Global equity markets remained strong through the end of July. Robust earnings reports lifted the Dow Jones to a new record high, while other major U.S. equity indexes hovered near record highs. By the end of July, the Dow Jones Index climbed to 2.68% closing at 21,891, and the S&P 500 added 2.06%. Technology stocks drove the NASDAQ Composite to a 3.42% gain and both mid and small cap stocks were up by about 1%. In total, second-quarter earnings were positive. More than half of the S&P 500 companies have reported results, and earnings are on track to rise 9.1% from a year earlier, according to FactSet. The Stadion Tactical Defensive Fund performed in-line with the Morningstar Tactical Allocation Category, but slightly underperformed the S&P 500.
Volatility as measured by the CBOE Volatility Index (VIX), also known as Wall Street’s “fear gauge,” remains near all-time lows and marked an all-time intra-day low, declining to 8.84 on July 26th.
The Fund seeks to combine two elements of trend following. The first element focuses on longer-term cyclical trends (the core portfolio), while the second element aims to balance safety and return among shorter to intermediate trends (the satellite portfolio).
The Fund’s short-term trend component began the month in a slight risk reduction mode following an increase in price volatility. Equity markets reacted negatively to comments from Federal Reserve Chairwoman Janet Yellen hinting the Fed might move to shrink their balance sheet later in the year. However, the markets soon regained confidence, and the short-term component was again fully invested. The longer-term component remained fully invested through the month.
Strongly performing international markets lead to rolling a currency hedged international position to an unhedged international position. Overall the fund has a slight overweight to Small-Mid (SMID) cap stocks and technology.
Confirmation is critical in technical analysis, and both price and breadth indicators support current market levels. The major broad market U.S. and international equity indexes are above their 50-day and 200-day moving averages. The S&P 500 Advance Decline-Line (AD Line) is near an all-time high. Growth stocks continue to outperform value stocks by a healthy margin of 17% versus 6%. Sector performance is dominated more by the offensive sectors like technology and cyclicals versus the more defensive sectors like consumer staples and healthcare.
The current “Goldilocks” environment of muddling economic growth, low inflation, solid corporate earnings, low interests, and rising equity prices cannot last forever. Although the sky is clear now, clouds could form over Russia, China, North Korea, or even Washington D.C. at any time. The S&P 500 is up over 17% since the November election, and it has been ten months since the S&P 500 has experienced a 1% decline. The last 5% monthly decline was in January 2016.
For over twenty years, we have specialized in risk management, seeking to participate in the market while utilizing defined processes to measure and respond to changing market conditions in an attempt protect client portfolios. As we move into August and September, which have been historically volatile months, we will continue to follow our disciplined processes.
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 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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
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 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 Advance-Decline Line (AD Line) is a breadth indicator based on Net Advances, which is the number of advancing stocks less the number of declining stocks.
One cannot invest directly in an index. All Benchmarks composite data supplied by third party vendors, assumes re-investment of all dividends.
Diversification does not eliminate the risk of experiencing investment losses.
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.