July 14, 2020
Markets rallied in the beginning of June, but since then have seen a slight pull back as markets are reacting to the spike in the number of COVID-19 cases. This new wave of cases has some investors worried about additional rolling national lockdowns and restrictions which several states implemented in advance of the July 4 holiday. The Federal Reserve has pledged to use as much ammunition as needed to help support the economy during this pandemic but even with the FED’s support, another shutdown could be detrimental to the U.S. economy.
. Another thing on investor’s minds is the historically high savings rate by U.S. consumers. Although Personal Consumption Expenditures have increased slightly1 there remains the fear that U.S. consumers will continue to save at these elevated2 rates and therefore spend less of their disposable income, which makes up about 70% of the U.S. Gross Domestic Product (GDP). Even with all the potential fear that currently exists, markets remain near all-time highs. For the month of June, the S&P 500 Index gained 1.99%, the NASDAQ Composite Index increased 6.07% and the Dow Jones Industrial Average Index returned 1.82%. International markets were positive in June as the MSCI Emerging Net Total Return Index rose 7.35% and the MSCI EAFE Net Total Return Index increased 3.40%.
The Tactical Defensive Fund began June with a 75% equity and 25% defensive allocation with the short-term Dynamic Trend model being fully invested and the long-term Cyclical Trend model being half defensive. As markets rallied, the underlying technical indicators of the Cyclical Trend model improved enough to add full equity exposure on June 22nd. The Dynamic Trend model was fully invested in equities for the entire month of June. The Fund ended the month with an 100% equity 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 June, the Tactical Defensive Fund’s I-share returned 2.44% versus its benchmark of the Morningstar Moderate Target Risk Index that returned 1.97%.
To view the most recent performance for the Stadion Tactical Defensive Fund, click here.
1https://www.bea.gov/data/consumer-spending/main; Accessed June 30, 2020
2https://www.bea.gov/data/income-saving/personal-saving-rate; Accessed June 30, 2020
Gross Domestic Product is the total value of goods produced and services provided in a country during one year.
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.
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.
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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