -1.95%, respectively. Emerging markets outpaced developed markets as the MSCI Emerging Net Total Return Index gained 3.07%% as the MSCI EAFE Net Total Return Index decreased -1.07%.
The Tactical Defensive Fund started January with a fully invested a 98% equity allocation and a 2% cash buffer. The long-term Cyclical Trend model and the short-term Dynamic Trend model showed a favorable market environment for equities. Markets rallied to new highs and the underlying technical indicators of both models strengthened even more indicating a risk-on market environment. Even with the uptick in volatility and slight sell off in the last week, both models remained fully invested. There were no trades in the Fund during the month.
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 January, the Tactical Defensive Fund’s A-share returned -0.33% versus its benchmark of the Morningstar Moderate Target Risk Index that returned -0.61%.
To view the most recent performance for the Stadion Tactical Defensive Fund, click here.
1https://poole.ncsu.edu/thought-leadership/the-covid-19-vaccine-supply-chain-potential-problems-and-bottlenecks/ Published January 5, 2021; Accessed February 2, 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-on refers to the market sentiment where traders and investors in the financial market are taking on 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.
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