The month of March was atrocious for global equities as the Coronavirus Pandemic crippled markets. In the U.S., markets experienced the quickest Bear Market in U.S. stock history as the fear of an economic recession worried investors. The Coronavirus took its toll on the U.S. economy, too, as businesses which were unable to remain open due to quarantine conditions, had to shut down. The initial jobless claims reported on 3/27/2020 hit 3.28 million which was the largest print ever. The Federal Reserve tried its best to limit the impact of the Coronavirus Pandemic and stepped in to provide liquidity to financial markets and cut its benchmark interest rate to zero. Markets saw a strong rebound to close out the month as Congress passed a $2 Trillion Virus Rescue Plan. For the month of March, the S&P 500 Index lost -12.35%, the NASDAQ Composite Index lost -10.03%, and the Dow Jones Industrial Average Index lost -13.62%.
The Tactical Defensive Fund started the month of March invested in 50% equity and 50% defensive positioning. The Dynamic Trend model had a 100% defensive allocation, but the longer-term Cyclical Trend model was still holding 100% equity. The Fund’s Dynamic Trend model is quicker to react to market movement as it uses daily indicators to determine its equity allocation. The Cyclical Trend model is slower to react as it uses weekly indicators to determine its equity allocation. Given the velocity of the market drawdown, the Cyclical Trend model didn’t have a model change until March 23rd. By March 30th, the Tactical Defensive Fund was 100% defensive positioning. The Coronavirus has had a disastrous impact on the global economy and the livelihood of citizens worldwide, and this could be the beginning of a larger drawdown which the Fund is currently well positioned.
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 March, the Tactical Defensive Fund’s I-share returned -9.72% versus its benchmark of the Morningstar Moderate Target Risk Index that returned -9.12%.
To view the most recent performance for the Stadion Tactical Defensive Fund, click here.
A bear market is a condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases.
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 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 phrase “$2 Trillion Virus Rescue Plan” refers to the Coronavirus Aid, Relief, and Economic Security Act or CARES Act. Its full text is located at https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
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.